Venture Capital Pours Into Biotech For Biggest Quarter Since 2012: Report

Published: Oct 03, 2014

Venture Capital Pours Into Biotech For Biggest Quarter Since 2012: Report

October 3, 2014

By Riley McDermid, BioSpace.com Breaking News Staff

Venture capitalists are doubling down on biotech, according to new data released this week by the National Venture Capital Association and Thomson Reuters, which found that initial public offerings from the biotech sector accounted for more than half of the 23 deals done in the third quarter.

It was the sixth consecutive quarter with more than 20 IPOs, according to the NVCA 2014 Yearbook, prepared by Thomson Reuters, with 23 initial public offerings by venture-backed companies—13 of which were solely biotech firms.

An additional five were in the closely related field of health care.

Biotech was the second largest sector for venture investment in 2013, behind software. But it appears to be gaining, as VCs look for value in a white-hot biotech stock environment.

The data found that the third quarter was the strongest in terms of disclosed deal value since the same time period in 2012.

Players taking their companies public also saw more bang for their buck, with an aggregate deal value of $7.9 billion, the third time since 2009 that metric has exceeded $7 billion.

Venture capitalists have been seeing a lot of value realized on their investments in biotech. Of the 32 deals with disclosed prices, 25 percent debuted at prices more than 10 times the original venture investment.

The report said the activity level of the US venture capital industry is roughly half of what it was at the 2000-era peak.

“However, looking behind the numbers, we know that the industry continues to contract from the circa 2004 high of $288.9 billion,” wrote the authors. “The peak capital under management that year was a statistical anomaly caused when funds raised at the height of the 2000 tech bubble were joined by new capital raised post bubble.”

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