Venture rounds shrivel as "bipolar" investors turn cautious

The steady drumbeat of bleak venture reports in the biotech industry is continuing this week with some fresh analysis from BioWorld which shows a whopping 60% plunge in third quarter investing. Not only was there a quarter to quarter nosedive, but BioWorld also notes a 48% drop in venture financing from the same period in 2010.

FierceBiotech reported a pair of disturbing VC reports last week. The bellwether Prospect Venture Partners abandoned its attempt to put together a $250 million fund, citing a lack of investor interest in high-risk developers. Prospect is now reportedly holding on to its cash reserves to back its existing portfolio and won't be supporting any fresh upstarts. And the National Venture Capital Association (NVCA) highlighted a venture survey noting that 39% of the VCs have pulled back from U.S. deals, turning to developers outside the U.S. which don't have to deal with the FDA--an agency that has come under enormous pressure to make over its approval process.

BioWorld's analysis comes without the NVCA's political agenda. But it underscores much the same bottom line, with biotech companies raising only $2.8 billion in the third quarter. But you don't have to go far to find a silver lining: While the quarterly report looked bleak, year to date biotechs ginned $16.1 billion, up 18% over 2010.

Matthew Geller told the biotech news group that the seasonal chill has much to do with all the "uncertainty" regarding a possible recession. But what goes around can come around quickly in this industry.

"If things do turn, they would turn on a dime," Geller told BioWorld. "The market is bipolar."

- here's the report from BioWorld