As part of its ‘Pharma Outlook for 2022’, leading healthcare publication, In Vivo, explored the outlook for US and EU venture capital funding in biopharma. Asking whether the sector can keep the momentum going for investments, it drew on the experience and insight of prominent investors [many among them our clients,] to provide comment on their expectations for the start of 2022.
The biopharmaceutical industry set a record in venture capital financing raised in a single year in 2021. With one quarter left to go, drug developers had raised $28 billion in VC funding through the third quarter versus $27.4 billion for all four quarters of 2020, according to the Pitchbook-NVCA Venture Monitor, from Pitchbook and the National Venture Capital Association. While the amount of venture capital raised declined quarter on quarter and fewer private biopharma companies raised money overall, the sums brought in were larger, with average deal sizes of $32.1 million versus $26.3 million in 2020.
Lucie Ellis writes on this record-breaking year for biopharma financing, both private and public, and spoke to a number of our Venture Capital clients about their perspective on fundraising patterns, IPO and M&A activity, and the year ahead.
The article found that “market spectators expect the trend to continue well into the new year”, with seasoned investors voicing varying views as to the level of company maturity most attractive to VC funds. Naveed Siddiqi, Senior Partner at Novo Ventures, which last year invested $500 million in portfolio companies and saw a record $800 million returned through successful exits including 7 IPOs, spoke about investment in early-stage companies, while Dr Björn Odlander, Founder and Managing Partner at Healthcap, which recently announced a raft of senior appointments in October 2021, was cited as expecting momentum to continue for both earlier and later rounds of private financing.
Stephan Christgau PhD of EIR Ventures, who commented in the article on “an increased focus on larger rounds” [and the “’valley of death’” associated with “the difficult transition from promising research to an actual company and development program”,] gave Optimum his perspective on last year and the year ahead
“2021 was indeed a remarkable year. At the beginning of 2020 when the world shut down as a result of Covid, there was widespread concern that this would severely affect VC financings. It did, but in the opposite way as was initially expected, as financings and allocations to the sector increased, and this has been particularly pronounced here in 2021. It is likely that the momentum will slow a bit. We would still expect to see a healthy activity and financings across all stages of biotech, but with the activity probably slowing down to a bit more sustainable levels.”
The article touched on comparative valuations in Europe and the US. In addition to Dr Björn Odlander providing comment on the leaning towards tranched financing, fellow Healthcap Partner, Dr Mårten Steen, told us separately:
“We see an increased interest from US VCs to invest in promising EU companies as the valuations are typically lower in EU than in the US. We often encourage our companies to include both EU and US investors to make sure that the investor base is strong.”
In Vivo’s article went on to talk about the ‘IPO Market’, ‘M&A Activity’ and ‘Therapy Areas to Watch’ before concluding with a comment on ‘Fundamentals’ pointing to the continued optimism for the sector.
Maina Bhaman, partner at Sofinnova Partners, summarized the situation, telling In Vivo that “the fundamentals remain strong for biopharma: continuing demand for new medicines and outstanding returns.”
To read In Vivo’s full article please click here.