VC Investment Jumps 51% Year-over-Year During Q3

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Biopharma venture capital activity maintained its red-hot pace during the third quarter of 2018


Biopharma venture capital activity maintained its red-hot pace during the third quarter of 2018, driven by a handful of deals exceeding $200 million, according to a report released this week.

Investors raised $4.002 billion in 130 biopharma VC deals during Q3 2018, according to the most recent quarterly PwC/CB Insights MoneyTree™ Report. That’s 51% above the $2.643 billion in 122 deals recorded for July–September 2017.

Those figures do not include “stealth mode” investments also recorded in the “healthcare” sector, for which details are unavailable. The value of those deals declined year over year, to $14.01 million in Q3 2018 from $49.08 million a year earlier, though the number of stealth deals remained consistent at four.

The third quarter dipped 1% from the $4.047 billion in 126 deals recorded during the first quarter.

Nearly half (43%) of all biopharma investment during Q3 was raised through eight “megadeals” of over $100 million, with nearly one-third (30%) of the total $4.002 billion ($1.218 billion) coming from four deals exceeding $200 million.

The third quarter’s largest biopharma financing deal was the $438 million in equity financing closed by Samumed and announced August 6. Founded in 2008, Samumed focuses on developing treatments based on its technology platform, designed to modulate the Wnt pathway in select tissues with small molecules.

A month later, Samumed garnered an additional $10 million upfront when it sold North American rights to its Phase I idiopathic pulmonary fibrosis (IPF) candidate SM04646 to United Therapeutics, in a deal that could generate more than $350 million for the privately-held San Diego biotech.

The second biggest financing saw 23andMe receive a $300 million equity investment from GlaxoSmithKline under a collaboration designed to accelerate development of new therapies for both companies by using genetic data to identify new drug targets.


Building a ‘Marketplace’

Indigo Ag captured $250 million in Series E financing toward its efforts to develop microbial products that increase crop yields by overcoming the environment, disease, and pests, with a focus on growing its recently-launched Indigo Marketplace™ digital platform for buying and selling grain.

The financing, announced September 18, came from new and existing investors that included Baillie Gifford, Investment Corporation of Dubai, the Alaska Permanent Fund, and the company’s founder, Flagship Pioneering. With the Series E capital, Boston-based Indigo Ag has raised a total $650 million.

Also winning mega-funding, at $230 million in Series B financing was Gossamer Bio, a San Diego developer of immunology-based therapeutics for autoimmune, allergy/inflammation, and immuno-oncology indications. New investors participating in this financing include among others, a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA), Invus, The Baupost Group, and Polaris Partners. Gossamer Bio’s existing investors—ARCH Venture Partners and Omega Funds—also “meaningfully” participated, the company said on July 23.

Four companies won between $100 million and $200 million during the third quarter—led by Alector of South San Francisco, CA, which on July 25 said it received $133 million in Series E financing. Alector is a neurology-focused developer of immuno-modulatory therapies for Alzheimer's disease and other neurodegenerative disorders.

Alector raised its capital through the venture investment firms of three biopharma giants and traditional VC firms. They included Deerfield Management, AbbVie Ventures, Federated Kaufmann Fund, Section 32, Euclidean Capital, Foresite Capital, Lilly Asia Ventures, New Leaf Venture Partners, Perceptive Advisors, Casdin Capital, Polaris Partners, OrbiMed, MRL Ventures, GV, the Dementia Discovery Fund, Mission Bay Capital, Amgen Ventures, and others undisclosed investors.


Corporate VC Expands

The presence of AbbVie, Lilly, and Amgen among Alector’s investors illustrates the growth of corporate VC financing in recent years—from $414 million in 2000 to $3.2 billion in 2017 among members of Pharmaceutical Research and Manufacturers of America (PhRMA), according to a report produced by TEConomy and released today by the industry group.

Immunotherapy developer Altreca of Redwood City, CA, on September 12 said it won $125 million in Series C financing led by an existing investor that was identified only as “a large U.S.-based, healthcare-focused fund,” with participation from Wellington Management Company, and Cormorant Asset Management, and new investors Aisling Capital, Boxer Capital of the Tavistock Group, EcoR1 Capital, Redmile Group, Samsara BioCapital, and funds managed by Tekla Capital Management.

Allogene Therapeutics of South San Francisco on September 6 completed a $120 million private financing of convertible notes. It was led by Perceptive Advisors and included Deerfield Management Company, Fidelity Management and Research Company, Franklin Templeton Investments, Jennison Associates (on behalf of undisclosed clients), Surveyor Capital (a Citadel company), funds and accounts advised by T. Rowe Price Associates, Inc., the University of California Office of the Chief Investment Officer, venBio Select Advisor, as well as additional large mutual funds.

The financing brought the developer of allogeneic chimeric antigen receptor T-cell (CAR-T) therapies for cancer to $420 million. The other $300 million came in April when Allogene emerged from stealth mode after Pfizer said it had taken a 25% stake in the cancer-fighting startup. Pfizer also agreed to contribute assets to Allogene that included its lead allogenic CAR-T candidate UCART19, licensed from Servier—as well as 16 preclinical CAR-T candidates licensed from Servier and Cellectis.

Chicago-based Tempus Labs, a precision medicine company building what it calls the world’s largest library of molecular and clinical data, and an enabling operating system, on August 29 raised $110 million in Series E financing from Baillie Gifford, funds and accounts managed by T. Rowe Price, Revolution Growth, New Enterprise Associates (NEA) and other existing investors.

Companies described solely as “biotechnology” raised more than half (54%) of total biopharma VC financing with just over $2.160 billion raised in 67 deals. Of the companies for which a specialty description was available, drug development companies won the most in VC funding during Q2, with $884.45 million, 22% of the total, raised in 33 deals.

Rounding out biopharma VC financing were companies focused on disease diagnosis ($481.71 million raised in 15 deals), drug discovery ($354.29 million in 7 deals), pharmaceuticals/drugs ($81.48 million in 4 deals), and drug delivery ($29.6 million in 3 deals). Unlike recent quarters, no financing was recorded in the category of drug manufacturing.






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