Big rounds push 2014 biotech venture funding to near-record $6B

With a big assist from Moderna's recent monster round, the biotech industry came within a rounding error of breaking the annual record for new venture investing in 2014, racking up $5.96 billion in total investments in a frenzied year of deals, data and buyouts, according to The MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters.

To hit that figure, biotech VCs came up with $2 billion in new deals in the fourth quarter of 2014, the largest sum the venture analysts have counted for a three-month period in the past 20 years.

While flirting with the record top, biotechnology investments jumped 29% over a busy 2013, as the deal pace slowed a tad to a total of 470 for 2015. As the industry plowed through an unprecedented surge of IPOs, biotech accounted for the second biggest sector tracked by analysts involved with the MoneyTree Report.

"It's been just a fantastic year for biotech," says Greg Vlahos, the life sciences partner at PricewaterhouseCoopers.

There were some exceptional drivers behind the big numbers, he adds, pointing to Moderna's $446 million round and three other big deals worth more than $100 million each in life sciences. That's a reflection of more money coming in to back companies with multiple diseases on the radar along with multiple compounds in the pipeline, to help reduce risk. There's also a lot more nontraditional capital sources stepping in, with private equity playing a bigger role earlier in the drug development game.

Obviously the wide-open IPO window has played a big role in all this, adds Vlahos, and there are good signs that the trend has legs that can carry it well into 2015. A slowdown in IPOs would likely trigger a slide in venture funds for late-stage companies, he says, but with a 25% increase in funding for early-stage life sciences companies in 2014, startups are likely to continue to do well in the year ahead.

The venture track record for 2014 is part of what has become a familiar story through the course of this year. M&A activity broke the $200 billion mark last year, even without any megamergers to warp the figure. Instead there was a spike in mid-sized deals, with Roche ($RHHBY) buying the likes of InterMune ($8.3 billion) as well as Seragon ($1.7 billion). IPO's, meanwhile, continued at a blistering pace, with high-profile companies grabbing big sums from a new generation of investors. And between M&A deals and IPOs, venture groups were able to excite their backers with some sizable exits.

As a result, venture groups pushed ahead with a whole roster of new funds in recent months.

For the industry as a whole, adding in devices, VCs poured in $8.6 billion--the highest number since the financial crisis hit in 2008. That money went into 789 deals, a 29% spike over 2013. Dollars invested into life sciences companies accounted for close to $1 of every $5 of venture money tracked in 2014.

- access the report through the NVCA

Editor's Corner: The JP Morgan mood: Damn the biotech valuations and full speed ahead in 2015

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