The initial public offering window continues to draw a steady stream of investment from venture and private equity investors allocating funding to what’s referred to as the crossover round that precedes an IPO. That was one of the takeaways of the MoneyTree report analyzing third quarter investment trends by the National Venture Capital Association and PricewaterhouseCoopers. Although it was always going to be tough to duplicate what was a blockbuster second quarter, Greg Vlahos, a partner with PwC, said in a phone interview with MedCity News that he was encouraged by biotechnology and medical device investment trends.
Investments in later stage companies increased 3 percent to $3.3 billion going into 200 deals in the third quarter, the largest quarterly amount invested in later stage companies since the third quarter in 2007. Later stage deals accounted for 20 percent of total deal volume in the third quarter — unchanged from the prior quarter.
Bobby Franklin, National Venure Capital Association CEO, said in a statement from the association, “The emergence of non-traditional investors, including hedge funds and mutual funds, is contributing to the increase in venture investing this year. Another factor that can’t be ignored is the changing nature of our economy, where startup companies are disrupting entrenched industries and, in some cases, creating new industries altogether.”
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There were 23 venture-backed IPOs in the third quarter and 18 of them were biotech and medical device IPOs. One was the first company to commercialize a bionic eye. Second Sight Medical raised about $32 million in an IPO in August.
When it comes to investing in biotechnology companies, Vlahos said the focus is on the ability of companies to access public markets quicker than past
public markets in an increasingly volatile environment.
Despite the strength of the second quarter, when investment in life science companies rose to $2.5 billion, Vlahos said biotech and medical device companies still performed well. Deal values in medical devices may have fallen in the third quarter, but deal volume remained the same as the second quarter
“If you look at the third quarter on a standalone basis, biotech [dealflow] is even with the first quarter and medical devices are almost the same as the first quarter,” Vlahos said
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One example of a high profile fundraise in the third quarter includes the $104 million raised by AdaptImmune last month. The company, with headquarters in Philadelphia, is developing a way to generate high affinity T cell receptors to combat several kinds of cancer. It is also began a strategic alliance with GlaxoSmithKlein as part of a deal earlier this year.
From a medical device perspective, these companies have attracted $1.9 billion in investment for the year to date. “We expect biotech to beat 2013 [numbers] and the same goes for medical devices,” Vlahos said. “Both are expected to outpace 2013.”
The report revealed that first-time financings in the life sciences sector fell 11 percent from the prior quarter with $217 million going into 50 companies, compared with 32 of the companies in this category receiving $245 million in the previous quarter.
Still, the fourth quarter is off to a roaring start. Dermatology biotech business Dermira had a $125 million IPO earlier this month
