Several substantial private financings have been announced in Europe in the past few months, with companies like Biontech, AM-Pharma and this week Alizé Phama all raising big pots of venture cash. Large rounds are far from uncommon in the US these days, but are much scarcer across the pond, meaning that a string of large European deals catches the eye.
When it comes to average round size, however, the data show remarkable similarity between the regions. The curves only really separate in 2017, when the venture bubble took hold in the US, around a year earlier than in Europe. This analysis illustrates just how out of the ordinary the past few years have been for this section of the biopharma field, the slowdown this year notwithstanding (Venture investing dips again for biopharma, July 11, 2019).
Seven months into 2019 the average size of a venture round has returned to parity, to sit at around $36m in both regions, according to EvaluatePharma data. The charts below, which look at all venture deals and then earlier-stage financings only, also show how the average venture round has more than doubled in size this decade.
This data concern drug developers only, and exclude sectors like medtech and genomics.
Still, the second chart, which looks at seed and earlier stages of investment, shows that these types of financings remain much larger, on average, in the US. Many of the mega-rounds of the bubble period have occurred at these initial stages of a start-up's life, and this perhaps supports the notion that valuations in the US remain far more stretched than in Europe.
A major caveat here is that the number of deals happening in Europe is much lower, which means that the average is more susceptible to the occasional outlier.
But it will come as little surprise that the US scene got a lot frothier, much faster, than Europe. Many venture capitalists are on the record as saying that intense competition for opportunities in the US prompted them to look overseas for more keenly priced proposals. This appears to be reflected in the analysis below.
The averages here might be getting closer again, but the total amounts being raised in each region remain very different. Last year, the biggest on record for the biopharma venture scene, start-up drug developers based in the US raised a huge $12.8bn to Europe’s $2.5bn.
Both territories are on track for a slowdown this year, the data so far suggest, although the US looks to have taken more of a hit. Seven months into 2019 US companies had raised $5.2bn to Europe’s $1.4bn. This is a much smaller spread than has been seen in the past couple of years, though again it is closer to that typically observed before the venture boom.
Europe will probably never match the US in terms of total amounts raised. But it seems likely that in areas of heightened interest, like RNA-based approaches and genetic therapies, valuations are in similar territories to those found in the US. For example Biontech, the German mRNA researcher, has never officially disclosed its valuation, though when it was said to be exploring an IPO earlier this year reports put this at $4-5bn.
This is unlikely to be the case for all therapy areas and approaches, however. While the sector as a whole remains flush with funds, European start-ups should continue to benefit from the attentions of cash-rich US-based investors.