BioWorld Today Columnist

As we head into autumn, the 2010 trend of lagging behind last year's venture activity has continued. Year-to-date rounds into private companies (as reported by BioWorld Insight and vetted by yours truly) raised a total of $1.7 billion, down 15 percent from 2009's $2 billion. The number of venture deals dropped to 90 from 99 in third-quarter 2009.

Series A rounds continued to look anemic, dropping 35 percent from third-quarter 2009 to a measly $391 million. The number of deals stayed about the same, but the median deal size plummeted to $20 million in 2010 from $73 million in 2009. This tends to give our early stage companies a much shorter time to get to the next fundable milestone.

The relative amount of dollars flowing into clinical-stage companies and into specialty pharma companies remained about the same. Venture investors continued to be willing to support companies not yet in the clinic, shown by the $323.5 million awarded to preclinical companies.

Third quarter 2010 is still showing the "boa swallowing pig" silhouette seen earlier in the year, with a hefty 32 percent increase to $720 million heading into Series B rounds. A majority of the dollars went to clinical-stage companies, with specialty pharma firms grabbing 22 percent of the funds.

Later-stage rounds grabbed only $608 million, a mere 69 percent of the $875 million that flowed by third-quarter 2009. Most of these companies were well into clinical testing of their compounds, and some were already marketing products. This profile looks very similar to the class of 2009 late-round deals. One significant difference seen this year: a drop in money invested in specialty pharma deals from 44 percent of the total in third-quarter 2009 down to only 15 percent in third-quarter 2010.

One bright spot in 2010 is the surge (well, OK, a minor groundswell) in initial public offerings (IPO) done year to date. Seven companies managed to make it into the public markets, raising a total of $446 million.

So, it's nothing like the glory days when biotech could rake in more than a $1 billion just in IPOs. But it's a major improvement over last year's third-quarter total of a lonely single IPO by a specialty pharma company raising just $85 million.

All of the newly public companies had compounds in the clinic, and only 20 percent of the dollars headed into specialty pharma deals.

I take some hope from the fact that adding this nice new chunk of change from the IPOs to the venture rounds, we get a total very close to the total dollars raised in 2009. So maybe we shouldn't be too discouraged by the drop in funding maybe the curve just shifted.

With mid-term elections representing a potential big shift in Washington and state capitols across the nation, it's not clear how investors will behave for the last quarter of 2010. Let's keep our fingers crossed that 201 1 brings more enthusiastic funding.

(Responding to queries from readers: Yes, it's true. I am prejudiced in favor of companies generating novel compounds and increasing our understanding of mechanisms of disease. Specialty pharma companies do create valuable product opportunities. But I see venture support for research and development innovation as an important indication of the general health of the biotech sector.)

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