Looking back over the first half of 2011 reveals a mixed picture of venture-capital funding performance for the US biotechnology
industry. The second quarter of 2011 ended with $1.24 billion invested through 116 deals, a marked increase of 46% in dollars
and 20% in deals from the first quarter. In comparing second-quarter performance to the same period of 2010, however, the
amount invested on a dollar basis declined 9%, and the number of deals decreased 24%. Comparing the first half of 2011 with
the same period of last year shows a decline of approximately $65 million in the amount of venture funding invested.
During the third quarter of 2010, venture investment in the US biotechnology industry declined considerably to $868 million
compared with the second quarter 2010 bump of $1.37 billion. The sector raised $3.78 billion in venture-capital funding for
all of 2010, slightly beating the $3.72 billion gleaned in 2009 and far underperforming the 2007 and 2008 totals. If investors
become disheartened by the slow growth in the US economy, a tightening federal budget and continuing regulatory uncertainly,
a similar drop for the third quarter of 2011 may occur.
For the second quarter of 2011, the US biotechnology industry remained in second place behind the software industry in its
share of total venture-capital funding, the position in which it ended the previous year. The software industry received $1.5
billion in 254 deals during the second quarter.
Two biotechnology subsegments experienced significant upswings in venture funding during the second quarter of 2011: biotechnology
research, up 216% year over year and biotechnology equipment, which gained 197%. Biotechnology human captured the largest
share of any biotechnology subsegment, with $819 million going into 70 deals, but this level represented a 2% decline in dollars
and a 21% decrease in the number of deals from the second quarter of 2010.
The average deal size for the biotechnology sector was $10.7 million in the second quarter of 2011, up 19% compared with the
same quarter last year and up 22% compared with the first quarter of 2011. Biotechnology captured two of the top 10 venture
capital deals for the quarter. Intrexon received $100 million, and Merrimack Pharmaceuticals drew $77 million.
One reason that average deal size is up is that investors realize that the time and capital required to bring a new biotechnology
product to market continues to grow as companies maneuver through a complex regulatory process that requires extended clinical
trials and a large amount of data to verify safety and efficacy. The lengthy regulatory process also gives investors a reason
to gravitate toward later-stage funding of companies closer to achieving liquidity.