In confidence survey, VCs sound lukewarm about biotech
Biotech looks weak in the eyes of many venture and private equity investors. In a confidence survey from Deloitte and the National Venture Capital Association, respondents lacked faith in the future of the biopharma industry, and the low confidence bodes poorly for an industry already suffering from dwindling VC dollars.
Young biotechs have fallen victim to a confluence of factors wounding investment in their industry. Venture investors have faced a capital crunch that has prompted many of them to steer away from risky and expensive bets in biotech. Also, the IPO market remains unavailable to many young drug developers, hurting one of the traditional routes to exit from investments in biotech companies. Add in the slim chances that most of these young developers will succeed, and you begin to see why so many investors have reservations about the industry.
According to the 2012 Global Venture Capital Confidence Survey, biotech fetched an unremarkable grade of 3.08 on a 1-to-5 scale of confidence (with 5 the high end), landing biopharma among the four industries with the lowest levels of investor confidence. In the U.S., investors painted a particularly bleak outlook for biotech, with 81% of respondents expecting either no change or a decrease in overall capital invested over the next 5 years in drug research companies. While U.S. and European countries' investors were lukewarm about biotech, respondents from China, India and Brazil expect strong growth in biotech investing.
In the near-term, biotechs must be creative about where they find capital to advance their new therapeutics. Big Pharma companies have boosted their involvement in venture investing, but statistics from the first half of this year indicate that drugmakers' investments in biotech haven't been enough to support levels of backing the industry has enjoyed in the past.
Analysis: A buyer's market dominates the H1 biotech deal scene|
Biotech fundraising sours in a bleak first half
BIO's James Greenwood sees industry optimism returning
Deloitte: The price of R&D success soars as investment returns shrivel