- The number and amount of biotechnology financings dipped in 2023, with venture firms investing 25% fewer dollars in companies compared to the year prior, according to new quarterly data released Thursday from Pitchbook and the National Venture Capital Association.
- Venture capital firms are increasingly investing in later-stage drug companies, which accounted for about 40% of deals in 2023. Rather than invest heavily in preclinical work, VCs now appear to be waiting for drug developers to enter or have a road map to clinical trials, said Kazi Helal, Pitchbook’s senior healthcare analyst.
- Pitchbook and NVCA also found venture activity dropped across all sectors last year, to $170.6 billion from $242.2 billion in 2022.
Veteran biotech VCs like Westlake Village BioPartners, OrbiMed and, most recently, Venrock have reloaded with new funds, while new life sciences-focused investors such as Yosemite and Cure Ventures launched last year.
But for how flush with new funding VCs have become, they haven’t been deploying as much into new companies. Within the biopharma sector, venture firms invested $18.4 billion across 481 deals last year, according to the report. That was down from 2022’s total of $24.5 billion over 559 deals and matches a trend of venture firms opting for fewer but larger deals.
In their quarterly report on dealmaking and venture capital investment, Pitchbook and NVCA also counted fewer cell therapy deals compared to other modalities, with the bulk of capital — about $14.2 billion — going to small molecule and biologics development.
Over the last two years, many publicly traded genetic medicine developers, including Editas Medicine, Intellia Therapeutics and Beam Therapeutics, have seen declining share value and turned to layoffs. A combination of trial hurdles and questions on the pricing have weighed down investor enthusiasm, Helal said.
“A lot of these early bets are still maturing,” Helal said.
With more weight being put on trial data, early-stage startups have had a harder time raising money. And for those looking to go public, the bar appears to be staying higher than in 2020 and 2021.
“You can’t have a machine learning, generative AI [company] and IPO without any clinical data,” Helal said. “The data demand is pretty high. You can’t just have 10 partnerships putting in $50 million each, you need to actually have your internal pipeline.”
Nor is it enough to rely on the popularity of certain classes of medicine, such as GLP-1 drugs for obesity, to drive investor interest. “We’re at an early-stage saturation point” with companies chasing those metabolic diseases, Helal said.
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