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Pharma, Biotech VC Investments Continue Shift to Early Stage Deals

Xconomy National — 

The number of investments that venture capitalists will make this year in pharmaceutical and biotech companies is on pace to match last year’s record—and that money continues to shift into earlier-stage deals.

Venture firms invested in 609 drug development deals as of Sept. 30, 2019, compared with 808 deals for all last year, according to the latest data from firms that track VC investments.

Since 2016, more than half of the money invested in pharma and biotech each year has been in the riskier angel, seed, Series A, and Series B stages, according to the latest Venture Monitor, a quarterly report published by Pitchbook and the National Venture Capital Association.

Previously a majority of the money plowed into pharma and biotech deals by VCs went into late-stage deals, the Pitchbook-NVCA data show. Outsized exits in the sector have induced some life sciences investors to place their bets earlier in the fundraising cycle.

Investors are eying potential rewards of getting in early in a market in which pharma and biotech has been making up a more significant portion of total annual exit value for VCs than ever before.

In three of the past four years, the sector made up more than one-quarter of the money companies generated through acquisition, buyout, or initial public offering, according to an Xconomy analysis of the Pitchbook-NVCA data. In the four years prior to 2015, the average was 12 percent.

Still, the amount of money invested this year so far this year in pharma and biotech companies by VCs isn’t on pace to reach the heights of 2018, when the sector pulled in an aggregate $19 billion. In the first three quarters of this year, VCs invested $11.5 billion.