With IPOs still booming, follow-on financings sizzling and venture capital rolling in at a steady pace, the biotech industry has been stocking up on billions of dollars in cash.
The folks at Burrill did the math for the cash in February and came up with an impressive $2.9 billion in new money raised for life sciences companies. About $1.1 billion of that was delivered to 18 companies which wrapped an IPO, with $1.8 billion racked up in follow-on offerings--the vast majority of which was raised in the U.S. And while Q1 numbers are typically a bit weak on the venture side, the $4.5 billion raised in the U.S. in 2013 tied to the new hunger for public offerings is giving a solid boost to the VCs as they scout for new investments.
The investment community is clearly turned on by the huge upside that's available in biotech. Burrill points to the InterMune ($ITMN) experience, where shares shot up 170% after a comeback Phase III study for IPF, as evidence of the allure of biotech. Then there are the more established biotechs like Gilead ($GILD), where the CEO just broke into billionaire status after the approval of the hep C drug Sovaldi pushed up its stock price.
"Unlike the disappointment that overshadowed drug launches in recent years," Burrill said in a statement, "these new products are meeting and exceeding expectations as they are proving to be not only effective, but also safer and more easily tolerated than alternatives."
It's not easy to stay focused on real value when overnight fortunes are being made. There have been plenty of disappointing drug launches in recent history, and there are more to come. And while the potential to win big has perhaps never been more obvious, this is also an industry that punishes failure severely. Perhaps the most important aspect of all the money rolling into biotech is that many companies are stockpiling cash that can fund R&D for years to come. And that should help biotech when the prospects for raising money aren't nearly this bonny.
- here's the release from Burrill (PDF)
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