Six top biotech VCs take a look at the lat­est trends, and of­fer their thoughts on 2018

This year has been a rel­a­tive gush­er of VC dol­lars flow­ing in­to biotech com­pa­nies, with gi­ant “mega-deals” pro­pelling the in­dus­try’s record-set­ting year. Top VCs in the field say they’re cau­tious­ly op­ti­mistic that the trend will con­tin­ue next year.

The in­dus­try has cruised past its pre­vi­ous VC fund­ing record of $7.3 bil­lion, which was set back in 2015. This year saw biotechs raise $9.3 bil­lion in 471 deals, ac­cord­ing to Pitch­Book, mak­ing it the best year out of the last sev­en when it comes to vol­ume.

Deal count is run­ning a bit low­er than 2016 and 2015, which saw clos­er to 500 deals. But 2017 was a year of mega-deals, with the third quar­ter alone bring­ing in sev­er­al $100 mil­lion+ rounds. Most re­cent­ly there was ADC Ther­a­peu­tics’ $200 mil­lion round backed by As­traZeneca to push for­ward its next-gen an­ti­body-drug con­ju­gate. And ear­li­er in the quar­ter, Jeff Be­zos, Arch and oth­er in­vestors sunk $151 mil­lion in­to Uni­ty Biotech­nol­o­gy, which is look­ing to make new drugs that can se­lec­tive­ly sweep away senes­cent cells that clut­ter our bod­ies as we age.

All this ac­tiv­i­ty comes short­ly af­ter a some­what tur­bu­lent 2016 — a year when po­lit­i­cal and so­cial rhetoric and in­dus­try un­cer­tain­ty weighed on the sec­tor; when drug ap­provals fell sharply; and when biotech com­pa­nies faced a dwin­dling sup­ply of pub­lic mar­ket cap­i­tal to fund R&D.

Con­sid­er­ing the pip­ing hot IPO mar­ket so far this year and the record-set­ting VC fig­ures, it’s fair to say the in­dus­try took the un­cer­tain­ty rather well.

We asked 6 top ven­ture cap­i­tal­ists in biotech what they thought might hap­pen in 2018. Will ven­ture dol­lars go up, down, or stay flat next year? Why? Read their pre­dic­tions be­low:

Pre­dic­tions

Jer­el Davis

Jer­el Davis, man­ag­ing di­rec­tor at Ver­sant Ven­tures:

We ex­pect that 2018 will con­tin­ue to be a very strong ven­ture fund­ing en­vi­ron­ment with a con­tin­u­a­tion of fund­ing across stages, with large rounds, and in­creased com­mit­ments from new funds and cap­i­tal sources that are not the usu­al biotech sus­pects. This like­ly means ven­ture dol­lars will trend up­wards. Watch­ing pub­lic mar­ket ver­sus pri­vate val­u­a­tions through­out the year will be es­pe­cial­ly im­por­tant to en­sure the pri­vate space does not get ahead of it­self.

Wende Hut­ton

Wende Hut­ton, gen­er­al part­ner at Canaan Part­ners:

Ven­ture-backed fund­ing for bio­phar­ma deals in 2018 will be vig­or­ous and like­ly up from the high lev­els in 2017. An ir­re­sistible sup­ply of top-tier sci­ence and re­peat man­age­ment teams are bub­bling up every­where in the start­up ecosys­tem, which cre­ate at­trac­tive new op­por­tu­ni­ties for in­vest­ment. Ad­di­tion­al­ly, an un­par­al­leled lev­el of re­cent­ly-raised bio­phar­ma-fo­cused funds will need to be de­ployed in a ro­bust fash­ion dur­ing the next year. Canaan looks out and sees a great fund­ing en­vi­ron­ment for 2018.

Jay Lichter

Jay Lichter, man­ag­ing di­rec­tor at Aval­on Ven­tures:

I think that in­vest­ing will re­main ro­bust. There is a lot of cap­i­tal in the sys­tem with some big wins/ac­qui­si­tions and sev­er­al IPOs that pro­vid­ed liq­uid­i­ty for VCs and their in­vestors. I ex­pect the mar­kets to re­main “open” and hot while at times chop­py.

Ab­bie Cel­niker

Ab­bie Cel­niker, part­ner at Third Rock Ven­tures:

At Third Rock, we see the trend of healthy in­vest­ing con­tin­u­ing in 2018.  Con­di­tions in the macro en­vi­ron­ment place biotech in a strong po­si­tion for con­tin­ued val­ue cre­ation. In ad­di­tion, we see a tremen­dous amount of nov­el and ex­cit­ing sci­ence dri­ving both com­pa­ny cre­ation and the ad­vance­ment of new ther­a­pies mov­ing to­ward the clin­ic. Phar­ma and large biotech con­tin­ue to turn to small­er biotechs to en­hance their pipelines, and this sup­ports a very healthy ecosys­tem.

Bruce Booth

Bruce Booth, part­ner at At­las Ven­tures:

Bio­phar­ma ven­ture fund­ing in 2018 will like­ly mod­er­ate from the record-set­ting pace of 2017, but be in the ro­bust range of the last few years; in short, ac­cess to cap­i­tal won’t like­ly be a con­straint. Plen­ty of ven­ture and crossover firms have re­loaded with fresh funds, and large un­con­ven­tion­al gen­er­al­ist as­set man­agers re­main keen on in­vest­ing more in­to the promise of biotech, both pri­vate and pub­lic.

Noubar Afeyan

Noubar Afeyan, founder and CEO of Flag­ship Pi­o­neer­ing:

I ex­pect in­vest­ments in­to pri­vate biotech com­pa­nies to in­crease sig­nif­i­cant­ly year over year due to the strong pipeline of prod­uct-plat­form com­pa­nies emerg­ing from in­no­va­tion ef­forts in acad­e­mia, ven­ture firms and oth­er sources. Al­so ex­pect phar­ma de­pen­dence on ex­ter­nal in­no­va­tion as a source of their prod­uct sup­ply to con­tin­ue in­creas­ing as they find new ways of part­ner­ing with firms like Flag­ship to cre­ate long-term sup­ply agree­ments for break­through prod­ucts. Sources of cap­i­tal fo­cus­ing on life sci­ence in­vest­ing are al­so in­creas­ing con­sid­er­ably for late stage and pub­lic in­vest­ment.

 

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Biogen has confounded the biotech world one more time.

In a stunning about-face, the company and its partners at Eisai say that a new analysis of a larger dataset on aducanumab has restored its faith in the drug as a game-changer for Alzheimer’s and, after talking it over with the FDA, they’ll now be filing for an approval of a drug that had been given up for dead.

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Vas Narasimhan. Getty Images

UP­DAT­ED: Failed PhI­II fe­vip­iprant tri­als pour more cold wa­ter on No­var­tis' block­buster R&D en­gine — and briefly spread the chill to a high-pro­file biotech

Back in July, during an investor call where Novartis execs ran through an upbeat assessment of their Q2 performance, CEO Vas Narasimhan and development chief John Tsai were pressed to predict which of the two looming Phase III readouts — involving cardio drug Entresto and asthma therapy fevipiprant, respectively — had a higher likelihood of success. Tsai gave the PARAGON-HF study with Entresto minimally better odds, but Narasimhan emphasized that their strategy of giving fevipiprant to more severe patients gave them confidence.

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David Liu, Liu Group

David Liu un­veils newest ad­vance­ment in CRISPR tech: Prime edit­ing

The researcher behind base-editing is out with what some scientists are hailing as the biggest advancement in CRISPR technology since that 2016 breakthrough: “prime editing.” The new molecular gadget is capable of erasing any base pair and stenciling in another and cutting or adding long segments of DNA without breaking both strands of the helix.

David Liu, base editing pioneer and founder of Beam Therapeutics, published the findings in Nature alongside Andrew Anzalone. They estimated that the breakthrough “in principle” puts 89% of human diseases in purview — although experts cautioned that human therapies were a long way off.

Bhaskar Chaudhuri. Frazier Healthcare Partners

Fra­zier Health­care Part­ner­s' der­ma­tol­ogy up­start at­tracts a mar­quee syn­di­cate, $94M+ for 'in-be­tween' top­i­cal drug

For the past three years Frazier Healthcare Partners’ Bhaskar Chaudhuri has been carefully and quietly grooming Arcutis Therapeutics, a new dermatology play he co-founded to deliver topical formulations of well-known drugs. Now that the biotech is poised to enter Phase III, he’s being joined by a marquee syndicate for its $94.5 million Series C.

HBM Healthcare Investments, Vivo Capital, BlackRock, Omega Funds, Pivotal BioVentures, and Goldman Sachs jumped on board, joining Bain Capital Life Sciences, OrbiMed and RA Capital Management in backing Arcutis’ lead topical cream for plaque psoriasis.

A new com­pa­ny en­ters the Tec­fidera fight, of­fer­ing to kill two birds

The remedy for the most common side effect for one of the most common multiple sclerosis drugs is simple: aspirin.

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Sometime in the 1st century AD, a patient presented to Arataeus looking like a varicose ghost. He was “emaciated and atrophied, pale, feeble and incapable of performing any of his accustomed works,” the Greek physician wrote, with hollow temples and huge veins running all over his body.

A dysfunctional digestive system, Arataeus concluded – an imbalance he attributed to a “heat” deficiency in a system he and other Greeks regarded as functioning similarly to an oven – and coined a term: coeliac disease, after the Greek word for abdomen.

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IM­brave150: Roche’s reg­u­la­to­ry crew plans a glob­al roll­out of Tecen­triq com­bo for liv­er can­cer as PhI­II scores a hit

Just weeks after Bristol-Myers Squibb defended its failed pivotal study pitting Opdivo against Nexavar in liver cancer, Roche says it’s beat the frontline challenge with a combination of their PD-L1 Tecentriq with Avastin. And now they’re rolling their regulatory teams in the US, Europe and China in search of a new approval — badly needed to boost a trailing franchise effort.
Given their breakthrough and Big Pharma status as well as the use of two approved drugs, FDA approval may well prove to be something of a formality. And the Chinese have been clear that they want new drugs for liver cancer, where lethal disease rates are particularly high.
Researchers at their big biotech sub, Genentech, say that the combo beat Bayer’s Nexavar on both progression-free survival as well as overall survival — the first advance in this field in more than a decade. We won’t get the breakdown in months of life gained, but it’s a big win for Roche, which has lagged far, far behind Keytruda and Opdivo, the dominant PD-1s that have captured the bulk of the checkpoint market so far.
Researchers recruited hepatocellular carcinoma — the most common form of liver cancer — patients for the IMbrave150 study who weren’t eligible for surgery ahead of any systemic treatment of the disease.
Roche has a fairly low bar to beat, with modest survival benefit for Nexavar, approved for this indication 12 years ago. But they also plan to offer a combo therapy that could have significantly less toxicity, offering patients a much easier treatment regimen.
Cowen’s Steven Scala recently sized up the importance of IMbrave150, noting:

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