By John Carroll
PricewaterhouseCoopers and the National Venture Capital Association crunched the numbers on venture investing in the second quarter, tracking a 46% spike in the amount of venture cash being injected into U.S. biotech companies. Biotechs garnered $1.2 billion in venture funds for the quarter, with deal activity jumping 20%–from 97 rounds in the first quarter to 116 in the last three months. Overall VCs invested $7.5 billion in the second quarter, according to the data supplied by Thomson Reuters.
Tracy Lefteroff, global managing partner of the venture capital practice at PwC, told Bloomberg that the increase in deals was helped by a steady stream of biotech buyouts and signs of life in the IPO market.
“We continue to see acquisitions by major pharma and large biotech companies of smaller biotech companies, as well as the return of IPOs to the sector,” said Lefteroff. “For funds that are fortunate to have those exits, that allows them to recycle money and put it into other deals.” Significantly, though, several of the biotech IPOs executed in the first half of the year had to offer deep discounts on share prices to attract investors. And the general sentiment in the biotech industry about IPOs is distinctly sour.
It’s also not unusual to see a spike in venture deals from the first to the second quarter, a trend that has remained consistent now for three years running, according the the PwC data. This quarter versus the same period in 2010 the numbers actually slipped, with more than $1.3 billion for biotechs last year.
Mark Heesen, president of the NVCA, also sees trouble on the horizon. “For the past three years,” he says, “the venture capital industry has been investing significantly more dollars into companies than it has been raising from institutional investors. This level of investment cannot continue if we do not start to see a pick-up in exits and, subsequently, fundraising. The money simply will not be available to invest.”
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