Beyond Borders: Global biotechnology report 2010

the pharmaceutical industry, as pharma
companies are forced to rationalize R&D
budgets and make tough decisions about
their pipeline assets. Pharmaceutical
companies — which have historically not
done much out-licensing — will increasingly
seek to out-license portions of their
pipelines, or develop products using risksharing
structures. (For more discussion
of these trends, see this year’s Global
introduction article.)
Even as public investors and VCs are raising
the bar, there is broad recognition that a
healthy emerging biotech sector is good
for innovation and for the overall drug
development ecosystem. As pharmaceutical
companies access more and more of their
drug candidates externally, they will need a
vibrant community of innovative companies
to take on the risk of early development. In
last year’s Beyond borders, we highlighted
one example of pharmaceutical companies
cooperating to fund new enabling
technologies through Enlight Biosciences.
We expect to see other examples of “precompetitive
collaboration,” but 2009 was
marked more by the increasing prominence
of corporate venture capital from several
perspectives. In the past, corporate venture
capital arms often invested as part of a
broader collaboration arrangement or as
a smaller player in a VC syndicate. It was
also relatively uncommon to see more
US yearly biotechnology financings, 1998–2009 (US$m)
than one corporate investor in a particular
transaction. In 2009, this changed
markedly — a prominent example being
Aileron Therapeutics, which raised US$40
million in a round in which the venture
arms of GlaxoSmithKline, Eli Lilly, Novartis
and Roche all participated. In Europe, the
importance of corporate venture capital
was even more stark, with 8 of the top 10
venture rounds having a corporate investor.
Over these eight transactions, Novartis
was an investor in six, including Opsana
Therapeutics, where they invested alongside
the Roche Venture Fund.
Also prominent on the scene in 2009 was
the Novartis Option Fund, which closed
investment transactions with the likes of
Avila Therapeutics, Elixir Pharmaceuticals,
Forma Therapeutics, Heptares and Viamet
Pharmaceuticals. In these deals, the
Option Fund typically purchases an equity
interest and obtains the right to license a
particular program. Finally, in what may
be the start of a trend, Eli Lilly announced
it would spin out Lilly Ventures as an
independent firm (with US$200 million)
so that the venture arm could attract
and retain partners who would otherwise
not want to be bound by corporate
compensation policies, and so that the
partners would have the same profit
interest as other syndicate investors.
66 Beyond borders Global biotechnology report 2010
United States
Public companies
At first blush, the rebound in financing
for public companies in 2009 was
remarkable, especially when layered against
the backdrop of the gloom-and-doom
predictions that existed at the beginning
of the year. Total financing of public
companies — including IPOs, follow-on public
offerings, private investments in public
equity (PIPEs) and debt deals — rebounded
to an impressive US$13.5 billion from the
anemic US$8.6 billion of 2008. However, as
described in this year’s Global introduction
article, the overall biotech funding story
continues to be that the money raised
is largely funding a very small cohort of
companies. In 2009, two-thirds of the total
was raised by just 19 companies — which is
actually an improvement over 2008, when
the same number of companies accounted
for 75% of the (significantly smaller) fundraising
total. Despite the fact that the
market’s appetite for follow-on offerings
and PIPEs improved in the second half of
2009, the reality was that the companies
raising the five highest amounts of capital
accounted for between 44% (in the third
quarter) and 78% (first quarter) of total
funds raised in each quarter of 2009.
2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998
IPOs 697 6 1,238 944 626 1,618 448 456 208 4,997 685 260
Follow-ons 5,165 1,715 2,494 5,114 3,952 2,846 2,825 838 1,695 14,964 3,680 500
Other 7,617 6,832 12,195 10,953 6,788 8,964 8,306 5,242 3,635 9,987 2,969 787
Venture 4,556 4,445 5,464 3,302 3,328 3,551 2,826 2,164 2,392 2,773 1,435 1,219
Total 18,034 12,998 21,391 20,313 14,694 16,979 14,405 8,699 7,930 32,722 8,769 2,766
Source: Ernst & Young, BioCentury, BioWorld and VentureSource
Numbers may appear inconsistent because of rounding.