UPDATED: Torrid pace of VC investing in H1 sets a new biotech record

Sanderling Ventures General Manager Tim Mills

The venture money machine backing the biotech industry in the U.S. was operating in overdrive during the second quarter, generating a record amount of investing in new drug development as IPOs continue their romp in the third year of a wide-open market.

A grand total of $2.1 billion was pumped into biotechs in Q2 in 126 deals, which is the largest dollar count since the group began keeping records in Q1 1995, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters. The cash number edges out a blockbuster $2 billion invested in the last quarter of 2014, bringing the total to $3.8 billion for the first half and putting the industry on track to crush last year's record $6 billion haul.

"Still blistering," summed up Atlas Venture's Bruce Booth in an email.

The number of deals was flat, though, so the emphasis for venture investing in Q2 was on deal size and cutting-edge technologies. South San Francisco-based Denali Therapeutics--a neurodegeneration upstart backed by an ex-Genentech crew--came up with a huge $217 million round from Arch, Fidelity and Flagship. and Seattle-based Adaptive Biotechnologies, a Fred Hutch spinout focused on immune sequencing, came in with $195 million. 

Rounding out the top 5 are ReGenX Bio, a Rockville, MD-based group that's been providing a significant amount of the new gene therapy IP now in play, which got $70.5 million, South San Francisco-based CytomX with $70 million and Melinta (New Haven, $67 million). The next 5 are all East Coast bets: Unum (Cambridge, $65 million); Dimension (Cambridge, $65 million); Voyager (Cambridge, $60 million); Jounce (Cambridge, $56 million) and the early-stage Edge Therapeutics (Berkeley Heights, NJ, $56 million).

Top venture players emerged from the 2008 financial crisis with thinner ranks, but ultimately fatter wallets. Venture groups of all stripes have been beefing up on new funds while new crossover investors have also been coming in to take advantage of the current bonanza as biotechs line up in the IPO queue. The latest numbers indicate that the industry is currently in the most bullish period ever for raising biotech cash and starting new companies or advancing older ones.

The numbers spotlight a long-running argument in biotech: Are we seeing trends associated with a frothy, overvalued bull market for a biotech industry headed for an inevitable and painful fall, or a sustainable surge of investment interest in major scientific advances that are breeding real, valuable new treatments.

Put Tim Mills, a general manager at Sanderling Ventures, in the sustainable corner.

"I think we kind of saw this coming," says Mills. "We are seeing an abundance of new scientific results especially with regard to human biology that understandably has translated to an all-time high in deal flow activity. We're seeing truly innovative opportunities in terms of all stages of investing; not just early-stage, it's all across the board."

Until the scientific innovation starts to peter out in terms of new products, Mills plans to remain an optimist. Sanderling, meanwhile, has tilted more toward small and large molecule development in its portfolio over the last two years, with more biotech and a little less med tech than in the past in order to take advantage of the trends.

(CORRECTION: The NVCA confirmed that one of the megarounds listed, a $200 million injection for Aduro, was in fact an upfront payment rather than a VC play. FierceBiotech deducted that from their numbers to provide a more accurate look at the trends.)

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