The A-List: 2009's Trend-Shaping Series A Financings

Full article reprinted from Start Up - December/January 2010

New company creation slipped significantly in 2009 as venture capitalists conserved capital and supported existing portfolio companies. In biopharmaceuticals, corporate venture got in at the ground floor while device start-ups continued to see stronger support from smaller, regional investors than traditional VCs. Read more...

The A-List: 2009's Trend-Shaping Series A Financings

Full article reprinted from Start Up - December/January 2010

New company creation slipped significantly in 2009 as venture capitalists conserved capital and supported existing portfolio companies. In biopharmaceuticals, corporate venture got in at the ground floor while device start-ups continued to see stronger support from smaller, regional investors than from traditional VCs.

The question many venture investors were asking themselves throughout 2009 seems to be, "is it safe to come out yet?" And that cautious approach to investing embraced by many VCs has translated into a significant dip in Series As. Still, START-UP has identified a baker's dozen to keep an eye on in 2010 and beyond.

There were 60 new Series A investments in biopharma firms in 2009, down sharply from 2008 and 2007, which each boasted more than 80 deals. The total value of all biopharma Series As fell by about one third, to about $870 million, although the average round size continued to hover around $15 million. (See Exhibit 2.) Meanwhile, illustrating VCs' priorities during uncertain times, at least a dozen biopharma companies that had raised A rounds prior to 2009 added to those rounds. If in 2008 flat rounds were the new up, in 2009 second tranches were the new flat rounds. (See "Reacting to the Crisis: Biotech Venture Capital's Plan B," START-UP, December 2008.)

Those companies that did manage to raise their first significant private capital followed several familiar paths. There were pharmaceutical spin-offs, and big bets on proven management teams. Anti-infectives and oncology plays again dominated the newco landscape; alongside biologics platforms these therapeutic spaces show no signs of going out of style. At the other end of the spectrum, cardiovascular and metabolic disease start-ups were absent from the 60 new A rounds of 2009, reflecting a difficult regulatory and reimbursement climate for drugs in these areas.

For the first time in several years there were no RNA-based drug developers receiving VC-backed Series As (though Miragen Therapeutics Inc., one of 2008's A-Listers, did close a second tranche to its maiden round). (See sidebar, Where Are They Now? Catching Up With the Classes of 2004–2008, Biopharmaceuticals.) Only Regulus Therapeutics Inc.—a microRNA-focused joint venture between Alnylam Pharmaceuticals Inc. and Isis Pharmaceuticals Inc.—pulled in a Series A, and (for now) Alnylam and Isis, which each contributed $10 million, are keeping their investment to themselves.

And strategic investors with more formal corporate venture capital ambitions were out in force in 2009, a phenomenon that was all the more pronounced thanks to traditional VCs' reluctance. (See "Corporate Venture Takes Center Stage," START-UP, May 2009.) Old standbys such as GlaxoSmithKline PLC's SR One have been among the most active dealmakers this year, but newer entrants such as the Novartis Option Fund have also made an impact at the earliest stages in the biotech life cycle.

The medical device industry, meanwhile, saw a serious drop both in dollars committed to Series A rounds and in the number of deals done. Only 35 medical device start-ups raised Series A rounds last year, a 20% drop from the 44 raising capital in 2008. More troubling, however, is the 40% drop in dollars, from $289 million to a paltry $167 million, the lowest figure we've recorded since 2005.

To be sure, venture-backed companies overall took in fewer dollars and closed fewer deals, drop-offs of 41% and 49%, respectively, according to Dow Jones VentureSource. But that database suggests the device industry was one of the stronger sectors. The total dollars committed to all device companies fell only 24%, while the number of deals done slipped by only 9%. This incongruity suggests that venture capitalists are steering their dollars away from early-stage companies, either committing them to their existing companies or looking for more established later-stage opportunities. (In fact, eight medical device companies padded more capital into Series A rounds they'd raised previously rather than attempting to raise a Series B.)

By Christopher Morrison and Tom Salemi

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Companies mentioned in this article:

Abbott Laboratories Inc.

Evalve Inc.

Afferent Pharmaceuticals Inc.

Agios Pharmaceuticals

Alimera Sciences Inc.

Alios BioPharma Inc.

Alnylam Pharmaceuticals Inc.

Amgen Inc.

Anaphore Inc.

Arrowhead Research Corp.

Calando Pharmaceuticals Inc.

Ascent Therapeutics Inc.

AstraZeneca PLC

Biolex Therapeutics Inc.

Biomet Inc.

Bristol-Myers Squibb Co.

CardiAQ Valve Technologies Inc.

CardioPolymers Inc.

Cardiovascular Systems Inc.

CeQur SA

Celgene Corp.

Cerulean Pharma Inc.

Clavis Pharma ASA

Clovis Oncology Inc.

Concert Pharmaceuticals Inc.

Current Solutions LLC

Dana-Farber Cancer Institute

Debiopharm Group

Debio Recherche Pharmaceutique SA

Dicerna Pharmaceuticals Inc.

Durata Therapeutics Inc.

Edwards Lifesciences Corp.

Eli Lilly & Co.

Endosense SA

Enlight Biosciences LLC

Ensemble Discovery Corp.

Esperion Therapeutics Inc.

Flexion Therapeutics Inc.

Follica Inc.

ForSight Vision4 Inc.

Forest Laboratories Inc.

Forma Therapeutics Inc.

Fresenius SE

Galil Medical Ltd.

Genocea Biosciences

Genzyme Corp.

Genzyme General

Genzyme Genetics

GlaxoSmithKline PLC

Haemonetics Corp.

Harvard University

Harvard Medical School

HealthTronics Inc.

Endocare Inc.

Helicos BioSciences Corp.

Helixis Inc.

Heptares Therapeutics Ltd.

HistoRx Inc.

Human Genome Sciences Inc.

Institute for Systems Biology

Integrated Diagnostics Inc.

InterMune Inc.

Invatec SRL

Inviragen Inc.

Isis Pharmaceuticals Inc.

Johnson & Johnson

Ethicon Endo-Surgery Inc.

Ethicon Inc.

Acclarent Inc.

LifeScan Inc.

Animas Corp.

Jubilant Organosys Ltd.

Kirin Holdings Co. Ltd.

Kyowa Hakko Kirin Co. Ltd.

Kolltan Pharmaceuticals Inc.

Lux Biosciences Inc.

Massachusetts General Hospital

Massachusetts Institute of Technology

Medtronic Inc.

Medtronic CoreValve LLC

Ventor Technologies Ltd.

Merck & Co. Inc.

Merck KGAA

Merck Serono SA

MicroTransponder Inc.

Miragen Inc.

Miragen Therapeutics Inc.

Movetis NV

Nabriva Therapeutics Forschungs GMBH

Neuros Medical Inc.

Novartis AG

Novexel SA

NovoCure Ltd.

On-Q-ity Inc.

PTC Therapeutics Inc.

Palyon Medical Corp.

Pfizer Inc.

Pharmaceutical Product Development Inc.

Magen BioSciences Inc.

RaQualia Pharma Inc.

Receptos Inc.

Regulus Therapeutics Inc.

Roche

Sadra Medical Inc.

Sensimed AG

Sequel Pharmaceuticals Inc.

SetPoint Medical Corp.

Spinal Kinetics Inc.

Symphogen AS

Receptor BioLogix Inc.

Technion Israel Institute of Technology

The Medicines Co.

Verus Pharmaceuticals Inc.

Vivaldi Biosciences Inc.

ZymoGenetics Inc.

f-star Biotechnology Research & Development Co.

mondoBiotech AG

About Start Up

No publication reviews leading edge companies and technology better than START-UP. Each issue of START-UP profiles the most important new product companies, identifies the hottest technology areas, reviews funds flowing into private companies and investment trends, and reports on university tech transfer licensing. Industries covered: pharmaceuticals, biotechnology, medical equipment & devices, and in vitro diagnostics.