Biotech VCs bet $1.8B in a colossal Q2

Crowdfuning-Bank

Biotechs raked in a whopping $1.8 billion in venture cash last quarter, the industry’s biggest haul since PricewaterhouseCoopers and the National Venture Capital Association started keeping track in 1995.

According to PwC and NVCA’s latest MoneyTree Report, based on data from Thomson Reuters, biotech’s record sum came from 122 deals, representing a 61% jump in dollars and a 9% increase in transactions over the previous quarter. The total was propped up by a couple of megadeals–Intarcia Therapeutics‘ $200 million raise and Proteus Digital Health‘s $119.5 million round–but, subtracting those outliers, biotech still pulled off a nearly 30% jump over the prior period.

The industry’s stellar fundraising quarter is due in part to a virtuous cycle for biotechs, PwC life sciences partner Greg Vlahos said. The IPO boom has provided VCs with some very real exit opportunities, he said, and the public markets’ warm reception to drug developers has pushed M&A valuations skyward. Combined, those factors have led to a great deal of liquidity for investors, allowing VCs to quickly put together new funds and back more companies.

Whether it can keep rolling remains to be seen, however. The market for biotech IPOs has recently taken a turn for the bearish after two quarters of widespread success, forcing a few entrants to cancel, delay or significantly reduce their offerings. If Wall Street interest dries up, VCs might start to see exit signs switching off, thereby constraining their willingness to invest.

But Vlahos believes things will largely stay on the up and up. It would be unrealistic to expect a run of double-digit biotech debuts every quarter, he said, but companies with strong stories and promising assets should still be able to make it out the IPO window, however narrow.

“I would say we’re cautiously optimistic,” Vlahos said, adding that the VCs he talks to expect a market correction, but nothing on the level of a sector-wide downturn.

Meanwhile, a stable of biotech’s biggest backers is out raising new funds. Last week, Sofinnova VenturesVersant Ventures and Essex Woodlands each revealed fundraising plans, seeking a combined $1.6 billion to fuel new investments. The three join a bevy of biotech VCs amassing or unveiling new funds over the last 12 months, following Arch Venture Partners and its April filing to raise a $250 million 8th fund. In February, the U.K.’s Abingworth closed a $375 million raise, while early-stage backer 5AM Ventures revealed a $250 million second close in December, and VC giant OrbiMed launched a $735 million fund the month prior.

– here’s the release