An Uneven Path for Biotech Financing

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PTSM: Pharmaceutical Technology Sourcing and Management

PTSM: Pharmaceutical Technology Sourcing and Management-06-06-2012, Volume 8, Issue 6

Venture-capital funding is up in 2012, but public financing remains sluggish in the biopharmaceutical industry.

Financing into the life-sciences industry is an important barometer of the health of the industry, particularly for small and emerging biotechnology companies, which are a key part of drug-development activity. In looking at the first five months of 2012, funding into the global and US-based life-sciences industry shows mixed results as global private financing made strong gains, but global public financing declined.

Venture-capital funding is the strong spot in biotechnology financing. During the first five months of 2012, global biotechnology venture-capital financing was nearly $4.9 billion, up 29.6% from a year ago, according to an analysis by Burrill & Company. US venture-capital funding increased to nearly $3.5 billion through the end of May, a 27.5% increase over the same period last year.

While venture-capital funding was robust, public biotechnology financing is dragging thus far in 2012. Overall global public financing for life-sciences companies declined 34.9% to $23 billion for the first five months of 2012, according to the Burrill & Company analysis. US public financing, however, was up 9.9% to $15.3 billion for the first five months of 2012.

Public financing weak

Initial public offerings (IPOs) in the life sciences also are down in 2012 compared to 2011. “The IPO market for life-sciences companies continues to be challenging,” said G. Steven Burrill, CEO of Burrill & Company, in a June 1, 2012, press release. “Anyone who was hoping for a lift from the Facebook IPO or improving economic news out of Europe can forget about that.”

For the first five months of 2012, there have been 17 global biotechnology-based IPOs, down from 28 during the same period last year. The 17 IPOs thus far in 2012 have raised $1.15 billion, down 58.2% from the nearly $2.8 billion raised in the year-ago period, according to the Burrill and Company analysis. A similar weak IPO front has hit the US biotechnology industry. Through the first five months of 2012, there were eight IPOs in the US biotechnology industry, down from 11 in the same period in 2011. The eight IPOs raised $549 million, a nearly 40% decline from the $911 million raised in the 11 IPOs through the first five months of 2011, according to the Burrill & Company analysis.


In looking at other forms of public financing, private investments in public equity (PIPEs) were up on a global basis but declined in the US for the first five months of 2012. Global PIPEs increased 135.6% to nearly $3.2 billion through the end of May, but US PIPEs declined 7.2% to $666 million. Global follow-on offerings declined 55% to $2.7 billion, and US follow-ons increased modestly, by 4.2% to nearly $2.6 billion, according to the Burrill & Company analysis.

Global debt offerings in the life-sciences decreased both globally and in the United States. Global debt offerings declined 64.8% to $7.9 billion, and US debt offerings decreased 44.4% to $5.0 billion. Other debt instruments in the life sciences, however, increased both globally and in the US. On a global basis, other forms of debt increased 212.6% to $7.2 billion and by 678.8% to $5.8 billion in the US.

Partnering declines

Funding raised from corporate partnering deals between life-sciences and bio/pharmaceutical companies also declined in the first five months of 2012. On a global basis, funding from partnering deals declined 18.4% to $12.5 billion through the end of May, according to the Burrill & Company analysis. US-based partnering/licensing deals also fell, declining by 37.1% to $6.95 billion. In May, partnering deals accounted for just $432 million, the lowest level of activity since Burrill and Company began tracking this data monthly in 2009. “...The lack of traditional alliances announced during the month is concerning since these agreements play such a critical role in funding development of the biotech industry’s most promising products,” said G. Steven Burrill in the June 1 press release.

Although traditional alliances between companies are down in 2012, there has been a recent uptick in partnerships between pharmaceutical companies, academia, nonprofit organizations, and government. In May alone, 15 such agreements were announced, according to Burrill & Company. Among the most significant of corporate–academic partnerships in May was the $285 million collaboration among five European pharmaceutical companies (GlaxoSmithKline, AstraZeneca, Sanofi, Janssen, and Basilea Pharmaceutica) and academic institutions for drug-resistant antibiotics.

Another important deal in the US was an agreement between Pfizer, Eli Lilly, AstraZeneca, and the National Institutes of Health’s National Clinical and Translational Sciences program for grants to fund preclinical and clinical feasibility studies for new uses of more than 20 compounds that had been previously abandoned. The initiative, Discovering New Therapeutic Uses for Existing Molecules, will direct researchers’ attention to a part of the therapeutic pipeline that traditionally has been difficult for them to access: compounds that already have cleared several key steps in the development process, including safety testing in humans. Approximately $20 million will be provided to support research grants of up to three years for preclinical and clinical feasibility studies. These studies will test more than 20 compounds from industry partners for their effectiveness against a variety of diseases and conditions. The companies will provide the researchers with access to the compounds and related data.