Exclusive: Fewer Deals, Capital In Biotech In Q3 But Sector Remains Popular, Says VC

Published: Oct 20, 2014

Fewer Deals, Capital In Biotech In Q3 But Sector Remains Popular, Says VC

October 20, 2014

By Riley McDermid, BioSpace.com Breaking News Sr. Editor

Venture capitalists continue to remain interested in biotech as a stable environment to put their investments, a venture capitalist told BioSpace this week, even if a recent survey of the industry saw a dip in the amount of venture capital going directly to the sector.

Venture capitalists invested $9.9 billion in 1,023 deals in the third quarter of 2014, according to the MoneyTree Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA) released Friday, but the dollar amount parked in the life sciences sector fell 35 percent.

Deals in biotech fell 6 percent in when compared to when compared to the previous quarter. Overall, the biotechnology industry captured the third largest total during the quarter with $1.1 billion going into 110 deals, down 43 percent in dollars invested and 10 percent in deals from the prior quarter.

Deepa Pakianathan, General Partner Delphi Ventures, said in an interview with BioSpace that despite the lower numbers, venture capitalists continue to be greatly interested in the biotech sector as a stable place to invest. “The majority of innovation is happening in small biotech companies. Venture investment in biotech has been fairly consistent for the last few quarters. In addition capital raised in IPO’s has lowered financing risk,” Pakianathan told BioSpace. “Across the drug discovery world, the science is advancing and drugs are being brought to market that work really well for patients. The missing piece was financial stability. With the IPO window opening up the entire biotech ecosystem is in very good shape.”

The medical devices and equipment industry also experienced a decrease in dollars and deals compared to the second quarter, falling 13 percent in dollars to $586 million invested into the same number of deals from the second quarter for a total of 78.

Pakianathan said that is consistent with a venture capital climate with a broader interest across the entire biotech sector.

“There is a wide variety of companies being invested in currently from gene therapy, new oncology drugs, kidney disease drugs, migraine drugs to new neurological drugs,” she told BioSpace. “We’re seeing a wide variety of startups with clinical data that are really close to doing pivotal studies that will be truly transformational for patients.”

Companies that can show proof of principal and have data driven pipelines are also going to continue to be popular with VCs, she said.

“There is always going to be huge opportunity for drugs that work for patients,” said Pakianathan. “Another piece of this story is the regulatory environment. The FDA likes first in class drugs and innovation and they have provided multiple pathways for these drugs to get approved with the right data. The regulatory environment for biotech is very positive.”

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