Biotech VC climate warmer than some thought

Lots of industry people have been decrying what has been seen as a dearth of venture money for biotech startups in recent years. However, a recent analysis of the situation during 2011 suggests that all of the doom and gloom appears to be unfounded. And get this: Biotech venture investing saw significant growth last year, and even early rounds of financing picked up in the fourth quarter, according to research from OnBioVC.

As cited in Pharmalot, OnBioVC says biopharma companies secured $3.5 billion in venture capital in 2011, up 16% from the previous year. There was also a jump in the number of financing deals (160) versus 2010 (153). And, as in the past, biotech topped other life sciences sectors such as medical devices, diagnostics and biofuels in total capital raised by a wide margin. (For the record, FierceBiotech last month reported the surge in biotech venture investing last year with figures from the National Venture Capital Association and PriceWaterhouseCoopers.)

Who's to blame for the misconception about the availability of venture money for biotechs? Adam Rubinstein, managing editor of OnBioVC, explained those newly hatched biotechs are culprits. In a note to Pharmalot, Rubinstein said: "What has contributed to this misnomer, in general, is the acceleration of university-based tech transfer offices focused on building patent portfolios and spinning out record numbers of newcos (new companies) who are seeking venture funding, and the contraction of availability of non-dilutive (grant) funding."

Rubinstein also points out there was a record number of Series A rounds in the fourth quarter, combating complaints that VCs are ignoring startups and making less risky bets on later-stage drug developers. The NVCA data, however, pointed out a 15-year low last year in the amount of money that went to biotech and medtech startups.

There are lots of ways to slice and dice data, of course, but Rubinstein's information appears to weaken arguments that biotech VC is a wounded animal, licking its scrapes and cuts until the IPO drought for drug developers ends. Still, those who maintain the climate for raising money for newly hatched companies can still point to developments of the recent past. For example, long-time life sciences backer Prospect Venture Partners is reportedly throwing in the towel for its fourth fund last year, and other VCs struggling to refill their coffers after underperforming with past funds.   

- check out the Pharmalot piece
- here's OnBioVC's report (.pdf)