Flow of US biotech VC dollars on track to match record 2018 levels — China? Not so much
With the third quarter of the year behind us, the US private biotech ecosystem has some solid numbers to celebrate — and some fog to clear out as it looks out the global window.
While the overall volume of deals and their sizes may not surpass red hot 2018 levels, PitchBook analysts see the deal count on pace to match the record, easily towering over the nine years prior. An effervescent IPO market and several high profile acquisitions helped keep enthusiasm high; in fact, this has been the most lucrative year for overall VC exits in a decade, the data company and the National Venture Capital Association noted in their quarterly Venture Monitor report published Tuesday.
Is biopharma in a bubble? No, according to Katherine Andersen, SVB’s head of life sciences and healthcare relationship banking. But brace for an off-cycle as slowing economies and continued geopolitical noise cast their shadows.
So far, with 609 VC deals on the books, biopharma has collectively raised $115 billion in 2019. And early-stage financing, generally classified as Series A or B, continues to take up a slight majority of that since overtaking late-stage VC deals in 2017.
Deal sizes, though, have resided somewhat from last year’s peak.
On the other hand, we’ve seen a good run in biotech IPOs and buyouts — something that PitchBook didn’t quantify except for pointing out that VC exit for all-female founded companies has reached a decade high of $2.4 billion in value (among 28 deals).
PitchBook’s analysis, of course, only involves US VC firms. But the China question is clearly looming over everyone’s head, and Andersen devoted much of her commentary in the report to the topic. As American regulators turn up their scrutiny on foreign (but especially Chinese) money, she expects to see smaller investments from China marking a sharp drop from a recent surge.
On an annualized basis, we’re predicting about a 35% decline from 2018 to 2019 in Asia’s total syndicated investment into the US and Europe across all healthcare subsectors. That is partly due to more stringent CFIUS scrutiny and a slowdown in the Chinese economy. Looking ahead, the future impact of CFIUS depends on who is viewed as a national security threat.
As far as US players go, Andersen observed that the heavyweights are playing a larger role in shaping the industry, with the top 15 crossovers backing 41% of all US biopharma deals in the first half of 2019.
“We also noticed an emerging trend in which many large, corporate-only equity rounds existed as part of collaborations or with options to buy,” she said.
Charts: PitchBook-NVCA Venture Monitor