Biotech financing remains strong

Biotech financing remains strong

The lifeblood of biotech companies is money, and multiple infusions of it are necessary given the long product development cycle and ability for these companies to generate revenue. Money usually comes in three buckets:
• Grants (SBIRs, SSTRs, state matching grants, etc.)
• Investors (family/friends, angels, venture capitalists, and Big Pharma/Big Biotech).
• Partnerships (Big Pharma/Big Biotech once again).
It is, then, imperative to track biotech financings to get a sense of the well-being of the industry. Nobody does this tracking better than Steve Burrill (a translocated Midwesterner, originally from Wisconsin, now living in San Francisco for many years) of the biotech merchant bank Burrill & Company, the biotech industry’s principal cheerleader.
In the March 2008 edition of the biotech publication, BioPharm International, Burrill summarizes key biotech financings for the last three years for two of the above three categories. Although the first quarter of 2008 has just ended, this financing data is not yet available.
Let’s take a look:
U.S. Biotech Financings ($ millions)

Type of Financing 2005 2006 2007 % Growth 2007/2005
Public• IPOS• Follow-On’s• PIPE’s• Debt % of Total $12,954 819 4,194 2,376 5,565 37% $22,691 920 5,766 2,027 13,978 48% $16,719 2,041 6,311 1,618 6,749 38% +29% +149% +40% <32%> +21%
Private• VC• Other % of Total $4,666 3,518 1,148 13% $4,661 4,236 425 10% $5,036 4,425 611 11% +8% +26% <47%>
Partnering % of Total $17,268 50% $19,796 42% $22,365 50% +30%
TOTAL $34,854 100% $47,148 100% $44,340 100% +27%

Source: BioPharm International, March 2008
Encouraging news
The encouraging news is that overall biotech financings have jumped 27 percent in three years, bringing in almost $45 billion and led by Partnering deals growth of 30 percent (representing 50 percent of all financings). Of great import is the growth of the Initial Public Stock Offering (IPO) market, which has been relatively quiet during the last 5-6 years. Last year saw a very large surge in IPOs as Steve Burrill reports that there were 28 IPOs in all. Additionally, the average amount of money raised was $73 million versus the prior year’s average of $50 million. Burrill says that there are about 30 IPOs teed up for 2008, but most will happen in the second half of the year.
Another area of high growth is debt financings, which had a huge spurt in 2006. The only areas of biotech financings showing declines were PIPEs (Private Investment Public Equity) and “other” types of private financing that was non-VC related. I don’t know if this refers to angel investors, but we know from other sources that angel investment was down for the year.
Burrill, who in general is Mr. Optimist when it comes to the biotech industry, seems to feel good about the prospects for 2008, even though the market has been down during the first quarter. Let’s take a quick look at how the public markets have performed this year:
Major Stock Market Index Performance – First Quarter, 2008

Market Index Stock Price Beginning of Year (January 2, 2008) Stock Price End of First Quarter (March 31, 2008) % Change
Dow Jones Industrials 13,261.82 12,262.89 <8%>
NASDAQ National Composite 2653.91 2279.10 <14%>
NASDAQ Biotech 836.34 780.90 <7%>
Amex Biotech 786.50 737.41 <6%>
Amex Pharmaceutical 338.52 295.23 <13%>

Source: Yahoo Financial Page, 4/6/08
Not-so-down downturn
All markets, as suspected, are down, but the declines in the two biotech indices are less severe than that of both the Dow Jones and NASDAQ National markets. Although the first quarter was bloody, Burrill is optimistic for the year; he believes that Big Pharma’s thirst for new products is so high that partnering deals will continue to grow to a level of $25 billion in 2008.
The first quarter already has seen several setback announcements from Big Pharma:
Merck and Schering Plough’s results on the cholesterol drugs Zetia and Vytorin, which received negative commentary at American Cardiology’s annual conference held in Chicago.
Wyeth’s announced cutbacks in its staff and salesforce.
Pfizer’s announcement of a Phase III cancer drug stopping further development.
AstraZeneca’s blockbuster drug Nexium, worth 21 percent of AZ’s total sales of about $30 billion, will lose patent exclusivity to generic companies Ranbaxy (India) and Teva (Israel).
Biotechnology merger and acquisition deals also grew substantially in 2007, with 142 deals being completed for $40.63 billion versus 115 deals in 2006 worth $36.41 billion – up 23 percent and 12 percent, respectively.
This news, however, is positive for the biotech industry, which will continue to provide products to satisfy Big Pharma’s voracious appetite.
As the year progresses, we will see if Steve Burrill and his crystal ball is right! See you soon!
Previous articles by Michael Rosen
Michael Rosen: Canadian biotech: a profile of our northern neighbor
Michael Rosen: A tale of two biotech cities: Chicago and Baltimore
Get set because here come two Olympics, athletics and biotech
Michael Rosen: 2007: M&As and IPOs continue in the Midwest life science sector
Michael Rosen: U.S. can learn from growth of biofuels in Latin America

Michael S. Rosen is president of Rosen Bioscience Management, a company that provides CEO services, including financing and business and corporate development to start-up and early-stage life science companies such as Renovar and Immune Cell Therapy. Rosen also is a founder and board member of the Illinois Biotechnology Industry Organization. He can be reached at
This article previously appeared in, and was reprinted with its permission. The article is not meant to be a stock recommendation.
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