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Aug 1, 2009 (Vol. 29, No. 14)

Biotechnology Investments Exhibit Resilience

Slivers of Light Are Evident in a Variety of Places Including Venture-Backed Exits

  • Opposing Forces

    Most of the investors surveyed by Deloitte Touche Tohmatsu and the NVCA in their 2009 Global Venture Capital Survey believe they will invest in fewer companies in the short term; only a handful (13%) said they expect to increase their investing activity. However, when asked to rank the sectors with growth potential, almost 25% of the investors indicated biopharma.

    Two trends identified in the survey include increased investment overseas and continued growth in cleantech investments. Because of the close connection between many clean technologies and the life science’s and biotechnology’s global reach, both of these trends offer opportunities for entrepreneurs in life sciences.

    Another trend identified by more than one-third of the Deloitte/NVCA survey participants is a move by venture investors toward later-stage financing, including VC financing in public companies. Only 6% of investors across all sectors surveyed intended to move toward earlier stage investing.

    According to MoneyTree data, approximately 45% of investments in 2008 were early-stage or seed compared to approximately 35% of early stage and seed investments so far in 2009. Dollars invested in early-stage and seed investments in 2008 represented approximately 36% of total biotech investments compared to 30% for investments in the same stages in the first half of 2009. Early-stage dollars continue to be harder to come by. But according to the Deloitte/NVCA survey, most investors think this is a terrific time to be investing.

    A final trend is that there are slivers of light shining through at the end of the tunnel for venture-backed exits. There were five venture-backed IPOs in the first half of 2009, compared with six in all of 2008. None of the 2009 IPOs and only one of the 2008 IPOs involved a life science company, but if the public markets continue to warm back up to the idea of new issuances, venture investing would increase on all fronts. And given the number of life science VC investments in public companies recently, biotech could benefit quickly and aggressively from even small openings in the IPO window.

    While that window remains closed, acquisitions are the primary exit for investors. Thomson-Reuters and the NVCA reported four biotech acquisitions in the first half of 2009 with a combined value of approximately $550 million. In 2008, there were a reported 16 biotech acquisitions, of which nine had disclosed values aggregating $893 million.

    The numbers don’t give us an adequate sample to draw firm conclusions, but on a per-reported-deal basis, 2009 is looking better than last year. So raise your half-full glass and toast the good fortune of those who have enjoyed success so far this year and those who may find success in the months to come.

  • Investment Profiles

    A number of companies received venture-backed biotechnology investments in the first half of 2009. Anecdotally, a significant portion of the higher-dollar investments were made by established venture funds in public companies and were directed to companies anticipating or in the middle of clinical trials for cancer and infectious disease treatments.

    An intriguing example of the potential for seeing a glass half full and rising is Boulder, Colorado’s Clovis Oncology, a start-up founded at the beginning of 2009 to acquire, develop, and market anticancer compounds. Led by executives from Pharmion, which was acquired last year by Celgene for $2.9 billion, Clovis raised $145 million in May from New Enterprise Associates, Domain Associates, Frazier Healthcare and Technology Ventures, Abingworth Management, Proquest Investments, Aberdare Ventures, and Versant Ventures.

    After going public in 2006, San Diego-based Cadence Pharmaceuticals, which in-licenses and develops infection-fighting products for use in hospital settings, continued to raise private equity funding, including approximately $25 million in 2008 and $87 million in 2009. Investors included Venrock, Frazier Healthcare and Technology Ventures, Domain Associates, Versant Ventures, New Enterprise Associates, Bay City Capital, and T. Rowe Price Associates.

    Hyperion Therapeutics, based in South San Francisco, closed a $60 million Series C financing to fund Phase II and Phase III clinical trials for its gastroenterology and hepatology therapies. Bay City Capital and Panorama Capital led the financing. which included existing investors, Highland Capital Partners, New Enterprise Associates, and Sofinnova Ventures.

    Anacor Pharmaceuticals raised $50 million in January from GlaxoSmithKline, Schering-Plough, Rho Ventures, Venrock Associates, Care Capital, and Aberdare Ventures to further develop products based on its boron chemistry platform.

    Proteon Therapeutics raised $50 million in Series B funding to continue clinical studies and development of its products targeted at preventing arteriovenous fistula maturation failure and arteriovenous graft failure in patients with end-stage renal disease who are on or preparing for hemodialysis. Investors included Bessemer Venture Partners, Devon Park Bioventures, TVM Capital, Skyline Ventures, Prism VentureWorks, Intersouth Partners, and several of Proteon’s original angel investors.

    Symphogen, a Danish company founded in 2000, raised €33 million from Essex Woodlands Health Ventures and existing investors to support clinical development of its antibody products.

    Cempra Pharmaceuticals was formed in 2006 in North Carolina. In May, it closed $46 million of Series C financing that will be used to advance clinical development of the company’s lead antibiotic compounds and the company’s preclinical pipeline. Investing in the round were Quaker BioVentures, Devon Park Bioventures, Aisling Capital, Intersouth Partners, and others.


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