VC Funding on the Wane
John Hodgson, director of Critical I, a business development and intelligence consultancy specializing in the life sciences, reported on his analysis of VC activity in Europe. He found a decrease in early- round finance, but an increase in later- round finance. Looking down the road, however, Antoine Papiernik, managing partner of Sofinnova Partners, said that he believed VCs would make more early-stage investments.
Hodgson also predicted a slight decrease in the size of deals occurring everywhere in Europe except in Switzerland. “In 2007, there was a move away from high-risk investment, and in 2008 that trend continued. Large pharma seems to be picking off the best among the larger biotech,” he said, adding that, strangely, the current global crisis could have the effect of making biotech actually look less risky.
Private investor Andy Richards, Ph.D., shared his belief that there is actually enough cash in the European public biotech system for it to do whatever it wants. However, there is an issue with poor management in biotech, especially in the U.K., although he is not convinced that management in the financial sector is necessarily any better. He also believes there are real signs that pharma is beginning to diversify its business model, and he predicts more pharma spinouts, with R&D-experienced people being recycled. In addition, he feels there could also be a resurgence in companies, without a big cash burn, who provide services, licensing, and deals.
Finally, Sam Fazeli, Ph.D., head of European research at Piper Jaffray, thinks that the bottom of the market is close and that there will be more mergers and acquisitions activity in the future.