Investor appetite for “megadeals” of $100 million or more grew during the second quarter, helping explain why biopharma venture capital investment more than doubled compared with a year ago, even as the number of deals stayed flat, according to a report released this week.

Investors raised $4.047 billion in 126 biopharma VC deals during Q2 2018, according to the most recent quarterly PwC/CB Insights MoneyTree™ Report. That’s 117% above the $1.867 billion recorded for the second three months of 2017.

And while the number of deals in Q2 2017 was slightly higher at 128, the biopharma dollar and deal numbers may ultimately be higher than recorded because they do not include a handful of “stealth mode” investments also recorded in the “healthcare” sector, for which details are unavailable. A total $68.46 million was invested in three stealth-mode startups during the second quarter, up nearly two-thirds in dollars from the $41.77 million invested in five stealth companies.

The second quarter finished slightly ahead of the first quarter in both dollars and deals, as PwC/CB Insights recorded a total $4.151 billion in 106 deals.

Of the total $4.047 billion invested in biopharma, more than one-third (34.5%) or $1.396 billion was showered by investors on the seven companies that received megadeals.

Two of those companies received $300 million each. Allogene Therapeutics emerged in April when Pfizer announced it had taken a 25% stake in the cancer-fighting startup. Pfizer also agreed to contribute assets to Allogene that included its lead allogenic chimeric antigen receptor T-cell (CAR-T) candidate UCART19, licensed from Servier—as well as 16 preclinical CAR-T candidates licensed from Servier and Cellectis.

Allogene is a portfolio company of the life sciences investment firm Two River, formed by an investment consortium that included Pfizer as well as TPG, Vida Ventures, BellCo Capital, and the University of California Office of the Chief Investment Officer, among others.

Also awarded $300 million in VC financing during Q2 was cancer diagnostics firm GRAIL, which on May 21 said it had completed an oversubscribed Series C financing. The Series C was led by Ally Bridge Group, co-led by Hillhouse Capital Group and 6 Dimensions Capital, and included Blue Pool Capital, China Merchant Securities International, CRF Investment, HuangPu River Capital (HPR), ICBC International, Sequoia Capital China, and WuXi NextCODE.

The second quarter financing brought to more than $1.5 billion the amount of capital raised by GRAIL since the company was formed in early 2016.

Targeting the Chinese Market

The second-highest megadeal completed during Q2 was the $260 million in early-stage financing recorded by PwC/CB Insights for Brii BioSciences, a Durham, NC, developer of new infectious disease medicines exclusively for the Chinese market. Investors in Brii included ARCH Venture Partners, 6 Dimensions Capital, Boyu Capital, Yunfeng Capital, Sequoia Capital, and Blue Pool Capital.

Another Durham startup, Precision BioSciences, said June 26 it had closed on an oversubscribed $110 million in Series B financing, with the aim of funding further product development efforts based on its ARCUS® genome editing platform.

Precision’s financing was led by ArrowMark Partners, and attracted numerous new investors, including Franklin Templeton Investments, Cowen Healthcare Investments, Brace Pharma Capital, Pontifax AgTech, OCV Partners, Adage Capital Management, Cormorant Asset Management, Gilead Sciences, Vivo Capital, Alexandria Venture Investments, Ridgeback Capital, Agent Capital, and entities affiliated with Leerink Partners.

The new investors joined seven existing investors: venBio, F-Prime, RA Capital Management, Amgen Ventures, Osage University Partners, DUMAC, and the Longevity Fund also participated in the financing.

Three additional startups completed megadeals during the second quarter. Kaleido Biosciences, a developer of Microbiome Metabolic Therapies™ (MMTs) for rare genetic disorders, closed on $101 million in Series C financing. Kaleido’s financing drew new investors that included a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA), Fidelity Management and Research Company, Invus, and Rock Springs Capital, along with the company’s founder, Flagship Pioneering, and several undisclosed investors.

Two Massachusetts startups each won $100 million in financing: Constellation Pharmaceuticals of Cambridge, MA, said on April 9 that it would use its funding to advance its cancer epigenetics platform and accelerate development of its ongoing therapeutic programs. Those are led by its two clinical-phase candidates—the EZH2 inhibitor CPI-1205 for metastatic castration-resistant prostate cancer and solid tumors; and the BET inhibitor CPI-0610 for myelofibrosis.

Constellation’s financing was raised by new investors that included Cormorant Asset Management, Deerfield Management, Fidelity Management and Research Company, Hillhouse Capital, NS Investment, OrbiMed, Sirona Capital, and Venrock Healthcare Partners. They joined current investors that included The Column Group, Third Rock Ventures, Venrock, SROne, University of California Investment Office, Topspin Partners, and Casdin Capital.

Stealth BioTherapeutics, a developer of therapeutics for diseases involving mitochondrial dysfunction, said on June 18 that it closed on an aggregate $100 million of financing in two convertible note rounds led by Nan Fung Technology’s Pivotal Beta. Existing investor Morningside Venture joined new institutional investors that included funds associated with Atlantis Investment Management, BVCF Management, CMBC Capital Holdings, Kingdon Capital, Ocean Equity Partners and Sagamore Investments.

Companies described solely as “biotechnology” raised more than half (52%) of total biopharma VC financing with just over $2.107 billion. Of the companies for which a specialty description was available, drug development companies won the most in VC funding during Q2, with $1.277 billion, 31.6% of the total.

Rounding out biopharma VC financing were companies focused on disease diagnosis ($324.4 million raised by six companies), drug discovery ($160.07 million), pharmaceuticals/drugs ($132.82 million), drug delivery ($33.89 million), and drug manufacturing ($17.39 million).

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