Worries that venture funding would disappoint in 2017 ought to be put to rest now that the third quarter has closed. Private biotech companies raised a remarkable $3bn from July to September, putting this year within striking distance of 2015’s record total.
Macro issues helped lift the sector this quarter, with biotechnology indices returning to 2015 levels, and the enthusiasm has likely flowed through to venture capitalists. On the other hand, a preference for fewer and bigger rounds cannot be giving smaller developers much comfort; this trend appears to have only magnified as the third-quarter books closed.
It has been driven by Roivant’s extraordinary $1.1bn round in August, which accounted for a third of the amount raised in these three months. For the year so far, venture investors have put $7.6bn into private biotech companies.
Average creeping up
The average financing in 2017 now stands at a record $26.8m, a figure that has more than doubled since 2013 as the number of rounds has declined. At 310 total fund-raisings through the first nine months, this year could yet exceed 2016 in terms of number of financings, but will be well below all other years since 2010.
|Annual VC investments|
|Date||Investment ($bn)||Financing count||Avg per financing ($m)||No. of rounds ≥$50m||No. of rounds ≥$100m|
The sweet spot appears to be the $50-100m range, with 37 financings putting 2017 on a pace at least to match last year. However, the number of rounds above $100m is lagging behind 2015 and 2016.
The tendency towards fewer, larger and often later rounds has been well documented by EP Vantage over the past few years, with the first noteworthy jump occurring with 2015’s record haul. With venture investors wanting to share the risk in the form of bigger syndicates, it has been more difficult for early-stage groups needing seed funding to get attention. This trend does not seem to be going away.
You're the one that I vant
Of course, 2017’s big round was quite the outlier. Roivant, more a holding company than a traditional biotech, landed the biggest ever healthcare haul when it raised $1.1bn in a tranche led by the Japan-based Softbank Vision Fund. This allowed the group to launch another one of its “vant” suffixed subsidiaries, Datavant, focused on data analysis to speed biopharmaceutical development.
|Top five VC rounds of the third quarter|
|Roivant Sciences||1,100||Series A||Aug|
|Bridgebio Pharma||135||Series A||Sep|
|Gritstone Oncology||93||Series B||Sep|
|Homology Medicines||84||Series B||Aug|
It was unfortunate for Softbank and Roivant that seven weeks later the biggest hope of this venture, the Alzheimer’s disease pill intepirdine being studied by the Axovant neurology subsidiary, failed decisively, which surely damaged the valuation of the parent group (Axovant scraps Alzheimer’s bid – now back to the amyloid hypothesis, September 26, 2017).
Two other third-quarter rounds have added to 2017’s tally of $100m-plus rounds: Bridgebio Pharma, launched in January, landed $135m to back a largely small-molecule approach to genetic disease, and the Pfizer spinout Springworks Therapeutics received $103m to develop four rare disease assets (Pfizer dodges costs and scrutiny by springing loose rare disease assets, September 25, 2017).
It might be a bit surprising that a cancer-focused group only managed to get the fourth-biggest round in the third quarter: Gritstone Oncology got big corporate names like Lilly and Alphabet to back its preclinical pipeline to the tune of $92.7m. And Homology Medicines received $83.5m to support its gene editing and gene therapy technologies for rare diseases.
This year has shown how a single quarter, or even a single massive fund-raising, can alter the financing picture. But the sector is still sensitive to a single macro issue – the threat of price restrictions – and the recent enthusiasm could be choked with a single tweet.