Comments on: Biotech’s dirty little secret: VCs are heading for the hills — fast

By: VentureBeat » Why dangerous defibrillator leads could usher in new medical-device regulations

Tue, 30 Oct 2007 07:37:17 +0000

[...] blocked vessels. (That appears to be in sharp contrast to biotech; see the most recent funding data here.) What relatively few people understand, however, is the degree to which the device industry [...]

By: VentureBeat » Why dangerous defibrillator leads could usher in new medical-device regulations

Tue, 30 Oct 2007 07:37:17 +0000

By: David P. Hamilton

David P. Hamilton — Fri, 26 Oct 2007 22:28:22 +0000

Don, I only focused on biotech in this item because that’s where the most dramatic shift took place. Devices are still going strong, both in funding and in exits. As I’ve suggested before, I think biotech investors would love to see an IPO along the lines of TranS1 or AthenaHealth, but so far it just hasn’t happened. Although on the other hand, the M&A market for biotech remains quite strong (i.e., BMS/Adnexus and Merck/NovaCardia, not to mention public-company deals like AstraZeneca/MedImmune and TBA/Biogen).

By: Don Jones

Don Jones — Fri, 26 Oct 2007 22:22:27 +0000

David – we agree on Biotech. I was just making a distinction for the medical device sector and using an exit example for that sector, though reading it again it looks like you’re more focused on biotech.

Keep up the analysis focus – there isn’t enough of that out there!

By: David P. Hamilton

David P. Hamilton — Fri, 26 Oct 2007 22:05:14 +0000

Don, you’re absolutely right that one quarter doesn’t make a trend, and I hope I was clear enough in laying out the caveats in this post. Your point on the exit market is also a good one, although it cuts against biotech — Targanta is down 15 percent from a lower-than-expected pricing, for instance, Bioheart got whacked even before it got to the gate.

All that said, I’ve taken a closer look at the Q3 data in a new post here. Bottom line to me is that the quarter still looks terrible, just not for the reasons I originally thought.

By: VentureBeat » Cratering VC funding for biotech: Not what it originally seemed, but still plenty bad

Fri, 26 Oct 2007 21:34:23 +0000

[...] venture capitalists really shunning biotechnology, as I wrote a few days ago? A deeper look at the data suggests the answer is still yes, although not exactly [...]

By: Don Jones

Don Jones — Thu, 25 Oct 2007 05:02:10 +0000

One quarter in the venture capital world doesn’t make a trend. It is also helpful to look at the exit market as well for an indication of the general health of a particular sector. For example, recently a medical device startup, TranS1, went public – on 10/18 – and the shares shot up 60% on the first day. The company lost $4.1 million on $7.2 million sales through 6/30/07, so the IPO results were astounding, and in a nervous stock market no less.

When venture capital firms see those kinds of results, it makes them smile…

By: David P. Hamilton

David P. Hamilton — Wed, 24 Oct 2007 19:01:29 +0000

Could be, Mr. Gunn, except that there’s no similar dropoff in the numbers for medical devices, where Q3 equity financing was $830.3 and VC financing was $817.8. I only have both sets of numbers for the healthcare sector, so I don’t have any insight into what may be going on elsewhere.

By: Mr. Gunn

Mr. Gunn — Wed, 24 Oct 2007 18:47:40 +0000

I’ve heard that the subprime market collapse has hit the VCs particularly hard. Could the drop-off just be a reflection of that, and not biotech specific?

By: VentureBeat » Corporations lock up your genome, while VCs flee biotech

VentureBeat » Corporations lock up your genome, while VCs flee biotech — Wed, 24 Oct 2007 16:50:14 +0000

[...] startups seemed pretty stable in the third quarter, but a closer look revealed that VCs are dropping the sector like a hot potato. Tagged N/A VentureBeat [...]

By: David P. Hamilton

David P. Hamilton — Tue, 23 Oct 2007 18:57:43 +0000

Mike, I can describe the data to you here, although I can’t actually post the spreadsheet with the VC-only data, as VentureOne doesn’t normally make it public, and provided it to me under that condition.

Also, just to be clear, I only have two sets of numbers: the “equity financing” data, a snippet of which I posted above, defined as funding from VCs, private equity, corporations, hedge funds, and individuals for companies that had received at least one venture round; and “venture financing,” which is pretty much VC only (although it might also include angels).

So for all of 2006, the broad biotech sector received $4.8 billion of equity finance in 290 rounds. For VC funding, biotech received $4.6 billion in 270 rounds. That’s a difference, but not a huge one.

In 2007, biotech equity finance in Q1, Q2 and Q3 amounted to $1.8 billion, $1.2 billion and $1.4 billion respectively. For the same quarters, venture funding came to $1.8 billion, $1.1 billion, and $871 million. So you can see that the dropoff — whatever it is — just happened in Q3. I’m still trying to run down whether that’s an artifact of some kind in the numbers, and I’ll post again when I get a good answer.

Btw, the financing-rounds data show a similar but less dramatic falloff. For the first three quarters of this year, there were 80, 87 and 66 equity rounds of all kinds, respectively. The data for venture rounds: 78, 84, and 58. This mainly suggests to me that that rounds grew dramatically larger in Q3, particularly on the non-VC side (average Q3 round size $15 million for VC, and $21 million for all equity).

By: Mike

Mike — Tue, 23 Oct 2007 14:02:47 +0000

David,
Interesting insight. Can you post the data that breaks out investments by type of company (VC, PE, other non-VC, etc.)?

As for the first question posted: every VC report I’ve ever seen includes all drug development companies, regardless of definition as pharmaceutical or biotechnology, as biopharmaceutical or biotech companies.

By: David P. Hamilton

David P. Hamilton — Mon, 22 Oct 2007 22:05:25 +0000

I am using the term somewhat loosely, and the short answer to your question is yes — the term does include pharmaceutical companies, although I don’t know exactly how VentureOne defines them.

VentureOne’s “biopharmaceuticals” category is a catch-all that includes the following:

* Biopharmaceuticals, other
* Biopharmaceuticals, TBA
* Biotechnology therapeutics
* Drug delivery
* Drug development technologies
* Pharmaceuticals

Although now that I think about it, I’m not sure that the “pharmaceuticals” category maps neatly onto the canonical large-molecule/small-molecule distinction. Among other things, VentureOne counts only nine “pharmaceutical” fundings in Q3, as opposed to 36 “biotech therapeutics” and one each of “biopharmaceuticals, other” and “biopharmaceuticals, TBA.”

By: DV Henkel-Wallace

DV Henkel-Wallace — Mon, 22 Oct 2007 21:04:48 +0000

When you say “biotech” are you including small molecule drugs (i.e. traditional “pharma”) as well? Your entry doesn’t say and people sometimes use “biotech” ambiguously.

By: VentureBeat » A quick note on Q3 venture life-science data

VentureBeat » A quick note on Q3 venture life-science data — Mon, 22 Oct 2007 18:16:33 +0000

[...] venture data I’d initially planned to update over the weekend got unavoidably delayed, but is now available in updated form. At the risk of ruining the suspense, the major surprise is that venture capitalists appear to be [...]