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Private biotech funding rises as venture firms deploy cash

Private funding for biotechnology startups rose during the first three months of the year, suggesting some of the sector’s momentum has translated to stepped-up investment in young drugmakers.

Twenty-six companies closed private fundraising rounds worth more than $100 million in the first quarter, according to data from HSBC Innovation Banking shared with BioPharma Dive. While venture rounds have grown in size in recent years, $100 million is typically viewed as a significant threshold.

Eight of those 26 biotechs were cancer drugmakers, while five were startups developing programs for neurological conditions, said Jon Norris, a managing director with HSBC. Overall, biotechs across the U.S. and Europe raised $6.8 billion in venture capital funding during the first three months of the year, nearly $1 billion more than the most active quarter in 2023.

“This is a good number for representing strong biopharma activity,” Norris said. “If you see another big increase, I’d be a little worried that we’d be trying to return ourselves to the 2021 cycle,” he added, referring to a boom year in biotech funding.

Venture firms are continuing to seek out surer bets, though. While some seed and Series A rounds are being built around more cutting-edge technology, many more are for tried-and-true management teams working to improve existing platforms, like antibody-drug conjugates or radiopharmaceuticals.

Among the most active investors currently are OrbiMed, Arch Venture Partners, GV, RA Capital Management and Cormorant Asset Management, according to William Blair. Several life sciences investment firms have closed new funds in the first quarter of 2024, including TCGX, Scion Life Sciences and Goldman Sachs — a sign of industry interest.

“Round sizes continue to increase given heightened focus from investors on providing sufficient ‘inflection capital,’” William Blair analysts wrote in a recent report.

Eighteen of the 26 private financing rounds identified by HSBC involved companies in preclinical or Phase 1 drug trials. That contrasts with the firms having the most success pricing initial public offerings, which have mostly been biotechs in mid-to-late testing so far this year.

There remain a number of “very hungry buyers” for the right IPO story and promising clinical data, Norris said.

The apparent uptick in private funding also stands out in comparison to this time last year, when IPOs dropped off and venture funding became harder to secure. Then, life sciences companies were forced to turn more often to so-called “insider rounds,” or cash infusions from their existing backers.

Now, new investors are returning and often joining through large syndicates. Mirador, a startup birthed by former Prometheus executives, recently pulled in $400 million from 17 venture investors, for example.

“When markets aren’t as strong, you want like-minded insiders who are going to have a pragmatic approach,” said Brian Matesic, a principal at Norwest Venture Partners. In March, Norwest co-led a $157 million Series B round for psychiatric drug developer Engrail Therapeutics.

“M&A really started this rebound,” Matesic said. Blockbuster deals brokered at the end of last year included AbbVie’s $8.7 billion acquisition of Cerevel Therapeutics and $10.1 billion buy of ImmunoGen, Roche’s $7.1 billion purchase of Telavant and Bristol Myers Squibb’s $14 billion deal for Karuna Therapeutics.