In order to elucidate the focus of Venture Capital funding in the Biotechnology sector this year, Evolution Analysts have assessed the deals carried out by the Top 25 US Venture Capital firms from the beginning of the year to the end of July 2016. Our analysis collected data across all investment levels from Series-level to Equity Arrangements. For companies involved in the ongoing development of therapeutics, the disease focus and type of treatment was analysed.
Whilst financial figures of Biotechnology start-ups are relatively easy to access, specific information regarding investment by Venture Capital firms is rarely reported. Collecting information regarding VC Investment into the Biotechnology industry remains obfuscated by the secretive nature of both the financial investment firms and R&D-focused start-up companies grappling with intellectual property concerns. Analysis by BIO indicates that 2015 was the best year on record for US Venture Capital with just under $7B raised, driven partly by strong funding of oncology and neurodegenerative disease companies.
Given that historical FDA attrition rates indicate that Small Molecule therapies are less likely to be approved than Monoclonal Antibodies, one would expect VC investment to be focused on companies that are developing therapies that are more likely to be approved. As such, industry analysts have predicted a decline in VC investment into Small Molecule-focused companies. Evolution Bioscience’s analysis of 2016 VC funding seeks to test this hypothesis to determine the current trends influencing capital investment into Life Sciences companies.
Chart 1: Top 25 US VC Investment Focus (January – July 2016)
Of the 91 Venture Capital deals carried out during this time frame, 68% were focused on companies involved in Human Therapeutics. 13% of deals involved investment in Medical Device companies, followed by Diagnostics & Personalised Medicine (8%), Research Tools (4%), Services (4%), AgBio (1%) and Other (1%).
Chart 2: Top 25 US VC Therapeutics Investment by Disease Target (January – July 2016)
With regards to disease indication, 35% of the VC deals analysed by Evolution involved the treatment of cancer. Of the deals analysed, 12% were involved in the treatment of Autoimmune Diseases, followed by Infectious (9%), Ophthalmology (7%), Orphan & Rare Diseases (6%), Metabolic (5%), Neurology (5%) & CNS (4%).
Chart 3: Top 25 US VC Therapeutics, Number of Investments by Treatment Type (January – July 2016)
32% of the companies analysed are involved in the development of Small Molecule treatments. Indicating that despite the ongoing rise of Biologics, Small Molecules remain the dominant single treatment type. As expected, Monoclonal Antibodies and Antibody Drug Conjugates are the second most dominant category with a combined total of 16%. Whilst only 8% of companies are involved in Gene Editing and Gene Therapy, Evolution anticipate that this number will grow as the technology becomes more robust.
Also of note is the VC investment in Antibacterials (8%). Given the global concern regarding superbugs and the rise of antibiotic resistance, increased investment into novel antibacterials may indicate the beginning of a trend that will see investment into a neglected-yet-vital area of research.
Given that a Small Molecule drug is less likely to successfully progress through clinical trials when compared to a mAB therapy, analysts have previously predicted a downturn in early-stage investment in Life Sciences Companies involved in the development of Small Molecules. Evolution Bioscience’s analysis of recent VC activity highlights that this prediction has failed to materialise, instead indicating that the variance in clinical trials attrition rates across therapy types has not had a significant impact on the flow of VC funding in 2016. Despite the incredible hype surrounding Immunotherapies and other Biologics, companies focused on the development of Small Molecule therapeutics remain an attractive proposition for Venture Capital investors.
Venture Capital data sourced from Crunchbase, Owler & individual Company Announcements
VC Companies Analysed: New Enterprise Associates, F-Prime Capital Partners, Third Rock Ventures LLC, Sanofi-Genzyme BioVentures, RA Capital Management LLC, OrbiMed Advisors LLC, Polaris Partners, Flagship Ventures, Deerfield Management Company LP, Venrock Inc, Sofinnova Ventures Inc, Norwest Venture Partners, Kleiner Perkins Caufield & Byers LLC, MPM Capital, Canaan Partners, Versant Venture Management LLC, New Leaf Venture Partners, Tpg Growth LLC, Foresite Capital Management LLC, S.R. One Limited, Arch Venture Partners LLC, Novartis Venture Funds, Column Group, 5AM Ventures LLC, Frazier Management LLC.
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