By Donald Zuhn --
A recent article in Signals Magazine reports that biotech and specialty pharma companies raised 41% more revenue in the first six months of 2009 ($8.3 billion) than they did in the same period in 2008 ($5.9 billion) ("Biotech Financing Gathers Steam"). Despite the overall rise in funding for the first half of the year, investment in the second quarter dropped by 4% ($180 million) from the first quarter of the year. The online biotech industry magazine also noted that while public offerings contributed more than $1.8 billion to the funding total (up 78% from 2008), and money raised by alternate financing schemes added $4.8 billion (up 75% from 2008), venture capital was down 8% from 2008 (from $2.4 billion to $2.2 billion). Despite the drop in venture funding, the report suggested that Clovis Oncology's ability to raise $145 million in venture capital demonstrated "once again venture capitalists' (VC) old adage that there will always be money for the right company."
Signals Magazine contended that the data on the whole "indicate[d] that VCs are not turning their backs on biotech start-ups, contrary to some analyses" (without mentioning the sources of such analyses), and cited the latest MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association (NVCA), which showed a 15% increase in venture dollars (rising from $3.2 billion in the first quarter to $3.7 billion in the second quarter) for roughly the same number of deals (up slightly from 603 in the first quarter to 612 in the second quarter). The MoneyTree Report noted that biotechnology received the highest portion of these venture dollars, securing $888.1 million of the second quarter talley. While second quarter biotech venture funding was up 54% from the first quarter ($576.6 million), it still lagged behind venture funding from the second quarter of 2008 ($1,062.3 million) -- as the Signals Magazine report had also indicated.
In summarizing the biotech/pharma financial landscape for the first half of the year, Signals Magazine concluded that:
By all accounts . . . the capital markets are starting to ease -- if ever so slightly. Biotech and specialty pharma companies are raising money again through underwritten public offerings (20 of them by the end of July) and registered direct offerings (33 by the end of July). The credit markets opened to a few select biotech firms in May, and venture capital investments are holding steady.
But make no mistake: The financial crisis is far from over. While the biotech sector raised 41 percent more money in the first half of 2009 than it did in the first half of 2008, it's still severely under-funded. Companies raised 55 percent less money in the first half of 2009 than they did in the first half of 2007 ($18,559M) and 49 percent less in the first half of 2009 than they did in the first half of 2006 ($16,458M).
Meanwhile, BusinessWeek reported last week that while research spending has been dropping over the past few years (decreasing 4% from the fourth quarter of 2007 to the second quarter of 2009), thirteen of the 25 companies that "most aggressively" increased their research budgets over the first half of 2009 were from the pharma/biotech sector ("Drug, Biotech Research Spending Hangs Tough"). The article notes that these thirteen companies raised R&D spending by a collective $2 billion in the first half of the year.
For additional information regarding this and other related topics, please see:
• "Investors Saw Biotech Rebound Coming," August 17, 2009
• "Is Biotech/Pharma Beginning to Bounce Back?" August 12, 2009
• "Docs at BIO: Steve Burrill's State of the Biotechnology Industry Report 2009," May 19, 2009
• "Docs at BIO: Ernst & Young Hosts Super Session Addressing Financial Performance of Biotech Industry," May 19, 2009
• "First Quarter Venture Capital Funding at 12-Year Low," April 23, 2009
• "BIO Meets the Press," February 26, 2009
• "NVCA Study Shows Decline in 2008 Investment; BIO Study Predicts Biotech Rebound in 2009," February 16, 2009
• "NVCA Predicts Another Slow Year for Venture-backed Businesses in 2009," December 18, 2008