Deals, M&A, Venture

SVB’s crystal ball points to big money biotech IPOs, downshift in the torrid pace of venture investing

It was a bang-up year for biopharmas in need of cash. Investors closed enormous funds in 2017, IPOs rolled out at a steady pace, and venture capital dollars flowed into companies in record quantities.

Sunny days are ahead for both the IPO and M&A markets, according to a Silicon Valley Bank report, but venture dollars may slow down in 2018.

The bank estimates investments in biotech and pharma hit a record in 2017, with 548 companies picking up a projected $10.5 billion in collective investment money during the year. Back in 2013, with nearly the same number of deals, companies only brought in $5.2 billion total. This indicates the year saw much bigger rounds, of course. Just in Q4, SVB counted several mega-rounds, with Cullinan Oncology, Arcus Biosciences, and Allakos each raising over $100 million.

Big rounds are also reflective of the piles of cash held by healthcare venture firms. According to the report, healthcare venture funding hit a new high in 2017 with $9.1 billion raised by funds during the year. That’s up from $7.2 billion last year, and significantly up from the years between 2009 and 2013, when funds raised hovered between $2 billion and $4 billion.

The bank predicts that number will decline next year, with healthcare venture funds raising between $6 billion to $7 billion. That’s because many larger firms closed new funds in 2017, the report says. The bank also expects biopharma investors will slow their deal pace next year.

Where is this money going? Primarily oncology companies (no surprise there), and companies developing platform technology. Of the 125 Series A investments made in 2017, 38 were cancer drug makers and 19 companies had platform tech.

“Platform companies piqued investor interest, as their technologies showed promise for multiple exits across different indications,” the report states.

IPOs and M&As

A few more VC-backed biopharmas went public in 2017 than the year prior, with 31 IPOs compared to 28 in 2016. It’s improved, but nowhere near the go-go days of 2014, when 66 biopharmas went public.

It’s important to note, however, that these IPOs are raising big money. In 2017, 39% of IPOs, or 12 companies total, raised over $100 million. That’s significant when you look at prior years. In 2016, only one company raised over $100 million.

Silicon Valley Bank expects IPOs to remain steady during 2018, with 28-32 IPOs predicted next year.

Although IPOs increased during the year, M&As did not. After a lackluster 2016 (thanks to uncertainty in an election year), many experts in the industry predicted — with President Trump firmly seated in the White House — that we would see an uptick in mergers and acquisitions in 2017. They were wrong. Besides Gilead’s nearly $12 billion move on Kite, 2017 was rather quiet on the M&A front. That has some wondering if acquirers are on standby, waiting to see what will happen with tax reform before moving forward on big purchases.

The bank is expecting M&A to pick up next year, with an estimated 20-plus “big exits” based on available cash held by acquirers — and the need for Big Pharma to replenish their pipelines.

The report — called Healthcare Investments and Exits 2018 — was authored by SVB’s Jonathan Norris, Thomas Joyce, and Caitlin Tolman.


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Director/Sr Director, Oncology/Immuno-Oncology
Aro Biotherapeutics Company Denver, CO
Director/Sr. Director Oncology
Aro BioTx Philadelphia, PA
Manufacturing Associate – Upstream
Molecular Templates Austin, TX
Scientist, Process Development
Molecular Templates Austin, TX

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