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Biopharma venture capital investors are less certain than those in high tech that concerns about President Donald Trump’s policies are to blame for any drop in startup deal-making.
Tech startup deal-making fell 37 percent since a high in December 2016, Bloomberg Technology reported on Feb. 27. Venture capital executives working with tech companies attributed this drop at least in part to uncertainty about the new Trump Administration.
VCs associated with biopharma startups acknowledged uncertainty about what the new administration will do, but were less convinced of its impact. “There may be a slow-down in new biopharma investment as people are trying to figure out what President Trump wants to prioritize,” Caleb Winder, managing director of Excel Ventures Management, told Bloomberg BNA in a March 1 phone interview. “But deals are being made, and things feel better than they did a year ago.”
David Berry, a general partner at Flagship Pioneering, told Bloomberg BNA by phone March 2: “As far as day-to-day is concerned, nothing has happened yet to negatively impact biopharma investment decisions. For therapeutics, there’s no sign that it’s going to get any harder for investments. In fact, conversations are going on that could take us into interesting places.”
Data from the National Venture Capital Association and Bloomberg Finance L.P. document a slowdown in biopharma startup investing starting in 2016, and possible signs of renewal.
The PitchBook-NVCA Venture Monitor characterized biopharma investing as “healthy” in 2016, with VCs putting $7.8 billion in biotechnology and pharmaceutical companies over 515 deals ( 11 LSLR, 1/20/17 ). This represented 11 percent of all U.S. VC investment, even though both deals and dollars for the sector declined from the prior year. A report by PricewaterhouseCoopers reached a similar conclusion.
An analysis of Bloomberg Finance data shows VC funds raised $2.4 billion for biopharmas over the last six months compared to $1 billion in the previous six months. There was a big jump in VC fund-raising in October 2016, a strong December and slight declines in January and February.
Winder noted that when a new administration begins there is always some uncertainty. “This time that has been combined with the surprise at the Trump victory when everyone had been pretty sure Hillary Clinton would win and that her campaign criticism of biopharmas would result in some negative impact on the industry. Now that Trump is in office, I think the lack of predictability about his policies may have had an impact, but I’m not sure how deep or long-lasting.”
Winder identified recent important biopharma deals.
Looking at the investment picture for biopharma startups, two companies— AnaptypsBio, which is developing treatments for inflammatory diseases, and Jounce Therapeutics, which is developing oncology therapeutics—launched initial public offerings in January and received strong responses. Some analysts suggested this was a good sign for other biopharma IPOs.
Braeburn Pharmaceuticals, however, dropped its IPO plans in early February, and Visterra, which is developing an antibody for treating the Zika virus, postponed its IPO. Bloomberg reported that biotech IPOs reached their lowest level in the last quarter of 2016 since 2012 .
While, as Winder noted, there is a lack of certainty during every change in administration, the transition from President George W. Bush to President Barack Obama in 2009 offers little guidance because it occurred in the midst of a financial crisis, which put U.S. investors in uncharted territory.
“Where we are now is that everyone is happy there is recognition that health care is complicated,” Berry said. “There is a mixed view here in a way because everyone has acknowledged a common goal of getting drugs to patients faster while at the same time ensuring their safety and efficacy. At the moment, we’re mostly in a wait-and-see position.”
“I hope when we make changes in regulations and laws we do things by increments rather than make wholesale changes,” Winder said.
To contact the reporter on this story: John T. Aquino in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Randy Kubetin at RKubetin@bna.com
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