BioWorld Today Columnist

Throughout July, the Dow jerked everyone around as it whipped up and down by 100+ points on what felt like a daily basis.

It's become a regular aerobic activity trying to follow the bouncing portfolio valuation.

Most folks went through the "panic and dump" phase a year or more ago, so now we just hold on and avoid looking at those statements.

From January through June of this year, a meager five IPOs made it through.

They raised a total of $346 million, and all had at least one product candidate in the clinic. IPOs remain out of reach for most biotech ventures, leaving the growing backlog of private companies straining the bankrolls of venture firms.

So let's take a look at where their money is going!

Midyear Results

The halfway mark for 2010 shows trends similar to last year around this time, with some key differences.

Starting at the top, the pattern of funds flowing into the Series A, B and later rounds show a significant shift from 2009.

Last year, the sector raised $1.44 billion through June; 37 percent of the total funds raised headed into Series A rounds, 15 percent went to Series B rounds and 48 percent flowed into the later-stage rounds.

This year, $1.2 billion was raised in all of the biotech rounds (as reported by BioWorld Insight and vetted by yours truly), meaning we had a 17 percent drop for biotech funding to date in 2010.

The bigger change is in distribution of the funds. Only 20 percent went into Series A deals – a 56 percent drop from the dollar amount shoveled into such deals last year. OK, so $145 million of last year's Series A money went to a single deal – Clovis Oncology Inc., a specialty pharma firm created by the folks who brought us Pharmion. But even if you pull Clovis out of last year's number, we still have a hefty drop in dollars and deals in the earliest rounds.

The rest of the 2010 midyear funding was evenly split into Series B and later stage deals. This reflects a 121 percent jump in funds flowing into the midstage deals this year, and a 66 percent increase in deal number. With $474 million raised this year, the Series C and higher rounds brought in 31 percent fewer dollars than in midyear 2009, even though the deal number was down only 14 percent this year.

Investors continued to be willing to shovel money into companies still in the R&D phase, and specialty pharma deals stayed in the minority. But the drop in Series A deals – the number of deals as well as dollars invested – suggests that the venture funds are saving their firepower for companies already in their portfolios as the worldwide markets continue to attempt recovery from the recession.

With the Series B deals this year resembling a giant rabbit stuck midway in a boa constrictor, can we expect the dollars to pool in the later-stage deals by year-end as the venture funds digest their meal?

Stay tuned for the next exciting adventure of Biotech: Not For The Faint Of Heart! (Makes you almost understand why Joe Lacob of Kleiner Perkins decided to take a chance on buying the Golden State Warriors basketball team with a Hollywood mogul. It probably seemed less risky!)

Cynthia Robbins-Roth, PhD, founding partner of BioVenture Consultants, can be reached at biogodess@earthlink.net. Her opinions do not necessarily reflect those of BioWorld Today.

Published: July 20, 2010