This year has seen large >$60M deals to Ascletis, Repare Therapeutics, SutroVax and Iterum Therapeutics.
Many of the most active investors in pharmaceutical startups are venture capital firms such as OrbiMed Advisors, NEA, or Versant Ventures. But direct investment from corporate entities and corporate venture arms has been trending up for the past 4 years. These corporates range from venture arms of pharmaceutical giants like Novartis and Pfizer to tech giants like Google and Samsung.
Using CB Insights data, we analyzed corporate investment activity in private pharmaceutical startups since 2012. We define pharma startups as those working across drug delivery, drug development, and drug manufacturing. Medical devices, digital health companies, and diagnostics are not included.
Annual corporate funding trends
In 2017 through 06/26/17, global corporate equity funding to private pharmaceutical companies has reached $1.85B over 93 deals. At the current run-rate, 2017 is projected to reach $3.8B, a down year for the first time in 5 years. Deals, however, are on track to reach a 5-year high of 192 as investors place more bets on promising biotechnologies.
In 2016, funding reached $4.88B, up nearly 3% over 2015. Deal count in 2016 was moderately down, falling 9% from 2015.
A few of the larger deals with corporate participation this year include the $100M Series B of China-based Ascletis backed by Goldman Sachs and Tasly Pharmaceutical, among others; the $68M Series A of Repare Therapeutics from investors including Celgene; and the $65M Series B of Iterum Therapeutics backed by Sofinnova Ventures, among others.
Quarterly corporate funding trends
In general, quarterly deal flow to pharma startups has trended up since 2012. On a quarterly basis, deal flow surged nearly 42% from 36 deals in Q4’16 to 51 in Q1’17. Funding also saw gains in Q1’17, climbing nearly 40% from $33B in Q4’16 to nearly $46B in Q1’17.
Q1’17 saw large >$50M deals to SutroVax, Spero Therapeutics, RaNA Therapeutics, and Solid Biosciences, with all but SutroVax being based in Massachusetts. SutroVax is developing complex vaccines for infectious diseases; Spero is developing a pipeline of antibacterials to treat multi-drug resistant bacterial infections; RaNA Therapeutics is working on RNA-targeted medicines for rare genetic disease; and Solid Biosciences is developing gene therapies for Duchenne muscular dystrophy.
Deal share by stage
Overall, 2016 saw a big uptick in activity to early-stage (seed/angel and Series A) pharma startups while mid-stage (Series B/C) deals dropped 8 percentage points to 27% and late stage (Series D/E+) deals remained relatively steady at 10% of all deals.
Last year, early-stage pharma startups took 49% of global deal share, up from a previous high of 41% of deal share in 2014. And in 2017 YTD, early-stage pharma startups are at 43% of all deals. A few of the larger early-stage deals this year include the $41.16M Series A of Vivet Therapeutics, the $39M Series A of OrphoMed, and the $38M Series A of Arrakis Therapeutics.
As early-stage deal share hovers between half to 40% of deal activity, late-stage deals have trended down since a high of 18% of all deals in 2012. Late-stage deals accounted for only 9% of deal share in 2015, 10% in 2016, and are currently at 4% in 2017 YTD. Mid-stage deals have remained relatively steady, hovering around 30% since 2014.
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