BioPharma, Startups

Some shifts in venture capital financing of biopharma companies appear underway

Silicon Valley Bank released its healthcare investments and exits trend report for the first half of 2019. It shows, among other things, oncology losing its first-place status in terms of Series A dollars raised.

Venture capital fundraising this year by biopharma startups is on course to fall behind last year, though it will be above the figure for 2017. But the biggest story may be where that funding is going.

Silicon Valley Bank released its 2019 midyear report, “Trends in Healthcare Investments and Exits 2019,” on Thursday. So far, healthcare companies have raised $5.8 billion in the first half of this year, compared with $9.6 billion for all of 2018 and $9.1 billion in 2017.

But one of the most noteworthy trends is that oncology appears to have lost its first-place status in terms of Series A dollars raised. Although oncology saw the largest number of deals by indication, with 21 Series A rounds, oncology companies raised $483 million. By contrast, companies focused on development platforms saw 20 Series A deals valued at $659 million.

“If you go back historically, oncology has dominated venture investing since 2013,” said SVB Managing Director and report author Jon Norris, in a phone interview.

“Platform” refers to early-stage companies that are developing technologies for drug development, but that may not have determined for what indication, which could nevertheless turn out to be oncology. Norris said that doesn’t mean oncology is dying out, but investing in platforms rather than specific types of indication like oncology helps expand possibilities.

“Having a platform technology that can be applied in multiple indications really allows for more shots on goal and allows for failures in the pipeline that can be replaced by more opportunities that can be interesting,” Norris said.

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Another significant change observed is that the number of investments in companies pursuing rare and orphan diseases by crossover investors has dropped. This year, Norris said, of the 20 orphan and rare disease venture-backed financings, the top 15 crossover investors participated in only three of them. According to the report, there have been seven Series A rounds in orphan and rare disease companies so far this year, valued at $371 million. Norris added it is likely there will be a bit of a slowdown this year compared to years past, but it also raises questions about the drugs themselves.

“Is there going to finally be some potential discussion on the price of these drugs?” he said. “That is always the question on people’s mind when you think about these opportunities.”

The biggest losers have been firms developing anti-infectives, which so far have seen one Series A investment worth $3 million, compared with 10 financings worth $104 million last year and 17 worth $309 million in 2017.

Photo: Feodora Chiosea, Getty Images