After coming off a hot 2011 financing year it appears that the biotech sector must be flush with cash because the amount of capital generated by private and public biotech companies slowed considerably in the first half of 2012. According to statistics compiled by BioWorld Insight drawn from BioWorld Snapshots, in the first-half of 2012 biotech fundraising generated just $7.9 billion, down 40 percent from the same period in 2011 when biotech companies raised a total of $13.3 billion. The 2012 total dropped below the $8.1 billion raised in the first-half of 2010 – a period when the industry was just beginning to recover from the economic meltdown of 2008.

It was also a tough second quarter with biotech companies collectively raising $2.76 billion, an amount that was 46.4 percent less than the $5.15 billion raised in the first quarter this year and 62 percent down from the total raised in the second quarter of 2011.

Drilling down into the data, venture capital appeared to be in short supply with only $594 million raised in the second quarter of 2012 from 40 deals that had disclosed values. This amount was 23 percent shy of the $774.6 million raised in the first quarter of 2012 from the 54 deals with disclosed values. It was also 53 percent down from the $1.26 billion raised across 47 deals in the second quarter of 2011.

For the half year, biotech companies raised a total of approximately $1.37 billion, which was down 35 percent from the $2.11 billion raised in the same period of 2011. These figures represent all fundraising by private firms globally and are not just limited to venture capital sources.

Although there was a sharp drop off in deal flow in the second quarter of 2012 compared with the first quarter, the average amount raised per deal stayed constant at around $14 million, but the average deal size was half what is was in the same period of 2011.

The top five deals in the second quarter accounted for 31 percent of the total raised. Global Blood Therapeutics Inc. completed a $40.7 million Series A deal that it plans to use to develop its "SHAPE" platform, which modifies the functions of key blood proteins by changings their shape. The company expects compounds generated from the platform to lead to therapeutic breakthroughs in illnesses such as sickle cell disease – the company's first target. (See BioWorld Today, June 12, 2012.)

Blueprint Medicines, of Cambridge, Mass., received $40 million in a Series A financing. Blueprint was established in 2011 to develop cancer therapies based on its Insights-to-Validation platform and chemical library, with an approach based on using cancer genome data to create kinase-targeted therapies using a personalized medicine approach. (See BioWorld Today, May 25, 2012.)

A new investor, Novo Ventures, led Alder BioPharmaceuticals Inc.'s $38 million Series D round, which included participation by existing investors Sevin Rosen Funds, Ventures West, WRF Capital, H.I.G. Ventures, Delphi Ventures and TPG Biotech. Proceeds will go to support a variety of internal clinical programs, including ALD403, Alder's calcitonin gene-related peptide (CGRP) inhibiting antibody therapeutic for treatment of migraine. The funds also will support earlier stage programs, including a therapeutic targeting PCSK9 for treating dyslipidemia. (See BioWorld Today, April 20, 2012.)

Cambridge, Mass.-based OvaScience successfully completed a $37 million Series B round in April. The company hopes to improve the in vitro fertilization (IVF) market by using fresh mitochondria isolated from a woman's own egg precursor cells to rejuvenate a mature egg during IVF and increase the chances of a successful pregnancy. (See BioWorld Today, April 6, 2012.)

Rounding out the top five venture capital deals was Igenica Inc., of Burlingame, Calif., which raised $33 million in a Series C financing to support the development of its initial monoclonal antibody (mAb) candidates toward the clinic. (See BioWorld Today, June 13, 2012.)

Environment for Biotech IPOs Improving

Although completing a successful initial public offering (IPO) has often been a challenge for biotech companies there are signs that a more welcoming "window" is opening. Evidence of this comes from oncology-focused biopharmaceutical company Tesaro Inc., of Waltham, Mass., which recently completed an IPO that was within its expected price range. In an uncertain financial environment, where biotech companies have had to, more often than not, drop their IPO price aspirations to get their deals done, this latest IPO could be a sign of better things to come in the second half of the year for biotech companies now positioned on the IPO runway.

That was a sentiment expressed by Mark Heesen, president of the National Venture Capital Association (NVCA), who said that if the public markets stabilize and remain fully open for the rest of the year then "2012 can still be strong for venture-backed exits."

Although there was an obvious fall-out from the Facebook IPO that curtailed IPO activity in the second quarter, behind the scenes many companies were registering to go public under the new JOBS Act provision, that has built an IPO pipeline that started to flow in the final days of June, he added.

According to BioWorld Snapshots, at the end of June, there were nine biotechs poised on the IPO runway.

In addition to the Tesaro IPO, there were five other U.S. biotechs and one European biotech company that priced IPOs in the first half of 2012, collectively generating $458 million compared to nine in the comparable period last year, which raised $467 million.

Another positive and encouraging sign for those biotechs in the IPO wings, is that the aftermarket performance of the newly minted U.S. public biotech companies has been very good. For example, after dropping its price drastically from a target range of $12 to $14, and ultimately pricing its IPO of 10 million shares of common stock at $5 per share, Supernus Pharmaceuticals Inc., of Rockville, Md., has performed well. (See BioWorld Today, May 2, 2012.)

At the close of the second quarter, shares of Supernus were trading up 87 percent at $9.36. Also Cempra Inc.(NASDAQ:CEMP), up 56 percent over its IPO offering price, and ChemoCentryx Inc. (NASDAQ:CCXI), up 50 percent, have had strong after-market debuts. The only 2012 biotech IPO graduate to stumble is Verastem Inc. (NASDAQ:VSTM), which closed the quarter at 9.69, down 3 percent.