3Q10 Biotech Data

I have had a gut feeling for some time now that biotech venture financings had fallen off a cliff over the last six months.  Sure, there were huge rounds completed – Immatics, Reata, Relypsa, TriVascular – but my sense was that the overall number of deals were way off. 

Unfortunately, my assumptions were correct (Report).  There were 70 biotech VC financings completed in 3Q10, compared to 95 in 3Q09 – a drop of almost a third! Quarterly data can always be taken with a grain of salt, but 2010 in aggregate biotech VC dollars is tracking to be the lowest yielding year since 2000.  Medical devices were particularly hard hit, as there were 50% less financings (43 vs. 21) in 3Q10 than there were in 3Q09.  Oncology continues to be the hottest investment area (20.7% of all 3Q10 deals), followed by CV, Device (Dx), and TeleMed, which in aggregate represent 17.1% of all 3Q10 deals.    

The 3Q10 numbers also indicate the continued trend of venture firms moving into later stages (Series B & C specifically) deals.  The average size of a Series B & C deal is increasing, and will continue to do so as VCs flock to clinical stage assets.  

So what does this all mean? 

Early stage companies will continue to struggle to raise money as venture capitalists become more risk averse.  Less competition from VCs means lower company valuations and more onerous deal terms for entrepreneurs.  On the flip side, there is increasing competition for later stage assets.  While there has certainly been some valuation pressure from VCs on companies given the current state of the economy, it has been my experience that company valuations for clinical stage assets have generally held firm (flat, but rarely up).  The large ($30M+) rounds that were completed in 3Q10 indicate that VCs are willing to invest in clinical stage assets that address large markets (oncology, CV, diabetes) and will plough their money into companies that they believe are winners.  

University spinouts that raised capital in 3Q10: 

• Accuri Cytometers ($6M) – University of Michigan
• Anchor Therapeutics ($10M) – Tufts
• Calithera Biosciences ($40M) – UCSF
• Cardioxyl Pharmaceuticals ($15M) – Johns Hopkins
• Immune Design ($32M) – Caltech, University of Washington
• iPierian ($22M) – Harvard
• Lineagen ($5M) – University of Utah
• Reata Pharmaceuticals ($70M) – Columbia
• TetraLogic Pharmaceuticals ($37M) – Princeton
• Tigris Pharmaceuticals ($6M) – Yale
• Trevena ($35M) – Duke