Venture investors keep the purse strings tight

Third-quarter numbers show that biopharma venture investments are firmly back in 2018 territory.

The IPO window is all but shut, equity markets are jumpy and global interest rates are climbing. Little wonder that venture investors are treading carefully when it comes to biotech, surely the highest-risk sector out there. 

Third-quarter numbers collated by Evaluate Pharma show that the retrenchment that started earlier this year is continuing. Biopharma groups raised $3.6bn from July to September, around a three-year low. Big rounds are still happening, however, suggesting that the gulf between the haves and the have-nots is widening. 

These data refer to pure-play drug developers only, with sectors like digital health and medtech excluded.

The absence of crossover rounds – substantial fundraisings intended to shore up a company’s balance sheet before an IPO – will be a big reason for the topline drop-off here. But the make-up of some of these larger rounds suggests that venture and other investors intend to start flipping developers on the market as soon as they can.

Acelyrin, for example, feels like prime IPO material. The group banked the quarter’s largest round, with a broad syndicate of big-name investors behind it. This deal followed a large $250m series B in 2021. The funds are ostensibly intended to pay for pivotal programmes of the group’s IL-17A inhibitor izokibep, in psoriatic arthritis and axial spondyloarthritis, and submission with the FDA.

Top five rounds of Q3 2022
Company Investment ($m) Financing round Description 
Acelyrin 300 Series C Immunology
Orna Therapeutics 221 Series B Circular RNA therapeutics
Arsenalbio 220 Series B Car-T therapies for solid tumours
Retro Biosciences 180 Seed capital Age-related diseases
Carmot Therapeutics 160 Series D Oncology and metabolic diseases
Source: Evaluate Pharma. 

Carmot is another interesting name in the top table. The developer has been around for a lot longer than the others in the top five, having been founded in 2008; none of the other four existed before 2019.

Carmot’s claim to fame is that it helped Amgen discover Lumakras, under a collaboration that started back in 2014. The small biotech is owed royalties on sales of the drug, a Kras G12C inhibitor. Carmot’s primary focus is metabolic disease, however; a big chunk of the new funds will be used to complete mid-stage trials of CT-388, a dual GLP-1/GIP inhibitor.

This is the same mechanism as that of Lilly’s newly approved Mounjaro, which is forecast to become a huge blockbuster in obesity and type 2 diabetes. Carmot says CT-388 has been optimised for improved tolerability and once-weekly dosing; the group’s new investors apparently believe that this profile has big potential.

For companies that do not tick enough boxes for venture investors, however, the situation is likely to be very different right now. Financiers are well aware that their existing portfolio companies are going to need support for longer in the current market, so the bar to sending money down new roads is going to be extremely high.

Venture players point out that the money flowing into early-stage biopharma remains historically high, and this might be true. But a flight to safety is surely under way.

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