$1.3B VC cash surge buoys biotech as analysts point to a rebound

A blistering round of IPOs wasn't the only source of fresh cash for biotech companies in the second quarter. The National Venture Capital Association and PricewaterhouseCoopers tracked a $1.3 billion gusher of venture capital in the biotech community, a spike of 41% over Q1 as two big rounds in a mix of 103 deals helped drive the surge.

Close to a third of those biotech deals were for first-time rounds in the life sciences field, with $328 million funding startups--double the dollar pace for early-stage companies seen in the first quarter. The two big biotech rounds include an $85 million investment in Intrexon, RJ Kirk's latest biotech play, and a $60 million round for Trevena.

The NVCA and PwC use numbers gathered by Thomson Reuters for their quarterly reports.

The big surge in VC cash for U.S. biotechs in the second quarter comes on the heels of the hottest three-month period for biotech IPOs in years. So far this year maiden biotech offerings have raised about $1.5 billion, and there's no sign that the boom is slowing.

From the NVCA's perspective, it all adds up to a major turning point for an industry that had been operating at depressed levels for years.

"Life sciences investment is poised for a slow and steady recovery, provided we can continue to see progress on the regulatory front," says Mark­­ Heesen, NVCA president.

The NVCA has been hammering at the FDA for some time now, saying that the agency had been too slow in approving new therapies. Some of that pressure may have lifted, though, as the FDA handed out a growing number of "breakthrough drug" designations, promising to hasten approvals on key therapies. And the number of new drug approvals has risen for two years running.

Right now, the hope is that the FDA will continue to deliver on that front as fresh investments in life sciences companies continues to grow. And that would be a welcome turnaround for entrepreneurs in the drug development field.

Brian Chee, a general partner at Polaris Partners, says he's been encouraged by the strong IPO market in recent months. Balanced against strong numbers on the private side, he says, and the general picture supports the notion that "we should have a strong back half (of the year) as well."

Also, encouraging, he adds, is that there are more bets being placed on startups, indicating that the venture groups will be sticking with these biotechs for the long run. "When people make a bet in biotech it's not for the short term."

"The increase in early stage investing is an encouraging sign that entrepreneurs with innovative ideas can get the funding they need to succeed," remarked Mark McCaffrey, global technology partner and software leader at PwC US. "As the exit window continues to open, we'll continue to see VCs shifting their focus back to companies in the earlier stages of development."

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