22 Sep Biotech IPOs bring in encouraging sums
CHICAGO — In last week’s column, I raised the premise that in the early years of biotech it wasn’t about making money but about providing radically new solutions to health care.
There’s a thread drawn to the early years of rock ’n roll where it was also not about making money but about expressing what was going on in society (without getting jailed for it). Today, both businesses are about big money and both have become industries that have become mainstream.
While the old biotech metric of the entire worth of the U.S. biotech industry being less than the value of Merck is not only not true, it now takes more than the top two Big Pharmas – Pfizer and Merck – to match up with the entire U.S. biotech industry, which is $339 billion versus $344 billion.
I am willing to bet with the slowed growth of Big Pharma and the rapid growth of biotech that we will in another few years see the value of the U.S. biotech industry equal to the combined value of the top 10 U.S. Big Pharma companies.
I have during 2004 frequently covered the financing cycle of the U.S. biotech industry given the opening of the IPO window and the replenishing of VC money, which is a vital factor for financing emerging new companies.
Though data for the third quarter isn’t out yet, the trend for total biotech financing in the U.S. through 2004 has been very encouraging.
According to biotech industry expert Burrill and Co., total biotech financing through mid-year 2004 ($14.5 billion) compares well to 2003’s total year figures of $25.3 billion. Still, this is substantially below the trend line of record year 2000 ($38.9 billion).
Note that Burrill’s numbers also include money raised via partnering (at the end of the day, money is money).
VC funding of biotech companies in the first half of $2.2 billion compares extremely well to full-year 2003 funding ($2.8 billion). The IPO market through mid-year 2003 raised $1.3 billion versus levels of less than $500 million for each of the three preceding years. The IPO market will be hard-pressed to achieve the record levels of 2000, which skyrocketed to $6.5 billion.
The problem with the above chart is that most of the financing is for large cap biotech companies that are publicly traded. As we all know well by now, most of the biotech companies in the Midwest are privately held and earlier stage companies.
Nevertheless, there are some encouraging financings for these types of companies even here in the Midwest. Within the last week, Chicago-based KeraCure, a wound-care company, raised $6.2 million from Indianapolis-based KD Investments.
Interestingly, while KeraCure is based on technology invented at the University of Michigan and Wayne State University, the company has set up shop here in Chicago. In more recent years, Chicago-based companies have been lured by tempting Michigan money to set up operations on the other side of the lake. It’s nice to see reverse migration!
Biotech IPO Update Around the World
There are no new IPOs so far in the September. We are holding steady at 34 IPOs with another 13 now queued up. We may just get to Steve Burrill’s projection of 50 IPOs in the U.S. for this window. The bad news is that there is an increasing number of IPOs that have been pulled and are now derailed (at least six).
Burrill has been following the biotech IPO trend not only in the U.S. but around the world as well. During the U.S. IPO window that opened in the fourth quarter of 2003, there was seven Japanese biotech IPOs, which is impressive given the early stage of Japanese biotechnology efforts.
There have also been nine Australian IPOs during the same period, three IPOs in the U.K. and one each in Germany, Switzerland, Canada, France and even the Czech Republic and India. This makes for a total of 25 international IPOs versus 34 in the U.S.
I can’t stress enough the importance of these IPOs. Other than an acquisition by a large biotech company or Big Pharma, this is the only way for the VC investors to exit from their investments in companies and replenish their financial coffers, attract new investors and invest in a new set of companies.
See you next week!
Michael S. Rosen is president and CEO of Barbeau Pharma and a founder and board member of the Illinois Biotechnology Industry Organization (IBIO). He can be reached at firstname.lastname@example.org. This article has been syndicated on the Wisconsin Technology Network courtesy of ePrairie, a user-driven business and technology news community distributed via the Web, the wireless Web and free daily e-mail newsletters. They can be found at www.eprairie.com.
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