First-Quarter Venture Financing: The Retrenchment Begins

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Includes: ARKG, BBC, BBH, BBP, BIB, BIS, CNCR, FBT, HQL, IBB, LABD, LABU, PBE, UBIO, XBI, ZBIO
by: EP Vantage

With the market having turned distinctly sour this year many will find it heartening to learn that money continued to flow to private biotech companies in the first quarter, with European groups showing a particularly strong performance.

That said, there is no hiding the fact that the retrenchment has begun (see tables below). While in broad historical terms the quarter is respectable, both the total raised and the number of rounds are down versus the fourth quarter of 2015 and the corresponding period 12 months ago.

Top 10 rounds of Q1 2016
Company Investment ($m) Round Date
Mission Therapeutics 86.4 Undisclosed Feb
C4 Therapeutics 73.0 Series A Jan
Forty Seven 70.0 Series A Feb
NextCure 67.0 Series A Jan
Millendo Therapeutics 62.0 Series B Jan
Zymeworks 61.5 Series A Jan
SomaLogic 60.5 Undisclosed Mar
Cardiorentis 60.1 Series B Jan
Autolus 56.7 Series B Mar
PanTheryx 53.0 Undisclosed Mar
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Watchers of European biotech will note with pride that a UK company, Mission Therapeutics, seized the global top spot for the largest round of the quarter – a healthy $86.4m.

This will go towards developing Mission’s portfolio of assets focused on deubiquitinating enzymes. Interestingly, the company was one of two in the top 10 to focus on ubiquitin, the second-placed C4 Therapeutics of the US being the other (Interview – C4 starts life with a bang, March 31, 2016).

Overall 75 individual private rounds brought in a combined $2.0bn in the first quarter. This means that not only are the totals slowly declining quarter on quarter, and year over year, but cash is increasingly going towards a chosen few biotechs.

This “safety in numbers” trend in VC financing has been evident for some time now. In the first quarter the average raised per round was about $28m, versus $23m or so a year ago – when the biotech bull market was in full swing and more cash was spread among more companies, notwithstanding Moderna’s monster $450m raise.

Annual VC investments
Date Investment ($bn) Financing count Avg per financing ($m) No. of rounds ≥ $50m
1Q 2016 2.0 75 27.9 13
2015 10.0 389 26.3 55
2014 7.1 467 16.4 35
2013 5.0 418 13.2 12
2012 4.8 431 12.1 16
2011 4.3 399 12.1 11
2010 5.0 451 12.2 13
2009 4.9 385 14.1 16
2008 4.9 362 15.4 14
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Mission comfortably edged out C4 to the top spot. It will come as no surprise that two other groups in the VC top 10 – Forty Seven and Nextcure – are targeting immuno-oncology, while Zymeworks and Somalogic are developing novel antibody technologies.

The list also includes Cardiorentis, a Swiss group benefiting from renewed enthusiasm around heart failure, and Autolus, a low-key UK start-up attempting to get into the hot CAR-T therapy space. Cardiorentis was to have revealed keenly awaited results from its large study of Ularitide at this month’s American College of Cardiology meeting, but the presentation was pulled at short notice.

Autolus was spun out of University College London a year ago, but has yet to make public anything about its CAR-T approach, pipeline or clinical trial plan. Presumably it revealed some of these to its new private backers, Woodford Investment Management and Perceptive Bioscience, before these put in £40m.

While UK biotech attracting increasing amounts of money is positive, one worry is that all we are seeing is a delayed reaction, and the EU simply has not yet caught up with the US biotech slump.