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Spring Has Sprung! Venture Funding up for Biotech

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By Cynthia Robbins-Roth
BioWorld Today Columnist

The birds are chirping, the garden is blooming and biotech is raking in the bucks – at least in the context of the past few years.

Based on BioWorld's data, the first three months of 2012 saw U.S. biotech venture rounds bringing in a rousing $391 million – a 34 percent increase compared to the same period last year.

The biggest jump showed up in the early rounds. Series A and seed deals brought in 63 percent more moola the first quarter, with a total of $98 million rolling into 11 companies. Investors put more of their cash into clinical-stage firms (25 percent vs. 7 percent for 2011) and much less of their cash into specialty pharma deals (26 percent vs. 83 percent for same period last year).

Median deal size didn't change much between 2011 ($4 million) and 2012 ($6 million).

That trend of supporting early stage innovators makes me very happy.

Those companies are the crucial engine for generating the new products that have a chance of making a significant clinical (as opposed to marketing) difference.

I realize the still-sluggish initial public offering (IPO) market means that venture investors have to have nerves of steel – not to mention brave limited partners – to stay in this game. I appreciate the vote of confidence their investments imply.

The numbers for the Series B deals for first quarter 2012 and 2011 stayed very similar. While 2012's first quarter saw 21 percent more funding for that second round class ($136.5 million vs. $112 million in 2011), the other measurements weren't that different.

There were nine deals completed this quarter vs. 10 deals for the same period in 2011, with a median deal size of $12 million vs. $16 million last year.

The first quarters in both 2012 and 2011 saw investors heavily favoring companies with ongoing clinical trials, and less than half the total Series B funds raised went into specialty pharma firms.

Investors in Series C and higher rounds shoveled 30 percent more bucks into the same number of deals (five) in first quarter 2012 compared to last year. Not surprisingly, median deal size moved up to $30 million this year.

All of this year's $156.5 million was deposited into companies developing innovative products – no specialty pharma deals showed up in that more mature class of companies.

Clinical-stage companies remained favorites, with 68 percent of this year's first-quarter funds flowing there vs. 71 percent in the first quarter of 2011 .

Even the IPOs picked up this quarter. OK, so we are talking about four IPOs vs. last year's two, but hey – every little bit helps!

Those four IPOs brought in $265 million vs. last year's $126.5 million for the two deals.

And IPO buyers seemed to increase their appetite for risk, at least a little bit.

First-quarter 2012 IPOs put 79 percent of the dollars into clinical-stage companies vs. 100 percent for the same period in 2011, and only 38 percent of the cash into specialty pharma firms vs. 68 percent last year.

All things considered, 2012 is shaping up to be a much-improved environment for biotech investing. Let's hope the trend continues!

Cynthia Robbins-Roth, PhD, founding partner of BioVenture Consultants, can be reached at biogodess@gmail.com. Her opinions do not necessarily reflect those of BioWorld Today.