Venture money floods biotech as big rounds dominate

The second quarter of 2014 confirmed the hopes raised by Q1: private drug developers are having the best year since before the 2008 economic crash when it comes to venture capital fund-raising.

And behind the headline numbers there are continued signs that the landscape has changed dramatically. The 190 VC rounds completed so far average $17m apiece, well above the immediate post-crash years when the average ran as low as $11m. “It is a flight to quality,” said Gilles Nobecourt, partner at Edmond de Rothschild Investment Partners in Paris.

The second quarter saw $1.82bn in venture financing raised, the best quarter since Q1 2007, when $1.86bn was raised. At the current run rate – $3.23bn in six months – 2014 will stand well above 2007, which ended on $5.9bn (see table below).

In four of the last seven years, Q2 has been the best quarter for fund-raisings. In 2007, the high-water mark for VC in single-quarter terms, Q1 was the best and the rest of the year dribbled away. Macroeconomic factors had something to do with this, as liquidity and financial confidence evaporated in the lead-up to the financial crisis.

They play a role today, too, but the pull seems to be in the opposite direction. Talk of a broad recovery has been the trend in economic and financial rhetoric in 2014, and this has been mirrored by an unsated appetite for initial public offerings in life science therapeutics as confidence builds that money invested today will see returns down the road (Biotech flotations slow but window remains open, July 1, 2014).

The drop in second-quarter floatations could give some cause for concern, however.

“In terms of IPO windows I think this has been one of the longer sustained open windows that I’ve known of in the last 15 years,” said Stephen Thompson, managing director of Brandon Capital in Australia. “These things are fragile."

What will change opinions is either macroeconomic downturns, or a general perception that some valuations have departed from reality, he said. “You only need a couple of examples where investors get burned for it to be felt more broadly.”

Financing Date Investment ($bn) Financing Count
2014 H1 3.23 190
2013 4.84 362
2012 4.69 404
2011 4.27 372
2010 4.82 415
2009 4.89 374
2008 4.69 342
2007 5.88 363

Get big or get out

This news could be surprising to a relatively early-stage developer trying to round up support to run a phase I or II trial, however, as the money appears to have migrated to bigger and later rounds.

When the year is marked by a $200m fund-raising round like Intarcia Therapeutics’ – the second round of such a level secured by the Massachusetts-based group – it is not surprising that the numbers would be skewed upwards. Helping out, to get into the top 10 for the first half of 2014 a private group needed to raise $56m – a number that would have made the top 5 in the first half of 2013, and, astonishingly, would have been the biggest raise in the first half of 2012 (Q2 VC funding totals confirm drought for drug developers, August 3, 2012).

Top 10 rounds of H1 2014
Company Investment Financing round Date
Intarcia Therapeutics $200.0m Series H * Apr
Glycotope Group €74.9m Undisclosed Mar
Spark Therapeutics $72.8m Series B May
Melinta Therapeutics $70.0m Series G * Feb 
NovImmune Sfr66.0m Series B Feb
C3 Jian $60.5m Series D Mar
Kolltan Pharmaceuticals $60.0m Series D Mar
ProNAi Therapeutics $59.5m Series D Apr
NuCana BioMed $57.0m Series B Apr
Advanced Accelerator Applications €55.8m Undisclosed Feb
*series assumed.

The current run rate would put the full-year number of financings at 380. While this number is respectable it would be lower than 2012 and 2010 and is more in keeping with the pre-crash years.

The difficult stage right now is moving from the preclinical and early phase I stage into funding for proof-of-concept studies, said Isabelle de Cremoux, chief executive of Paris-based Seventure. In Europe seed rounds can often be raised from government investment funds, and B rounds usually generate interest from large international consortia.

That view is consistent with EP Vantage’s analysis, which finds that the biggest A round so far in 2014, that of Voyager Therapeutics, ranked 20th overall, and 27 of the fund-raisings in the first half were listed as A; 15 of these came in at less than $5m each. There were 54 B rounds.

“That’s the most difficult step,” Ms de Cremoux said. “They’re too early-stage for a large B round, but they ask too much for national VCs.”

To contact the writer of this story email Jonathan Gardner in London at or follow @JonEPVantage on Twitter

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