The stock market pullback and lackluster IPO market have weighed on biotech venture financing--but only a bit. The sector is still on track for its second-highest venture financing total ever, behind last year’s sums. That’s according to the latest data through the first half of this year from PricewaterhouseCoopers and the National Venture Capital Association.
VCs are continuing to back early stage deals, despite the need to keep financing late stage companies with IPOs that require continued investment--or with IPO potential that remain on hold during this election year.
“Venture investors are still supporting new entrants at same pace as prior years, but they are having to deploy more dollars in late stage companies,” PwC Life Sciences Partner Greg Vlahos told FierceBiotech. “This was a good quarter for IPOs, 9 out of 12 IPOs this quarter were for biotechs. But investors had to buy a large part of the IPO book. Normally, we wouldn’t see those dollars deployed in an IPO setting.”
VCs invested more than $3.6 billion in biotech during the first half of the year, which puts investment roughly on track for $7.3 billion for 2016. That's as compared with $7.7 billion in 2015, a record year for biotech venture financing.
Vlahos doesn’t expect to see the biotech IPO market strengthen much this year due to the overall market volatility typical of a presidential election year.
“This may be the number of IPOs we see going forward, but we will not see a substantial increase,” he said. “We will get more clarity after the fourth quarter. There are a lot of companies in the pipeline waiting to see what happens in early January.”
Biotech did see a shrinking share of overall venture capital in the second quarter, due to a couple of megabillion dollar financings for mobile software plays Uber and SnapChat. Biotech had its own smaller version of big rounds. The largest last quarter was $220 million for J. Craig Venter’s ambitious genomics play Human Longevity, in addition to a $100 million round for synthetic biology company Gingko BioWorks.
As biotech tries to tread water, med tech venture has slid a bit but not entirely out of its typical range.
“Med tech floats between $2 billion and $3 billion a year, this year it’s on the lower side trending toward $2.1 billion to $2.2 billion,” noted Vlahos. “There are IPOs on the biotech side and some larger M&A deals, we’re seeing more money in biotech versus device. It’s staying within the band but at the lower end.”
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