Venture Funding
of Therapeutic
Innovation
A Comprehensive Look at a Decade of
Venture Funding of Drug R&D
by David Thomas, CFA and Chad Wessel
BIO INDUSTRY ANALYSIS
February 2015
A Letter from The Honorable
Jim Greenwood & Dr. Cartier Esham
Access to early-stage financing is the lifeblood of biotechnology innovation. For therapeutic-focused biotechnology
companies in particular, the required capital and development timelines dwarf most other industries, making it
challenging to find sizable early investments from committed investors. As the world’s largest trade association
representing biotechnology companies across the United States and in more than 30 other nations, it is important
for BIO to better understand investor trends in order to determine where scientific or policy issues may be
impacting the ability to maintain a robust pipeline of innovative medicines.
In this report, we set out to better understand where venture financing over the last decade has been put to work in
terms of disease area and novelty of research. Some of the key findings of this first-of-its-kind report are:
• Over the last decade, 78% of U.S. venture investment for therapeutics went toward novel drug R&D,
suggesting innovation is a core priority for venture investors.
• Comparing five-year periods before and after the recent financial crisis (2004-2008 vs. 2009-2013), total
funding of drug R&D dropped 21%, from $21.5 billion to $16.7 billion.
• Disease areas affecting large populations of Americans have seen a decline in novel drug R&D funding
over the five-year periods: Diabetes (-81%), Psychiatry (-56%), Gastrointestinal (-49%), Respiratory (-41%),
Cardiovascular (-33%).
• Rare disease funding has seen a large increase over the past decade in terms of both dollars raised and
number of companies funded.
• Threefold more venture dollars were raised by companies working on drug improvements of previously
approved pain drugs than for novel drug R&D in Alzheimer’s Disease.
• Biologics developers now receive 50% of total venture funding for therapeutics, up from only 27% in 2004,
with most of the increase seen after the signing of the Affordable Care Act in 2010, which included 12 years
of data exclusivity for biologics.
• There are fewer first-time Series A financings in recent years, down 30% from a peak in 2006.
With a contracted life-science investor base and an investor community continuously examining issues such
as industry productivity, the reimbursement landscape, scientific barriers, and regulatory hurdles, some areas
of therapeutic innovation are bound to face greater challenges than others. This report will help inform our
future policy work and provide industry, policymakers, and other stakeholders with a comprehensive view of the
investment environment.
Sincerely,
Jim Greenwood
President & CEO, BIO
E. Cartier Esham, Ph.D.
E.V.P., Emerging Companies Section, BIO
Table of Contents
Introduction.................................................................................................................................................................................................................................2
Ten-Year Trend..........................................................................................................................................................................................................................3
Novel Drug R&D vs. Drug Improvement R&D..........................................................................................................................................................3
Phase of Development................................................................................................................................................................................................4
Biologics...............................................................................................................................................................................................................................5
Major Disease Areas..............................................................................................................................................................................................................6
Oncology..............................................................................................................................................................................................................................9
Neurology..........................................................................................................................................................................................................................10
Psychiatry.........................................................................................................................................................................................................................14
Infectious Disease........................................................................................................................................................................................................16
Cardiovascular..............................................................................................................................................................................................................20
Endocrine.......................................................................................................................................................................................................................... 21
Metabolic..........................................................................................................................................................................................................................23
Immunology....................................................................................................................................................................................................................25
Gastrointestinal............................................................................................................................................................................................................ 27
Respiratory......................................................................................................................................................................................................................29
Hematology.....................................................................................................................................................................................................................32
Ophthalmology.............................................................................................................................................................................................................33
Platform.............................................................................................................................................................................................................................34
Other...................................................................................................................................................................................................................................35
Rare Disease............................................................................................................................................................................................................................36
Series A Financing................................................................................................................................................................................................................37
Discussion..................................................................................................................................................................................................................................41
Methodology............................................................................................................................................................................................................................42
References............................................................................................................................................................................................................................... 44
Appendix....................................................................................................................................................................................................................................45
BIO Industry Analysis | 1
Introduction
To investigate investor trends, examine investment in specific therapeutic areas and indications, and study whether
there are disease areas that might be struggling for early-stage venture equity financing, we analyzed data from
four venture capital databases to create the broadest, most comprehensive study possible – a categorization
of $38 billion of venture capital into more than 1,200 U.S. drug companies, receiving more than 2,000 rounds of
funding over the last 10 years (2004-2013).
We categorized each company’s lead research focus at the time of investment by: phase of development, disease
and indication, modality, and, most uniquely, level of novelty. More specifically, individual tranches within each
investment round were tagged by lead program at the time funding was received. This allowed us to capture
changes in company therapeutic focus over time (see Methodology for more details).
To assess level of novelty, we grouped companies into two categories: 1) novel R&D of new chemical entities with
no prior regulatory approval, and 2) R&D that improves upon existing therapeutics, such as new delivery methods,
new formulations, or development of approved drugs for new indications (repurposing). Both have their place in
the spectrum of drug development and, in the end, serve to benefit patients. Products generated from the second
category will improve the quality of life for patients through enhanced benefits of already approved drugs. Over
time, these benefits have proven valuable in expanding use, compliance, and overall patient experience.
The first category of novel drug R&D examines truly innovative and potentially disease-modifying agents for
diseases with current unmet medical need. Without adequate funding of novel drug R&D, the next generation of
innovative medicines cannot be discovered.
This report also analyzes financing in specific therapeutic areas in order to better determine where scientific or
policy issues may be impacting the ability to maintain a robust pipeline of innovative medicines – a goal that is
shared by patients, healthcare providers, policymakers, investors, and the biopharmaceutical industry alike.
2 | BIO Industry Analysis
Ten-Year Venture Funding Trend
As shown in Chart 1, venture equity funding of private drug development companies peaked in 2007 with $5 billion
in total funding. This was followed by a severe decline through the financial crisis of 2008 and into 2010, a year in
which only $2.8 billion was raised, a drop of 44% from the industry’s peak in 2007. Since that time, investment has
begun to trend upward, but only to $3.6 billion in 2013. The industry has not made it all the way back to the heights
of 2007, in part because of an exodus of biotech venture investors. In fact, it is estimated that there were 40% fewer
biopharma venture investors in 2013 than in 2007.1
When comparing the relative amount of total financing for novel drug R&D vs. drug improvement R&D, we found
that the majority of venture investment (78% on average over the last 10 years) is directed toward novel drug R&D.
However, as will be described below, there are major disparities within specific therapeutic indications. For some
areas the percentages are reversed, with as much as 70% of investment going into improving existing drugs rather
than novel, potentially transformative medicines.
Total Venture Funding of Drug R&D, 2004-2013
Novel Drug R&D
$6,000
Drug Improvement R&D
Total Raised ($M)
$5,000
$4,000
$3,000
$2,000
$1,000
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
$0
Chart 1. Total venture funding 2004-2013. Funding is represented as investment toward R&D of novel molecular entities vs. R&D for
improvements of approved drugs (including delivery, repurposing, and reformulation).
Novel Drug R&D = R&D pursuing new chemical entities to treat disease, with no prior regulatory approval.
Drug Improvement R&D = R&D that improves upon existing therapeutics, such as new delivery methods,
new formulations, or using approved drugs for new indications (repurposing). Examples: Drug delivery
patch, topical cream, implanted delivery device, needle-less injection, extended release, prolonged half-life
chemical modifications (conjugations, including pegylated variants), reformulations of approved drugs,
repurposing of an approved drug, nutraceuticals.
BIO Industry Analysis | 3
Total Venture Funding by Phase of Development – Core Focus on Early-Stage
We also examined total investment dollars broken down into the five phases of drug development: Preclinical;
Clinical Phases I, II, and III; and market launch. More than half of venture investment goes into companies at the
early drug development stages, with 34% of dollars going into companies not yet in human testing and 20% to
companies in Phase I, which is predominantly the safety testing stage in humans. Preclinical funding in 2013 is near
where it was back in 2004 (near ~$1.5 billion), which was the highest level of the last decade.
The clinical Phase II companies received 30% of venture dollars over the last 10 years, a significant percentage that
enables companies to complete ongoing Phase II trials or to fund an expensive Phase III trial. Companies in Phase
III at the time of financing, account for only 12% of the total funding. As Phase III trials are the most expensive to
conduct, many companies seek large pharmaceutical or established biotech partners to help finance the cost of
these trials. Alternatively, companies can raise larger sums of money for Phase III trials when they raise capital in an
initial public offering and follow-on offerings. This fact, combined with the Phase III funds raised when a company
is in Phase II, may explain the low percentage of overall funding into Phase III companies. Note that we categorize a
company’s Phase at the time of receipt of funding, which may not be the Phase that the invested dollars will actually
be used for. A tiny fraction of the 2004-2013 funds went into a few private specialty companies with drugs already
on the market, for a total of 3%.
Total Venture Funding by Phase of Drug Development
$6,000
Total Raised ($M)
300
$4,000
250
$3,000
200
150
$2,000
100
$1,000
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
50
Chart 2. Total venture funding by Phase of Drug Development, 2004-2013.
4 | BIO Industry Analysis
0
Phase I
# of Companies Financed
350
$5,000
$0
Pre Clinical
400
Phase II
Phase III
Market
Total Venture Funding by Drug Type – A Shift to Biologics
While biotechnology can be understood as utilizing genetic and cellular engineering to achieve new biologic
products, only one third of companies in the industry actually work on biologics development. Nearly two thirds of
companies develop small molecules, the traditional pharmaceutical modality that is commonly associated with oral
pills. However, if venture funding is an early indicator of what is to come, this distribution may be shifting to more
biologics companies. The percentage of biologics R&D (large molecule R&D, including vaccines) being funded back
in 2004 was 27%; in 2013, it reached 50%. The majority of the increase in biologics investment took place in the last
few years, from 2011 to 2013.
“The 12 year data exclusivity for biologics,
which BIO succeeded in getting signed
into law in 2010, has added to the growing
interest in this innovative modality”
“The enthusiasm for biologics investment
has a lot to do with the expansion of
platform technologies, like RNA and
gene–based therapies – many of which
were not well appreciated a decade ago”
Jim Greenwood, CEO, Biotechnology Industry
Bruce Booth, Partner, Atlas Venture
Biologics vs. Small Molecules
Biologics
$6,000
Small Molecules
Total Raised ($M)
$5,000
$4,000
$3,000
$2,000
39% 29%
39%
31%
32%
38%
49% 50%
2006
2008
2009
2010
2011
2012
2013
32%
2007
27%
2005
$0
2004
$1,000
Chart 3. Modality shift over 10 Years of Venture Financing.
Large Molecules = Complex biologic entities that are either made using living cells or require advanced
biochemical synthesis. Vaccines are included in this group, and on average make up 12% of the “biologics”
category over the study period.
Small Molecules = Traditional, chemically synthesized pharmaceuticals commonly associated
with oral pills.
BIO Industry Analysis | 5
Venture Funding by Disease Category
We grouped annual investments into 14 major therapeutic categories by a company’s lead program at the time of
investment. We then further subdivided these into sub-indications to identify areas responsible for decreases or
increases in funding. Chart 4, below, shows the total investment breakdown by main disease area.
Total Venture Funding by Disease
Psychiatry
$6,000
GI
Hematology
Total Raised ($M)
$5,000
Respiratory
Immunology
$4,000
Ophthalmology
$3,000
Metabolic
Endocrine
$2,000
CV
Other
$1,000
2013
2012
2011
2010
2009
2008
2007
2006
2005
ID
2004
$0
Platform
Neurology
Oncology
Chart 4. Total venture funding by disease category, 2004-2013.
Oncology was the top funded disease area by a wide margin. Oncology accounted for 24% of all investment dollars
in the last 10 years, with over $9 billion in total dollars invested, followed by Neurology and Infectious Disease
funding with 12.1% and 10.9% respectively. Together these three disease areas account for almost half of the total
venture financings. On the other end of the spectrum, combined financing for Psychiatry, Gastrointestinal, and
Respiratory makes up less than 10% of the total.
We also looked at disease-specific increases or decreases in financing over time. For this, we compared yearover-year changes as well as five-year windows – the most recent five-year window versus the preceding five-year
window. This splits the 10-year period into pre-financial crisis (2004-2008) and post-financial crisis (2009-2013).
6 | BIO Industry Analysis
Venture Funding by Disease ($M), 2004-2008 vs. 2009-2013
Venture Dollars
Raised ($M)
Disease Area
Novel Drug R&D
2004-08
2009-13
Oncology
$3,932
$3,869
Neurology
$1,627
Drug Improvement R&D
2009-13
2004-08
2009-13
2004-13
Change %
$958
$370
$4,890
$4,239
$9,129
-13%
$991
$1,262
$735
$2,889
$1,727
$4,615
-40%
$2,065
$1,462
$406
$204
$2,471
$1,666
$4,137
-33%
$937
$948
$416
$484
$1,352
$1,433
$2,785
6%
Platform
$1,095
$1,150
$81
$116
$1,176
$1,266
$2,443
8%
CV
$1,049
$700
$356
$324
$1,405
$1,024
$2,429
-27%
Endocrine
$962
$384
$458
$590
$1,420
$974
$2,394
-31%
Metabolic
$872
$1,192
$97
$23
$969
$1,214
$2,183
25%
Ophthalmology
$633
$715
$175
$170
$807
$885
$1,693
10%
Immunology
$777
$604
$106
$80
$882
$685
$1,567
-22%
Respiratory
$596
$352
$270
$139
$866
$491
$1,358
-43%
Hematology
$672
$466
$30
$59
$703
$525
$1,228
-25%
GI
$581
$299
$247
$12
$828
$311
$1,140
-62%
Psychiatry
$465
$203
$123
$99
$588
$302
$889
-49%
$16,264
$13,337
$4,983
$3,407
$21,247
$16,743
$37,991
-21%
ID
Other
TOTAL
2004-08
Total Funding
Table 1. Venture funding by disease ($M), 2004-2008 vs. 2009-2013, broken down into Novel Drug R&D and Drug Improvement R&D. Ranked by
total amount raised over 10 years.
Platform = These companies are engaged in molecular platforms that can generate numerous new
chemical entities. This category includes companies with no clearly defined lead product whose research
has a potentially broad application, such as inventions within antibody generation, antibody scaffold
design, gene therapy, stem cell therapy, regenerative medicine, or patented small molecule design
(combichem, cyclization chemistry, covalent linkage). Once companies identify a lead product and utilize
the majority of their funds for that product, they are relabeled as a product company within a specific
disease indication.
Other = This area includes Dermatology, Allergy, Renal, Osteoarthritis, Musculoskeletal Disorders,
Genitourinary, and others.
BIO Industry Analysis | 7
“The data found within this kind of
analysis should help stakeholders
better assess scientific, regulatory,
and public policy issues that may
have dramatic impact on venture
capital investments within specific
disease areas.”
For the overall funding comparison for all disease areas for
the two five-year timeframes, a drop of 21% was realized, from
$21.3 billion in 2004-2008 down to $16.7 billion in 2009-2013.
Although significant, when we look at specific disease areas,
as in table 1, we see drops in funding that are two to three times
that percentage. When breaking out novel drug R&D funding,
significant declines in 9 of the 14 other disease categories are
found. As illustrated in the chart below, there are declines in the
amount of novel R&D funding going into most of the disease
categories examined.
Robert Kiss, Managing Director,
J.P. Morgan Asset Management
Change in Novel Drug R&D Venture Funding by Disease Area
-80%
-60%
-40%
-20%
0%
20%
40%
60%
Metabolic
Ophthalmology
Platform
Other
Oncology
Immunology
ID
Hematology
CV
Neurology
Respiratory
GI
Psychiatry
Endocrine
Chart 5. Novel drug R&D venture funding by disease area, 2004-2008 vs. 2009-2013.
The chart above compares novel drug R&D funding by disease in the two prior five-year windows, 2004-2008
vs. 2009-2013. The most notable decreases are found in Endocrine (-60%), Psychiatry (-56%), Gastrointestinal
(-49%), Respiratory (-41%), and Neurology (-39%). These are substantial declines that have impacted many
entrepreneurs across the industry seeking additional funding for diseases effecting large populations. For many
of these areas, the breakout by sub-indication (below) provides additional insight into these large decreases in
investment.
8 | BIO Industry Analysis
Oncology
Amount Invested
2004-2008
2009-2013
% Change
2004-2013
$4,890M
$4,239M
-13%
$9,129M
57
68
19%
62
23%
25%
10%
24%
Avg. # of Co.’s per Year
% of all Venture Investment
Oncology is a very diverse set of literally hundreds of different
diseases. Biotechnology has been at the cutting edge of new
More than 1.6 million Americans
breakthroughs to meet unmet medical needs in this area.
are expected to be diagnosed with
Many of the investments over the last decade have led to
cancer, and more than 585,000 are
notable advancements, such as immuno-oncology, targeted
expected to die in 2014 alone.2
antibodies, and selective kinase inhibitors. The field is on the
brink of making biomarker-defined, patient-stratified medicine
a reality. Innovation is evident throughout the majority of oncology investments since 2004, as nearly 85% has
gone toward novel R&D as opposed to improvements of older regimens. In this regard, oncology could perhaps
serve as a benchmark by which other disease areas should be funded: significant amounts of funding, high levels of
innovation, and a broad diversity of companies. Unfortunately, as will be described later, other disease areas have
seen just the opposite over the last few years.
Venture funding of companies with lead programs in cancer was just over $9.1 billion over the last 10 years and
accounted for 24% of total venture capital raised - the largest of the 14 disease categories. Looking at the data year
by year in Chart 6, we see a drop of almost 50% from the 2007 peak into 2010. This illustrates that even a topfunded disease area like Oncology did not escape the pullback in drug discovery investment in the years following
2008. The bulk of Oncology R&D funding (66%) occurred at the Preclinical and Phase I stage, and the number of
companies per year receiving funding has increased since the lows in 2005-06.
80
$1,400
$1,400
70
$1,200
$1,200
60
$1,000
$1,000
50
$800
40
$600
30
$800
$600
Drug Improvement R&D
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2009
2008
2013
2012
2011
2010
2009
2008
2007
2006
2005
Novel Drug R&D
2007
$0
2006
10
$0
2005
20
$200
2004
$400
$200
$400
# of Companies Funded
$1,600
Total Raised ($M)
$1,600
2004
Total Raised ($M)
Oncology 2004-2013
0
Market
Chart 6. Total venture funding ($M) into companies with lead drug R&D in Oncology, 2004-2013. Left: Novel R&D vs. Drug Improvement
R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific venture round.
BIO Industry Analysis | 9
Neurology
2004-2008
2009-2013
% Change
2004-2013
$2,889M
$1,727M
-40%
$4,615M
Avg. # of Co.’s per Year
37
41
11%
39
% of all Venture Investment
14%
10%
-24%
12%
Amount Invested
We have split the Central Nervous System (CNS) diseases into two main groups: Neurology and Psychiatry. The
area of Neurology includes neurodegenerative diseases such as Alzheimer’s, Parkinson’s, Amyotrophic lateral
sclerosis (ALS), and Huntington’s disease, as well as the relatively large area of Pain. Additionally, the nerve cell
autoimmune disease Multiple Sclerosis is included in this group along with brain and spinal cord disorders, sleep
medicines, stroke, and many other neurological diseases. Psychiatric medicine, analyzed later in this report,
includes mental health disorders.
Venture funding of companies with lead programs in Neurology was just over $4.6 billion over the last 10 years and
accounted for 12% of total venture capital raised. However, we observed a significant decline when we compared
funding in the five-year windows - from $2.8 billion in 2004-2008 to only $1.7 billion in 2009-2013, a decline of 40%.
Funding for novel R&D in Neurology dropped even more, by 56%. The number of companies financed in Neurology
reached 40 per year, while investment dropped over the latest five-year period. This would imply companies are
receiving smaller amounts of funding.
$1,000
$1,000
$800
$800
Novel Drug R&D
Drug Improvement R&D
30
25
$600
20
$400
15
10
$200
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2009
2008
5
2007
$0
2006
2013
2012
2011
2010
2009
2008
2007
2006
$0
2005
$200
35
2005
$400
40
2004
$600
45
# of Companies Funded
$1,200
Total Raised ($M)
$1,200
2004
Total Raised ($M)
Neurology 2004-2013
0
Market
Chart 7. Total venture funding ($M) into companies with lead drug R&D in Neurology, 2004-2013. Left: Novel R&D vs. Drug Improvement
R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific venture round. The
spike of 2004 is largely due to a $250 million B round into a single company and six rounds over $40 million.
10 | BIO Industry Analysis
10 Year Venture Funding, Neurology
$0
$500
$1,000
$1,500
$2,000
Novel Drug R&D
$2,500
Drug Improvement R&D
Pain
Other
MS
Alzheimer's
Parkinsons
Chart 8. Relative venture funding of Pain vs Neurodegenerative diseases Alzheimer’s, Parkinson’s, and Multiple Sclerosis. Novel R&D vs
Drug Improvement R&D.
From Chart 8, it is clear that pain accounts for the majority of all Neurology funding. Funding of pain medicine R&D
has been threefold higher than the major neurodegenerative areas.
Pain 2004-2013
4
$50
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2009
2
# of Companies Funded
6
2008
2013
2012
2011
2010
2009
2008
2007
2005
2006
Drug Improvement R&D
8
$100
$0
Novel Drug R&D
10
2007
$50
12
$150
2006
$100
14
2005
$150
16
$200
2004
Total Raised ($M)
$200
2004
Total Raised ($M)
18
$250
$250
$0
20
$300
$300
0
Market
Chart 9. Total venture funding ($M) into companies with lead drug R&D in Pain, 2004-2013. Left: Novel R&D vs. Drug Improvement R&D.
Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific venture round.
What is perhaps more significant is that the majority of this funding has gone to delivery of approved pain therapies,
not novel R&D. Only 33% of dollars invested in pain since 2004 went toward novel R&D, as can be gleaned from the
year-by-year chart data in Chart 9.
BIO Industry Analysis | 11
Alzheimer’s 2004-2013
$90
$70
$70
$60
$60
Novel Drug R&D
Drug Improvement R&D
4
$20
2
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
$0
2010
$10
2009
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
$10
6
$30
2008
$20
8
$40
2007
$30
$50
2006
$40
10
2005
$50
12
2004
Total Raised ($M)
Total Raised ($M)
$80
$0
14
$80
# of Companies Funded
$90
0
Market
Chart 10. Total venture funding ($M) into companies with lead drug R&D in Alzheimer’s Disease, 2004-2013. Left: Novel R&D vs Drug
Improvement R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific
venture round.
Alzheimer’s Disease
Alzheimer’s disease is ranked as the
sixth leading cause of death in the
United States, and it is estimated
it will affect 7.1 million people age
65 and older by 2025. In 2014,
individuals with Alzheimer’s are
estimated to cost the healthcare
system $215 billion in payments,
which is projected to increase to
$1.2 trillion by 2050.3
Relative to the large population in need of new therapies and
burden to the healthcare system, the dollar amount heading
into Alzheimer’s-focused companies is quite small. For example,
Ophthalmology received 5x this amount, while delivery and
reformulation of previously approved Pain drugs received 3x
more funding. From Chart 10, there does seem to be a silver
lining in the trend, as funding has been increasing. There has
also been an increase in the number of companies that received
funding for early-stage research. The spike in 2005 was
primarily from just two companies working on improvements to
approved drugs.
Parkinson’s investment was even less than Alzheimer’s, and
when looking at the five-year windows novel drug R&D fell from
$103 million to only $27 million, a 74% decrease. Some of this is
likely explained by the fact that companies are tagged by lead product only, and many of the companies working
in Alzheimer’s have other neurodegenerative disease programs such as Parkinson’s. When aggregate funding falls
below $50 million per year and the number of companies financed is less than five per year, the change can be
significantly influenced by just one or two sizable rounds. Similar issues arise in the year-by-year chart for Multiple
Sclerosis focused companies as shown in Chart 11.
12 | BIO Industry Analysis
$40
2
$20
$20
1
$0
$0
0
Total Raised ($M)
Novel Drug R&D
Drug Improvement R&D
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
Total Raised ($M)
$40
Pre Clinical
Phase I
Phase II
Phase III
2013
3
2012
$60
$60
2011
4
2010
$80
$80
2009
5
2008
$100
$100
2007
6
2006
$120
$120
2005
7
2004
$140
$140
# of Companies Funded
Multiple Sclerosis
Market
Chart 11. Total venture funding ($M) into companies with lead drug R&D in MS, 2004-2013. Left: Novel R&D vs Drug Improvement R&D.
Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific venture round.
Multiple Sclerosis
The same issue of too few companies and tiny funding amounts is evident with companies supporting a Multiple
Sclerosis lead program. The decrease in funding for novel therapies (from $362 million to $78 million postfinancial crisis) is largely due to two companies raising large amounts in the earlier dataset. In 2004, the majority of
investment ($77 million) went toward two companies in B and C rounds. In 2008, the majority of investment ($75.8
million) went toward a single company’s B round.
Other Indications
Other indications in Neurology account for a much larger portion of funding in this disease area, representing a third
of all Neurology and a fourth of all CNS funding. This group, which includes Amyotrophic lateral sclerosis (ALS),
Huntington’s disease, sleep medicines, stroke, brain and spinal cord injury, comas, and many other neurological
diseases, experienced a 50% decrease in total funding over the 10-year period. A large portion of funding is from
2004, as seen in the large spike in Chart 7 at the beginning of the Neurology section, when a single company raised
$250 million, the largest B round in biotech history.
BIO Industry Analysis | 13
Psychiatry
2004-2008
2009-2013
% Change
2004-2013
$588M
$302M
-49%
$889M
6
6
0%
6
3%
2%
-36%
2%
Amount Invested
Avg. # of Co.’s per Year
% of all Venture Investment
4
$50
2
$0
0
Novel Drug R&D
2013
2012
2011
2010
2009
2008
2007
2006
$0
2005
$50
Drug Improvement R&D
Pre Clinical
Phase I
Phase II
# of Companies Funded
$100
$100
2013
6
2012
$150
$150
2011
8
2010
$200
2009
$200
2008
10
2007
$250
2006
$250
2005
12
2004
$300
Total Raised ($M)
$300
2004
Total Raised ($M)
Psychiatry 2004-2013
Market
Phase III
Chart 12. Total venture funding ($M) into companies with lead drug R&D in Psychiatric Disorders, 2004-2013. Left: Novel R&D vs. Drug
Improvement R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific
venture round.
Novel Drug R&D Venture Funding – Psychiatry
$0
$100
$200
$300
$400
$500
Psychiatry (all)
Schizophrenia
Depression
Other Indications
Chart 13. Funding of Novel Drug R&D only, 2004-2008 vs 2009-2013, for Psychiatric Diseases.
14 | BIO Industry Analysis
2004-08
2009-13
Psychiatric diseases include mental disorders such as Schizophrenia, Bipolar Disorder, PTSD, ADHD/ADD, OCD,
Depression, Anxiety, and other mood related disorders. Venture funding of companies with lead programs in
Psychiatric diseases was just under $0.9 billion over the last 10 years, and accounted for only 2% of total venture
capital raised. That is 5x less than Neurology. Furthermore, funding for Psychiatry has dropped over the five-year
windows, from over $588 million to less than $302 million (-49%). Novel R&D for this group dropped even more
(-56%), from $465 million to $203 million.
There is a still an unmet medical need in many of these disorders, and the funding levels do not point to a strong
investment in future breakthroughs. As seen in Chart 12, total dollars raised in a single year can be lower than $50
million, smaller than what some Oncology companies receive in a single financing round. The lack of Preclinical
investment suggests there might be relatively few new targets or new approaches to attract early-stage financing.
Schizophrenia & Depression
Investment for Schizophrenia-focused companies peaked in
2005, but only involved two companies, and more than half of
the total investment was for reformulation development. Almost
no funding was found in the four years prior to 2012, explaining
the 78% decrease in total funding for Schizophrenia-focused
companies, from $181 million to $39 million for the five-year
windows. On average only two companies per year received
funding with this focus.
Mental health disorders are the
leading cause of disability in the US.
One in four US adults, or 61.5 million
people, have been diagnosed with a
mental health disorder.4
Investment in Depression-focused companies was also sparse, with only one to four companies funded per year.
As with Schizophrenia, 2005 was a big year for Depression funding, but almost half went into a single company’s
C round. Additionally, in 2012, more than half the money went into a company focused on improving an already
approved drug. Investment was close to zero from 2008-2011.
The remaining investments (listed as “Other” in Chart 13) similarly accounted for less than four transactions per
year, and often far less than $50 million in a given year. This group consists of ADHD/ADD, PTSD, OCD, Bipolar
Disorder, Anxiety Disorders, and other mood-related disorders. Again, peak years were often accounted for by a
single company investment, and often a post-Series A round.
BIO Industry Analysis | 15
Infectious Disease
2004-2008
2009-2013
% Change
2004-2013
$2,471M
$1,666M
-33%
$4,615M
Avg. # of Co.’s per Year
36
33
-8%
35
% of all Venture Investment
12%
10%
-14%
11%
Amount Invested
$700
$600
$600
$500
$500
35
$400
30
$300
20
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2009
5
# of Companies Funded
10
2008
2013
2012
2011
2010
2009
2008
2007
$0
2006
$0
2005
$100
Drug Improvement R&D
15
$200
$100
Novel Drug R&D
25
2007
$200
40
2006
$300
45
2005
$400
50
2004
Total Raised ($M)
$700
2004
Total Raised ($M)
Infectious Disease 2004-2013
0
Market
Chart 14. Total venture funding ($M) into companies with lead drug R&D in Infectious Disease, 2004-2013. Left: Novel R&D vs. Drug
Improvement R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific
venture round.
Novel Drug R&D Venture Funding – Infectious Diseases
$0
$500
$1,000
$1,500
$2,000
$2,500
Infectious (all)
Antivirals
Antimicrobials (all)
Vaccine
Antifungals
Chart 15. Novel drug R&D funding of Infectious Disease focused companies, 2004-2008 vs. 2009-2013.
16 | BIO Industry Analysis
2004-08
2009-13
Infectious diseases include viral, bacterial, fungal, and parasitic infections. There is a high demand for novel drugs in
these areas to reverse disease progression within patients and to stop the wider spread throughout the population.
For antibiotics in particular, there has been a rise in strains resistant to older therapies, making the need for novel
drugs highly important.
Venture funding for Infectious Disease totaled $4.6 Billion over the last 10 years, and accounted for 11% of total
venture capital raised. However, it has dropped over the five-year windows, from over $2 Billion to less than $1.5
billion (-33%).
The following chart shows novel drug R&D investment for the main subcategories within Infectious Disease. As can
be seen in the chart, the majority of this decline is in antiviral (non-vaccine small and large molecule) R&D. When we
dig deeper into these companies, we find that HIV and HCV funding has dropped precipitously. Those two areas
have experienced a drop of 74% over the funding periods, from $785 million down to just $202 million.
Antimicrobials
The antimicrobial space accounted for one third of all Infectious
Disease funding over the last five years, and has decreased
“The GAIN Act has helped
19% over the two five-year windows. However, there are some
incentivize funding into the much
disparities that are important to point out based on data in
needed area of novel antibiotic
Chart 16 below. First, the level of Gram positive focused funding
R&D, and catalyzed the financing
has consistently outstripped that of Gram negative. In the
most recent period, there was a fivefold difference between
of venture backed companies that
funding for Gram positive and Gram negative novel R&D. Both
received FDA approval for new
areas have a consistent level of novel R&D investment when
antibiotics in 2014.”
comparing the two time frames (2003-2008 vs 2009-2013),
with Gram positive funding actually increasing. The lower levels
Jim Healy, General Partner,
Soffinova Ventures
of gram negative strain funding are of particular concern due to
the current threat of antibiotic resistance in these strains and
the lack of new drugs to combat them. Broad spectrum antibiotic investment actually accounted for much of the
funding drop in this space. In fact, there was only one company funded in the last two years with this category as
their lead program.
Novel Drug R&D Venture Funding – Antimicrobials
$0
$100
$200
$300
$400
$500
$600
$700
Antimicrobials (all)
Antimicrobial g+
Antimicrobial gBroad Spectrum
2004-08
2009-13
Chart 16. Novel drug R&D funding of Antimicrobial focused companies, 2004-2008 vs. 2009-2013.
BIO Industry Analysis | 17
Antivirals
Hepatitis C and HIV are some of the few areas where close to 100% of funding went into novel R&D. However,
we found a sizable decrease in the five-year window. The large peak in funding in 2004 is mostly split between
two companies. Several drugs have been approved since 2004 and the field is largely dominated by larger
biopharmaceutical companies.
Funding for other antivirals such as Hepatitis B (HBV), Influenza, cytomegloviris (CMV), and herpes simplex virus
(HSV) actually picked up over the last 10 years.
Novel Drug R&D Venture Funding – Antivirals
$0
$200
$400
$600
$800
$1,000
Antivirals
HCV
HIV
Other
2004-08
2009-13
Chart 17. Novel drug R&D funding of Antiviral focused companies, 2004-2008 vs. 2009-2013.
Anti-fungal
Within the Anti-fungal space, 60% of all investment was for delivery or reformulation of approved drugs. Only a
couple of companies per year were funded in this area and yearly totals for novel drug R&D ranged from $0 to $30
million in most years, save for 2009 when the total reached $70 million.
18 | BIO Industry Analysis
Vaccines
The vaccine space within Infectious Disease covers both viral and bacterial targets. Examples from the viral
vaccine R&D front include new vaccines against influenza, SARS, RSV, HIV, and Ebola viruses.
Novel vaccine financing was about half that of antivirals or antibacterials in the recent five-year period. Most of the
recent financing has been for clinical-stage companies, not preclinical as in prior years.
10
$80
$80
9
$70
$70
8
$60
$60
$50
$40
$30
$20
7
6
$50
5
$40
4
$30
3
$20
2
Novel Drug R&D
Drug Improvement R&D
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2013
2012
2011
2010
2009
0
2008
$0
2007
1
$0
2006
$10
2005
$10
# of Companies Funded
$90
Total Raised ($M)
$90
2004
Total Raised ($M)
Vaccines 2004-2013
Market
Chart 18. Total venture funding ($M) into companies with lead drug R&D in Vaccines, 2004-2013. Left: Novel R&D vs. Drug Improvement
R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific venture round.
BIO Industry Analysis | 19
Cardiovascular
2004-2008
2009-2013
% Change
2004-2013
$1,405M
$1,024M
-27%
$2,429M
Avg. # of Co.’s per Year
21
17
-19%
19
% of all Venture Investment
7%
6%
-8%
6%
Amount Invested
Cardiovascular indications, such as heart failure, Acute Coronary Syndrome, Atherosclerosis,
Hypercholesterolemia, and Hypertension received total venture funding of $2.4 Billion over the last 10 years, and
accounted for 6% of total venture capital raised. However, funding has dropped 27% over the five-year windows,
from over 1.4 billion to less than $1.0 billion.
$350
$350
$300
$300
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2009
5
2008
2013
2012
2011
2010
2009
2008
2007
$0
2006
$0
2005
$50
Drug Improvement R&D
10
$100
$50
Novel Drug R&D
15
$150
2007
$100
$200
2006
$150
20
$250
2005
$200
25
2004
$250
30
# of Companies Funded
$400
Total Raised ($M)
$400
2004
Total Raised ($M)
Cardiovascular 2004-2013
0
Market
Chart 19. Total venture funding ($M) into companies with lead drug R&D in Cardiovascular, 2004-2013. Left: Novel R&D vs. Drug
Improvement R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific
venture round.
An estimated 83.6 million American
adults have a cardiovascular
disease. By 2030, 44% of the US
population is projected to have
some form of cardiovascular
disease.5
20 | BIO Industry Analysis
Delivery and reformulations accounted for as much as 60%
of the funding in Cardiovascular in some years and as little as
15% in others. The bulk of CV funding went toward Heart Failure
and Acute Coronary Syndrome. Very few companies and total
dollars went into Hypercholesterolemia and Hypertension (only
15% of the total in cardiovascular funding).
Endocrine Diseases
2004-2008
2009-2013
% Change
2004-2013
$1,420M
$974M
-31%
$2,394M
Avg. # of Co.’s per Year
18
17
-6%
18
% of all Venture Investment
7%
6%
-13%
6%
Amount Invested
Venture funding for Endocrine Diseases, such as Diabetes, reached $2.4 Billion over the last 10 years, and
accounted for 6% of total venture capital raised. However, funding has dropped 31% over the five-year windows,
from over $1.4 billion to less than $1 billion.
While there has been a large amount of financing for drug improvements in this disease category, novel drug R&D
venture funding for Endocrine dropped more than 50%, as seen by the declining blue bars in Chart 20.
$450
$400
$400
$350
$350
$100
Drug Improvement R&D
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
5
2009
2013
2012
2011
2010
2009
2008
$0
2007
$0
2006
$50
2005
$50
Novel Drug R&D
10
$150
2008
$100
$200
2007
$150
$250
2006
$200
15
$300
2005
$250
20
2004
$300
25
# of Companies Funded
$500
$450
Total Raised ($M)
$500
2004
Total Raised ($M)
Endocrine 2004-2013
0
Market
Chart 20. Total venture funding ($M) into companies with lead drug R&D in Endocrine, 2004-2013. Left: Novel R&D vs. Drug
Improvement R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific
venture round.
Novel Drug R&D Venture Funding – Endocrine
$0
$200
$400
$600
$800
$1,000
Endocrine (all)
T2D
T1D
Other
2004-08
2009-13
Chart 21. Novel drug R&D funding of Endocrine focused companies, 2004-2008 vs. 2009-2013.
BIO Industry Analysis | 21
Type II Diabetes
About 30-40% of Endocrine investment is in Type 2 Diabetes.
The total amount of novel drug Endocrine investment is almost
10x that for Type I Diabetes-focused companies in both fiveyear windows. Example of non-novel: Peaks in 2011 and 2012
are financings for delivery technologies of approved drugs
with a $150 million C round and a $163 million Series D. These
account for 75% and 85% of those two years of Type II Diabetes
financing.
Diabetes remains the 7th leading
cause of death in the United
States6, with more than 29 million
people affected by the disease.7
$200
$200
Novel Drug R&D
Drug Improvement R&D
6
$100
4
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
0
2009
$0
2008
2
2007
$50
2006
2013
2012
2011
2010
2009
2008
2007
2006
$0
2005
$50
8
$150
2005
$100
10
2004
$150
12
# of Companies Funded
$250
Total Raised ($M)
$250
2004
Total Raised ($M)
Type II Diabetes 2004-2013
Market
Chart 22. Total venture funding ($M) into companies with lead drug R&D in Type II Diabetes, 2004-2013. Left: Novel R&D vs. Drug
Improvement R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific
venture round.
Endocrine – Other
This category includes contraceptives, growth hormones, osteoporosis-related disorders, Acromegaly,
hypogonadism, Menopause, and other hormone-related diseases. Fifty-five percent of investment went to novel
R&D over the dataset period. Pre-fiscal crash, $316 million was spent on novel R&D whereas post-crash only $261
million was raised. Peaks in 2006 and 2007 saw about 50% or more of the investments go to improvements for
approved drugs.
22 | BIO Industry Analysis
Metabolic Diseases
2004-2008
2009-2013
% Change
2004-2013
$969M
$1,214M
25%
$2,183M
Avg. # of Co.’s per Year
12
13
8%
12
% of all Venture Investment
5%
7%
59%
6%
Amount Invested
Metabolic covers a wide range of diseases, from the rare genetic diseases to broader population diseases such
as obesity. Total venture funding for the last decade reached $2.2 Billion, or 6% of the total raised during that
timeframe. Metabolic funding seems to have experienced the opposite trend as Endocrine over the two five-year
windows – Endocrine funding fell 31%, but Metabolic funding rose 25%. This extraordinary divergence can be
explained by the sub-indications under each area. For Endocrine, a drop in Type II Diabetes funding of novel drug
R&D was the culprit. For Metabolic, the rising interest in genetic diseases explains the increase.
$400
20
$350
$350
18
$300
$300
8
Drug Improvement R&D
4
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2
2009
2013
2012
2011
2010
2009
2008
$0
2007
$0
2006
$50
2005
$50
Novel Drug R&D
6
$100
# of Companies Funded
$150
2008
$100
10
2007
$150
12
$200
2006
$200
14
$250
2005
$250
16
2004
Total Raised ($M)
$400
2004
Total Raised ($M)
Metabolic Diseases 2004-2013
0
Market
Chart 23. Total venture funding ($M) into companies with lead drug R&D in Metabolic, 2004-2013. Left: Novel R&D vs. Drug Improvement
R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific venture round.
Novel Drug R&D Venture Funding – Metabolic
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
Metabolic (all)
Obesity
Genetic Disorder
Other Indications
2004-08
2009-13
Chart 24. Novel drug R&D funding of Metabolic focused companies, 2004-2008 vs. 2009-2013.
BIO Industry Analysis | 23
Obesity
The 2004-2008 investment in novel R&D for obesity therapies
was $105 million vs $172 million during 2009-2013. The majority
of investments (85% in dollar terms) have gone toward novel R&D.
Genetic Disorders
This is one of the few areas where 100% of funding went into
novel R&D, and also an area well represented in the rare disease
section of the report (below). We found a sizable increase in
the five-year window – investment jumped from $288 million
to $500 million after 2008. There was a large peak in 2012, but
64% of this is explained by two rare disease companies raising B
and D rounds prior to going public.
Metabolic – Other
More than one-third, or 78.6
million, of U.S. adults are obese8
and 12.7 million childern ages 2 to
19 are obese.9
Individual orphan diseases affect
fewer than 200,000 people in the
U.S. each, but taken together are
estimated to affect some 30 million
people,10 with approximately 50% of
them being children with an orphan
disease.11
This group includes Musculoskeletal diseases, Cachexia,
Familial Amyloid Polyneuropathy, Hyperkalemia, and other metabolic disorders. Eighty-five percent of this
investment went toward novel R&D funding, which increased from $236 million (2004-2008) to $425 million
(2009-2013).
24 | BIO Industry Analysis
Immunology (non-GI, non-Respiratory)
2004-2008
2009-2013
% Change
2004-2013
$882M
$685M
- 22%
$1,567M
Avg. # of Co.’s per Year
15
11
-27%
13
% of all Venture Investment
4%
4%
-2%
4%
Amount Invested
Immunology covers a set of disease that are primarily of autoimmune origin, such as Rheumatoid Arthritis and
Psoriasis. For this section, we excluded immune-based diseases that are covered under the Gastrointestinal (e.g.,
Crohn’s) and Respiratory (e.g., Asthma) sections below. Total venture capital raised for Immunology was $1.6 billion
for the 10-year period, or 4% of the total venture capital raised. For the five-year windows, Immunology funding
dropped 22% in funds raised, from $882 million to $685 million.
Investment for Immunology has been jagged, with spikes in 2006 and 2008 followed by massive drops in 2007 and
2011. Most of the funding has been toward novel drug R&D with 10-20 companies per year receiving that funding.
$300
$300
$250
$250
$150
Drug Improvement R&D
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2009
2008
5
2007
2013
2012
2011
2010
2009
2008
$0
2007
$0
2006
$50
2005
$50
Novel Drug R&D
10
$100
2006
$100
15
$200
2005
$150
20
2004
$200
25
# of Companies Funded
$350
Total Raised ($M)
$350
2004
Total Raised ($M)
Immunology 2004-2013
0
Market
Chart 25. Total venture funding ($M) into companies with lead drug R&D in Immunology (non GI, non-Respiratory), 2004-2013. Left:
Novel R&D vs. Drug Improvement R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year
for a specific venture round.
BIO Industry Analysis | 25
Novel Drug R&D Venture Funding – Immunology
$0
$200
$400
$600
$800
$1,000
Immunology (all)
Arthritis
Psoriasis
Other Indication
2004-08
2009-13
Multiple Indications
Chart 26. Novel drug R&D funding of Immunology (non-GI, non-Respiratory) focused companies, 2004-2008 vs. 2009-2013.
Rheumatoid Arthritis and Psoriasis
Companies receiving financing with a Rheumatoid Arthritis (RA)
indication as lead product saw novel R&D funding drop from
over $200 million to below $100 million for the most recent five
five-year window. The peak investment in 2008 went mostly
(47%) to a C round for a single company. Additionally, some of
the decrease might be explained by successful products being
introduced during the last decade.
Psoriasis is the most common
autoimmune disease in the
country, affecting 7.5 million
Americans.12 Rheumatoid
Arthritis affects about 1.5
million Americans.13
Since 2004, there have been few companies with a Psoriasis
indication as their lead product receiving financing. One possible
explanation for this could be that most companies target Rheumatoid Arthritis as the primary indication and
Psoriasis as a secondary one; thus, their Psoriasis work is not picked up in the analysis. Furthermore, many new
drugs for Psoriasis have come to the market over the past decade.
Immunology – Other
This category includes Graves’ Disease, Lupus, Primary Biliary Cirrhosis, Celiac Disease, Gout, and many other
diseases. The majority of investment in this space (88%) went towards novel R&D, and the amount has increased
over the last five years vs the prior five years.
26 | BIO Industry Analysis
Gastrointestinal Diseases
2004-2008
2009-2013
% Change
2004-2013
$828M
$311M
-62%
$1,140M
9
5
-44%
7
4%
2%
-51%
3%
Amount Invested
Avg. # of Co.’s per Year
% of all Venture Investment
The majority of the Gastrointestinal Diseases category venture funding is split into two main sub-disease areas:
Irritable Bowel Syndrome (IBS) and Inflammatory Bowel Disease (IBD), but there are many other diseases that fit
into this area. Total venture capital raised for Gastrointestinal Diseases was $1.1 billion over the ten-year period,
or 3% of the total venture capital raised for therapeutics. One of the biggest drops of the major disease groups
analyzed is found here – a 62% drop in funding from $828 million to $311 million for the two five-year windows.
Gastrointestinal Diseases 2004-2013
$250
$200
$200
14
12
Novel Drug R&D
Drug Improvement R&D
8
6
$100
4
$50
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2009
2008
2007
2006
$0
2
2005
2013
2012
2011
2010
2009
2008
2007
2006
$0
2005
$50
$150
2004
Total Raised ($M)
$100
2004
Total Raised ($M)
10
$150
# of Companies Funded
$250
0
Market
Chart 27. Total venture funding ($M) into companies with lead drug R&D in GI, 2004-2013. Left: Novel R&D vs. Drug Improvement R&D.
Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific venture round.
BIO Industry Analysis | 27
Novel Drug R&D Venture Funding – Gastroinestinal
$0
$100
$200
$300
$400
$500
$600
$700
GI (all)
IBS
IBD
Other Indication
2004-08
2009-13
Chart 28. Novel drug R&D funding of Gastrointestinal focused companies, 2004-2008 vs. 2009-2013
IBD and IBS
The main types of Inflammatory Bowel Disease (IBD) are Crohn’s
disease and Ulcerative Colitis (UC). Irritable Bowel Syndrome
(IBS) is a non-inflammatory chronic condition affecting the large
intestine. Both of these areas, IBD and IBS, show a drop in novel
drug R&D funding, as shown in the chart above.
In the United States, there are 60
to 70 million people affected by
digestive diseases.14
GI – Other
This category includes Gastroenterologic disorders, Chronic Idiopathic Constipation, Ulcers, Dyspepsia,
Gastroparesis, Exocrine Pancreatic Insufficiency, Liver failure/Cirrhosis, Colon Cleansing/Laxatives, and other
GI disorders. This diverse group of companies raised over $100 million for each of the two five-year windows and
funding only slightly fell in the second five-year window.
28 | BIO Industry Analysis
Respiratory Diseases
2004-2008
2009-2013
% Change
2004-2013
$866M
$491M
- 43%
$1,358M
11
9
-18%
10
4%
3%
-29%
4%
Amount Invested
Avg. # of Co.’s per Year
% of all Venture Investment
Respiratory diseases examined include a number of common
diseases such as Asthma, COPD, and Idiopathic Pulmonary
Fibrosis (IPF), as well as other diseases such as Cystic Fibrosis,
Emphysema, Acute Respiratory Failure, Acute Lung Injury
(ALI), Acute Respiratory Distress Syndrome (ARDS), and other
respiratory diseases. Total venture capital raised for Respiratory
Diseases was $1.4 billion for the ten-year period, or 4% of the
total venture capital raised for therapeutics. Funding dropped
significantly, from $866 million to $491 million (a change of
-43%), between the two five-year windows.
Respiratory diseases cause
138,000 deaths annually and are
the third leading cause of death
in the U.S. In children under 1 year
of age, approximately one in six
deaths are due to lung disease.15
$300
$250
$250
$200
$200
14
Novel Drug R&D
Drug Improvement R&D
8
6
$100
4
$50
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2009
2008
2
2007
$0
2006
2013
2012
2011
2010
2009
2008
2007
2006
2005
$50
$150
2005
$100
10
2004
Total Raised ($M)
12
$150
$0
16
# of Companies Funded
$300
2004
Total Raised ($M)
Respiratory 2004-2013
0
Market
Chart 29. Total venture funding ($M) into companies with lead drug R&D in Respiratory, 2004-2013. Left: Novel R&D vs. Drug
Improvement R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific
venture round.
BIO Industry Analysis | 29
Novel Drug R&D Venture Funding – Respiratory
$0
$100
$200
$300
$400
$500
$600
$700
Respiratory (all)
Asthma
Other Indications
COPD
2004-08
2009-13
Chart 30. Novel drug R&D funding of Respiratory focused companies, 2004-2008 vs. 2009-2013. Select sub-indications are shown for
comparison to the total amount raised in the category.
Asthma
Looking at novel R&D, $266M was invested in the 2004-2008 period compared to only $60M in the five years post
2008. In 2007, $77 million (57%) was from a single company’s C round.
$160
$140
7
$140
6
$120
Total Raised ($M)
$120
$100
$80
$60
$40
5
$100
4
$80
3
$60
2
$40
Novel Drug R&D
Drug Improvement R&D
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2013
2012
2011
2010
0
2009
$0
2008
$0
2007
1
2006
$20
2005
$20
2004
Total Raised ($M)
$160
# of Companies Funded
Asthma 2004-2013
Market
Chart 31. Total venture funding ($M) into companies with lead drug R&D in Asthma, 2004-2013. Left: Novel R&D vs. Drug Improvement
R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific venture round.
30 | BIO Industry Analysis
COPD
COPD was one of the few respiratory areas that increased, from below $50 million during 2004-2008 to over $100
million in the five years after 2008.
Respiratory - Other
Acute Respiratory Failure, Acute Lung Injury (ALI), Acute Respiratory Distress Syndrome (ARDS), Cystic Fibrosis,
Emphysema, Idiopathic Pulmonary Fibrosis (IPF), fall under “other” respiratory diseases. Funding in the 2004-2008
timeframe shows a large amount invested into the “other” category. This was predominantly directed to later-stage
companies, and 44% of the money invested in 2004 and more than 60% in 2006 went toward improvements to
already approved drugs. Most companies pursuing multiple lead therapies in multiple respiratory areas were found
to be delivery companies.
BIO Industry Analysis | 31
Hematology (non-oncology)
2004-2008
2009-2013
% Change
2004-2013
$703M
$525M
- 25%
$1,228M
8
8
0
8
3%
3%
-6%
3%
Amount Invested
Avg. # of Co.’s per Year
% of all Venture Investment
The Hematology category includes Blood Stimulators, Coagulation agents, Anemia, Antithrombotic, Chronic
Venous Ulcers, Peripheral Arterial Disease (PAD), Sickle Cell Disease, Iron Overload, Hemophilia, and Neutropenia/
Leukopenia. Some of these diseases are rare, and therefore were also analyzed rare disease section of this report.
12
$200
$200
10
Novel Drug R&D
Drug Improvement R&D
4
$50
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2009
2008
2007
$0
2
2006
2013
2012
2011
2010
2009
2008
2007
2006
$0
2005
$50
6
$100
2005
$100
8
$150
2004
$150
# of Companies Funded
$250
Total Raised ($M)
$250
2004
Total Raised ($M)
Hematology 2004-2013
0
Market
Chart 32. Total venture funding ($M) into companies with lead drug R&D in Hematology, 2004-2013. Left: Novel R&D vs. Drug
Improvement R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific
venture round.
Funding for Hematology has declined since peak the years of 2005 and 2007, when more than $150 million per
year went into this area. Almost half of the investment before 2009 were for Blood Stimulators, which dropped
thereafter, as did the category as a whole. Novel drug R&D funding dropped from $332 million in 2004-2008
to $139 million in the last five years. In 2005, $117 million out of $148 million went to a single company’s F round.
Additionally, in 2007, $125 million out of $129.4 million went to just two companies for late rounds. Other subindications actually saw an increase in funding as a group, but the levels were less than $100 million per year
when combined.
32 | BIO Industry Analysis
Ophthalmology
2004-2008
2009-2013
% Change
2004-2013
$807M
$885M
10%
$1,693M
Avg. # of Co.’s per Year
12
16
33%
14
% of all Venture Investment
4%
5%
39%
5%
Amount Invested
Many of the companies with lead programs in the Ophthalmology space work on macular degeneration but
with new biologics platform technologies, such as gene therapy or novel target binding proteins (non-antibody
scaffolds). Ophthalmology venture funding totaled $1.7 billion over the last decade, representing 5% of the total
venture capital raised. Year-to-year totals are choppy, but investment interest has maintained the $800 millionplus level of funding when comparing the five-year windows before and after the 2008 fiscal crash.
The high degree of novelty over the last decade can be seen in the blue bars in Chart 33. The average number of
companies receiving funds per year has increased more than the actual dollar amounts, with 2013 being the highest.
Ophthalmology 2004-2013
Drug Improvement R&D
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2009
2008
5
2007
2013
2012
2011
2010
2009
2008
2007
$0
2006
$0
2005
$50
2004
$50
Novel Drug R&D
10
$100
2006
$100
15
$150
2005
$150
$200
2004
Total Raised ($M)
$200
20
# of Companies Funded
$250
$250
Total Raised ($M)
25
$300
$300
0
Market
Chart 33. Total venture funding ($M) into companies with lead drug R&D in Ophthalmology, 2004-2013. Left: Novel R&D vs. Drug
Improvement R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific
venture round.
BIO Industry Analysis | 33
Platform
2004-2008
2009-2013
% Change
2004-2013
$1,218M
$1,266M
4%
$2,484M
Avg. # of Co.’s per Year
24
27
13%
26
% of all Venture Investment
6%
8%
38%
6%
Amount Invested
The Platform category contains primarily preclinical-stage companies that have a core technology in creating a
diverse set of new molecules. A great example is an antibody-generating platform that can generate antibody drugs
for targets across all diseases. Other examples include gene therapy, stem cell therapy, regenerative medicine,
nanoparticles, and small molecule diversification methods that generate combinatorial libraries, cyclization of
fragments, or covalent linkage inhibitors. Once companies identify a lead product and utilize the majority of their
funds for that product, they are relabeled as a product company within a specific disease indication. This explains
why nearly all funding for this category is for Preclinical stage companies.
$400
Total Raised ($M)
$300
$250
$200
$150
$100
40
$350
35
$300
30
$250
25
$200
20
$150
15
$100
10
Novel Drug R&D
Drug Improvement R&D
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2013
2012
2011
2010
2009
2008
0
2007
5
$0
2006
$50
$0
2005
$50
2004
Total Raised ($M)
$350
$400
# of Companies Funded
Platform 2004-2013
Market
Chart 34. Total venture funding ($M) into companies with molecular Platform technologies, 2004-2013. Left: Novel R&D vs. Drug
Improvement R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific
venture round.
Overall, Platform start-ups received $2.5 billion in funding over the past decade, representing 6% of the $38 billion
of venture financing during the 2004-2013 period. On average, 25 companies per year received financing in this
group, placing it near one of the highest in both dollars and companies receiving investment. In terms of both dollars
invested and the number of companies funded, the trend is up over the last decade.
34 | BIO Industry Analysis
Other Diseases
2004-2008
2009-2013
% Change
2004-2013
$1,218M
$1,266M
6%
$2,484M
Avg. # of Co.’s per Year
23
25
9%
24
% of all Venture Investment
6%
9%
34%
7%
Amount Invested
Many other diseases were funded that did not fit within our top 14 categories discussed above. These include
Dermatology, Allergy, Musculoskeletal diseases, Osteoarthritis, Otology (ear diseases), Periodontitis, Urology,
non-viral liver diseases, fertility drugs, and treatments for side-effects of chemotherapy or radiation. In aggregate,
the funding for these diseases accounted for less than 10% of the total for any given year, and 7% for the tenyear period covered by this study. More than 40% of funding in the “Other” group of diseases was split between
Dermatology and Renal, with Dermatology accounting for the majority of the delivery development in the form of
topical cream formulations of existing drugs.
40
$350
35
$300
$300
30
$250
25
$200
20
$150
15
$100
10
$250
$200
$150
$100
Novel Drug R&D
Drug Improvement R&D
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2013
2012
2011
2010
2009
2008
0
2007
5
$0
2006
$50
$0
2005
$50
# of Companies Funded
$400
$350
Total Raised ($M)
$400
2004
Total Raised ($M)
Other Disease Areas 2004-2013
Market
Chart 35. Total Investment ($M) into companies that did not fit into the major 14 areas above, 2004-2013 Left: Novel R&D vs. Drug
Improvement R&D. Right: Total Investment by Phase of R&D and number of companies receiving financing per year for a specific
venture round.
In contrast to the diverse Platform group, the “Other” category includes many Phase II through Market phase
companies, and contains mostly companies focused on improving existing drugs.
BIO Industry Analysis | 35
Rare Disease
According to a recent report, there are 7,000
rare diseases that cumulatively affect 30 million
Americans.14 Only 350 therapeutics are approved for
these diseases, indicating there are thousands of rare
diseases without a treatment or cure. Over the last 10
years, there has been an increase in investment into rare
diseases, with the highest amounts (over $500 million/
year) seen recently in 2012 and 2013. As shown below,
most funding is directed to clinical trial stage companies,
with the exception of 2013 when nearly half of the
funding went into Preclinical stage companies.
“We see significant interest in rare
diseases as gene therapy technologies
mature and generate meaningful clinical
data and returns for investors. We are
hopeful that advanced gene therapy
approaches will deliver products that will
dramatically improve patients’ lives.”
Jim Healy, General Partner,
Soffinova Ventures
$600
35
$500
30
25
$400
20
$300
15
$200
10
$100
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
$0
5
Pre Clinical
Phase I
Phase II
# of Companies Funded
Total Raised ($M)
Rare Diseases 2004-2013
Phase III
Market
0
Chart 36. Total venture funding ($M) into companies with a lead drug in a rare disease, 2004-2013. Total Investment by Phase of R&D
and Number of companies receiving financing per year for a specific venture round.
This category includes medicines focused on treating Epidermolysis Bullosa (EB), Hereditary Inclusion Body
Myopathy (HIBM), Friedreich’s Ataxia, Primary Hyperoxaluria (PH), Familial Amyloid Polyneuropathy, Spinal
Muscular Atrophy, Transthyretin amyloidosis, Hypohidrotic Ectodermal Dysplasia, Pompe disease, Fabry’s disease,
von Gierke’s disease, Leber’s Congenital Amaurosis, Muscular Dystrophy (MD), Narcolepsy, Hunter Syndrome,
Hurler Syndrome, and Lymphangioleiomyomatosis (LAM). Although many Oncology companies do seek Orphan
Drug status for rare cancer indications, we only found a few unique cases where a company’s lead program was for
a specific rare cancer. Most Oncology companies analyzed had multiple lead cancer areas and indications often
switched from lead to non-lead status from year to year.
36 | BIO Industry Analysis
Series A Funding
Series A funding is the first significant financing round after the smaller “Seed” round, and often involves a syndicate
of venture firms that back a new approach to drug development. Tracking the Series A rounds can tell us what
areas the most sophisticated venture investors have decided to come together and support amongst a plethora of
potential ideas that come across their desks.
In total, $10.7 billion went into Series A over the last 10 years, which is 28% of the $38 billion invested in all rounds. A
healthy 82% of Series A money has gone into novel drug discovery over the last 10 years, with the highest amount
seen last year.
$1,600
$1,400
$1,400
$1,200
$1,200
$600
Novel Drug R&D
Drug Improvement R&D
Pre Clinical
Phase I
Phase II
Phase III
2013
2012
2011
2010
2013
2012
2011
2010
2009
2008
2007
$0
2006
$0
2005
$200
2009
$400
$200
2008
$400
$800
2007
$600
$1,000
2006
$800
2005
$1,000
2004
Total Raised ($M)
$1,600
2004
Total Raised ($M)
Series A
Market
Chart 37. Series A venture funding ($M) by Phase and by Innovation Level. As expected more early phase with early financing stage.
Preclinical-stage companies took in the majority (56%) of Series A venture dollars between 2004-2013, and “early”
R&D, as defined as Preclinical to Phase I, made up 74%. Molecular platform companies accounted for 17% of the
Series A Preclinical funding and 10% of total Series A rounds. Investment into the Platform group, as shown in the
table below (Table 2) rose 66% when comparing the two five-year timeframes.
The volume of first-time Series A investments gives us insight into how widespread the funding is in a given year.
Based on this analysis, the peak in initial Series A financings was in 2006, when 89 companies received their first
Series A financing. This compares to only 63 in 2013, a near 30% drop from the peak. Interestingly, 2012 was the low
point, not 2010 as was the case for total investment dollars overall (Chart 1), with only 55 therapeutics companies
receiving their first Series A tranche.
BIO Industry Analysis | 37
Number of Companies Receiving First Series A Round, 2004-2013
100
80
70
60
50
40
30
20
2013
2012
2011
2010
2009
2008
2007
2006
0
2005
10
2004
# of Companies Receiving
First Series A Financing
90
Chart 38. Declining # of New Series A Financing for Drug Development R&D
Series A by Disease
Psychiatry
GI
$1,600
Hematology
Total Raised ($M)
$1,400
Endocrine
$1,200
Metabolic
$1,000
Respiratory
$800
Immunology
$600
CV
Ophthalmology
$400
Other
$200
2013
2012
2011
2010
2009
2008
2007
2006
2005
PLATFORM
2004
$0
ID
Neurology
Oncology
Chart 39. Series A venture funding ($M) broken down by disease area.
38 | BIO Industry Analysis
Although the number of new companies receiving Series A
financing is down, the total dollar amount that is flowing into
“With fewer early-stage investors
Series A financing rounds is approaching prior highs. In fact,
starting companies, Series A
investment into novel drug R&D reached its highest point in 2013.
financing has evolved over the last
This also suggests more money per company, as dollars have
decade into a much more selective
increased while the number of companies has decreased. Part of
this might be explained by the trend in biotech venture to make
process.”
the Series A financing last longer, so company management is
Jean-Francois Formela, Senior Partner,
not out searching for the next round of financing shortly after
Atlas Venture
the first large raise. Following the fiscal crisis of 2008, company
executives and venture capitalists began to stretch small initial
funds to mitigate dependence on later rounds early in development.
As with the overall data for all rounds described earlier in the report, Oncology brings in the bulk of Series A
funding, with 24% of the total funding over the last 10 years of A rounds. Neurology had the second highest level of
investment (13% of Series A), which was largely due to the boost to novel drug R&D investment. Most of this went
into the “Neurology – Other Indication,” a category that includes a diverse group focused on ALS, Huntington’s, and
rare CNS disorders.
Venture Dollars
Raised ($M)
Disease Area
Novel Drug R&D
2004-08
Drug Improvement R&D
2009-13
2004-08
2009-13
Total Funding
2004-08
2009-13
Change %
Oncology
$909
$1,158
$125
$22
$1,034
$1,180
14%
Neurology
$174
$458
$525
$256
$699
$713
2%
ID
$666
$351
$70
$36
$736
$387
-47%
PLATFORM
$354
$612
$40
$40
$394
$652
66%
Other
$132
$320
$203
$178
$335
$499
49%
Ophthalmology
$298
$316
$96
$43
$394
$359
-9%
CV
$263
$222
$158
$56
$421
$278
-34%
Immunology
$308
$242
$34
$0
$342
$242
-29%
Respiratory
$162
$72
$149
$64
$311
$136
-56%
Metabolic
$165
$228
$17
$0
$181
$228
25%
Endocrine
$186
$53
$102
$53
$288
$106
-63%
Hematology
$150
$130
$10
$31
$160
$161
0.2%
GI
$136
$98
$36
$6
$172
$104
-39%
$72
$99
$10
$12
$82
$110
35%
$3,976
$4,359
$1,574
$797
$5,550
$5,156
-7%
Psychiatry
TOTAL
Table 2. Series A venture funding ($M) broken down by disease area in five year windows.
BIO Industry Analysis | 39
In contrast to the overall funding, Series A funding shows 7 of 14 disease areas with increases over the five-year
windows examined. The major decreases in funding were found in Endocrine (-63%), Respiratory (-56%), Infectious
Disease (-47%), GI (-39%), and Cardiovascular (-34%). Similar values were found when looking at changes only
in novel drug R&D, except in Neurology and the “Other” categories. Neurology novel drug R&D funding increased
163% (vs. 2% for total Series A), and the “Other” group increased 142% (vs. 49% for total Series A). The 49% jump in
the overall “Other” category was influenced in part by investments into women’s health products.
Average Amount Raised ($M)
per Venture Round
Average Series Size
$60
$49.0
$50
$40
$30
$25.2
$16.3
$20
$10
$0
N
$28.5
$1.5
Seed
A
B
C
207
747
496
317
D or Later
186
Chart 40. Average amount raised by round (since 2004). “D or Later” includes all subsequent financings beyond the C round.
In terms of relative size of venture rounds, the average Series A capital raised was found to be roughly 10x the
size of a Seed round, with the average Series A financing totaling $16 million over the last decade compared to
$1.5 million for Seed rounds. Subsequent B rounds garnered about $10 million more than Series A, at an average
of $25.2 million. Series C rounds, as might be expected, were even larger, at $28.5 million. All money raised after
Series C was found to be, on average, $49 million per round. Some companies have actually raised to Series G
and beyond, but this is rare in the dataset. Typically, venture backers will seek exit options by at least the C round,
depending on the M&A and IPO environment.
40 | BIO Industry Analysis
Discussion
“The JOBS Act, signed in 2012, has been
a key factor in opening capital markets
to small innovative biotech companies.
The increased access to public
markets has already started a favorable
feedback effect of capital flowing back
into private start-up companies.”
Venture investors vary by fund in terms of what stage
of development and what sequence of financing they
participate in. Their commitment to the life science sector
is influenced by multiple factors that include: 1) the financing
environment as experienced by the LPs (Limited Partners),
2) the venture capital perception of unmet medical need
based on availability of currently marketed therapies
in a given therapeutic area, 3) the exit opportunities via
Jonathan Leff, Partner, Deerfield Management
acquisition (i.e., interest from larger pharmaceutical or
biotech companies), 4) the exit opportunities available
through public markets (Form-10 or traditional IPOs that will be dependent on market conditions), and 5) the
regulatory and reimbursement environment overall and within a specific indication.
The first factor (the financing environment) was quite evident in the slowdown following the 2008 financial crisis.
Many LPs, such as pension funds, decided to decrease their allocation to venture, with a particular exodus from life
science venture funds due to the extensive capital and timeline requirements of groundbreaking R&D (which can total
much more than $1 billion and 10 years before a therapy reaches the market). In the data described above, we see the
fallout deepening into 2010, when innovative therapeutic venture dollars slipped to the lowest level in over 7 years.
For the second factor (VC perception of unmet medical need), when there are currently available therapies and high
hurdles for innovation, more of the R&D funding may find its way into improving already approved drugs. For example,
many investments in the area of Pain were found to be in drug improvement rather than in companies developing
inhibitors of novel targets. At the other end of the spectrum, in Oncology most of the investment in recent years has
been largely in companies developing innovative new drugs, as there is a strong desire to improve upon the current
standard of care for cancer patients.
A strong environment for VC exits (whether M&A or IPO) is critical to the maintenance of the funding ecosystem. In
the past decade there has consistently been a large company suitor for small biotechs, although the type, stage, and
focus of companies acquired has varied. For the public exits, the last decade has been anything but consistent. Only
recently, has the IPO window for small private biotechs opened. From 2008-2011, not a single Preclinical or Phase
I biotech was able to exit into the public markets. However, since the JOBS Act became law in 2012, we have seen
more than 20 Preclinical/Phase I IPOs and more than 130 total biotech IPOs. The current environment of both of
these exit options influences the investment decisions at the venture stage.
With respect to the last factor, the regulatory and reimbursement environment, VCs will pull back from areas that
are seen as having unfavorable or unpredictable regulatory and reimbursement hurdles. For example, requiring drug
developers in certain chronic disease indications to run larger cardiovascular outcome trials after completing pivotal
efficacy studies has contributed to a funding exodus of chronic illnesses that affect large populations. This has had
some impact on tilting investment over the last few years toward drug R&D for small populations and rare diseases.
All of these factors have been at play over the last decade, as seen in the overall drop in funding into 2010 and the
dramatic drop within particular disease areas. Policies that have helped reverse or buffer some of the negative impact
from these factors have been critical to maintaining stable funding of the innovation ecosystem. However, for some
segments of the biotech sector further policy initiatives are needed.
BIO Industry Analysis | 41
Methodology
Data Source
Four databases were combined to create the broadest study possible: BioCentury’s BCIQ, Informa’s Strategic
Transactions Database, EvaluatePharma, and Thomson Reuters’ ThomsonONE. Further, investigation of company
R&D and financings was complemented with Factset and SEC filings as well as Fierce Biotech, Xconomy,
BiotechGate, and company press releases. Equity investments from 2004-2013 were aggregated, and duplicates
and non-drug company financing events were removed. Generics, distribution, and pharmacy companies were
also excluded. Cases where private money was raised for the sole purpose of acquiring an existing company were
also excluded.
Equity investments in this study are predominantly venture in nature, with some differences at the Seed stage
where angel investors, family offices, and other non-venture capital investors have an impact. Additionally, debt
financing, bridge loans, government grants, and disease/patient foundation grants were also excluded.
The numbers reported in this report are not inflation adjusted to 2013. However, we did look at inflation adjusted
numbers over the 10 year period studied. The overall drop in funding is even more severe when expressed in 2013
dollars: from -21% in this report to -28% adjusting for inflation when comparing the 2004-2008 period with 20092013. For changes in the major disease areas, there is a similar shift: the decreases are slightly larger and the
increases are smaller.
Innovation Score
For the innovation score, we grouped companies into two categories, novel R&D pursuing a new chemical entity,
and R&D that expands the properties, availability, patient experience, etc. of an already-approved chemical
entity. In the first bucket, we include in-licensed assets with prior data, such as spin-outs from big pharmaceutical
companies. The lead drug for the novel category cannot have had a prior approval for any indication.
The second category includes delivery technologies such as nanotechnology, lipids (micelles), new adjuvants
for approved vaccines, extended release and prolonged half-life chemical modifications (conjugates and linkers,
including pegylated variants) patches, topical creams, implanted delivery devices, needle-less injections, as well as
reformulation of an approved drug, repurposing of an approved drug, nutraceuticals, and medical foods.
Round of Investment
Series financings often occur over multiple years as tranche payments. For example, a Series A round can have the
sequence of A1, A2, A3 rounds within the same year or in different years. These were accounted for by year such
that the accounting is for companies financed per year, not payments/tranches per year. For example, a company
with A1, A2, and A3 payments in 2012 would be treated as a single company financing in 2012, not three separate A
round financings. If the A1, A2, A3 rounds occurred in 2011, 2012, and 2013, then these would be counted as one A
round investment per year. This enables an accurate accounting of breadth of funding on a yearly basis.
42 | BIO Industry Analysis
Therapeutic Areas and Phase
Each financing event was tagged by the company’s lead program disease area and phase of development as of
the date of payment. As mentioned above, this is based on the date of actual funding, not commitment to future
tranches. For example, large A rounds can be spread out into payments stretching beyond a single year when press
releases and major media outlets report a financing event. Each year of funding, for each round, investment was
labeled by one of 14 major diseases and by sub-indication - these indications are listed in Appendix Chart A3.
Vaccines include both bacterial and viral vaccines. Thus, all other Infectious Disease categories are for small
molecule or large molecule approaches ex-vaccine. Oncology vaccines are tagged as vaccines if a true antigen
(peptide often) is being utilized and will have the modality tagged with vaccine instead of large. Thus, Oncology
vaccines do not show up under Vaccines within Infectious Disease. This allows us to sort vaccines across all
disease areas. “Other” in Infectious Disease refers mainly to anti-parasitic medicines and Head Lice treatments.
Wound healing was placed under Dermatology if directly related to skin injury, but if directly affecting the immune
system it is labeled under Immunology. Platform refers to molecular platforms only, not target- or hypothesisdriven platforms. For example, a company focused on the mTOR pathway would not be a platform company, but
a company designing bispecific Fab fragments would count as Platform. Strokes involving the brain are classified
under Neurology, but if designed for heart stroke in patients, it is labeled as Cardiovascular. Osteoporosis falls
under Endocrine, and Osteoarthritis was placed under “Other.” Also under “Other” are Dermatology, Allergy,
Musculoskeletal diseases, Osteoarthritis, Otology (ear diseases), Periodontitis, Urology/Genitourinary, non-viral
liver diseases, fertility drugs, and treatments for side effects of chemotherapy or radiation.
BIO Industry Analysis | 43
References
1. Based on analysis of the Dow Jones Venture Source database by Bruce Booth of Atlas Ventures: http://lifescivc.
com/2014/09/early-stage-biotech-venture-scarcity-fitness-fear-and-greed/
2. American Cancer Society. Cancer Facts & Figures 2014. http://www.cancer.org/research/cancerfactsstatistics/
cancerfactsfigures2014/.
3. Alzheimer’s Association, “2014 Alzheimer’s Disease Facts and Figures,” Alzheimer’s & Dementia, Volume 10, Issue
2. http://www.alz.org/downloads/Facts_Figures_2014.pdf
4. “PhRMA: 119 drugs for mental health disorders in R&D,” PharmaTimes. 6 May 2014. http://www.pharmatimes.com/
Article/14-05-06/PhRMA_119_drugs_for_mental_health_disorders_in_R_D.aspx
5. American Heart Association. Heart Disease and Stroke Statistics—2014 Update. AHA Statistical Update Web
site.http://circ.ahajournals.org/content/early/2013/12/18/01.cir.0000441139.02102.80.full.pdf
6. http://www.cdc.gov/media/releases/2014/p0610-diabetes-report.html; http://www.cdc.gov/diabetes/pubs/
statsreport14/national-diabetes-report-web.pdf
7. http://www.diabetes.org/diabetes-basics/statistics/#sthash.mSjrWE9B.dpuf
8. http://www.cdc.gov/obesity/data/adult.html; http://jama.jamanetwork.com/article.aspx?articleid=1832542
9. http://www.heart.org/idc/groups/heart-public/@wcm/@sop/@smd/documents/downloadable/ucm_319588.pdf
10. Report to the President on Propelling Innovation in Drug Discovery, Development, and Evaluation. President’s
Council of Advisors on Science and Technology. September 2012.
11. http://globalgenes.org/rare-diseases-facts-statistics/
12. http://www.psoriasis.org/document.doc?id=793
13. http://www.arthritis.org/arthritis-facts/disease-center/rheumatoid-arthritis.php
14. http://www.niddk.nih.gov/health-information/health-statistics/Pages/digestive-diseases-statistics-for-theunited-states.aspx#1
15. http://www.nhlbi.nih.gov/about/documents/factbook/2012/chapter4.htm
44 | BIO Industry Analysis
Appendix
Disease Area
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
10 yr SUM
Oncology
$1,032
$689
$680
$1,353
$1,136
$919
$616
$923
$740
$1,042
$9,129
Neurology
$989
$473
$481
$493
$453
$532
$314
$184
$322
$375
$4,615
Infectious
$460
$458
$522
$596
$435
$452
$323
$375
$171
$345
$4,137
Other
$177
$256
$283
$370
$266
$225
$320
$256
$367
$265
$2,785
Platform
$201
$227
$360
$208
$180
$221
$250
$141
$286
$369
$2,443
CV
$230
$281
$299
$374
$221
$167
$141
$256
$283
$177
$2,429
Endocrine
$200
$183
$430
$398
$209
$176
$77
$279
$284
$157
$2,394
Metabolic
$176
$173
$288
$239
$93
$162
$176
$241
$371
$265
$2,183
Ophthalmology
$106
$105
$174
$285
$138
$196
$92
$216
$107
$275
$1,693
Immunology
$163
$67
$265
$77
$310
$157
$152
$57
$148
$171
$1,567
Respiratory
$240
$64
$157
$237
$169
$106
$154
$106
$65
$60
$1,358
Hematology
$88
$210
$126
$170
$109
$90
$104
$91
$150
$90
$1,228
Gastroinstestinal
$131
$146
$216
$128
$207
$39
$67
$66
$87
$52
$1,140
Psychiatry
$93
$274
$129
$56
$36
$50
$39
$58
$111
$44
$889
$4,286
$3,606
$4,411
$4,984
$3,960
$3,491
$2,826
$3,249
$3,492
$3,686
$37,991
TOTAL
Table A1. 10 years of venture investing by disease - $M invested. In the rare case where two different rounds (for example, B and C rounds) were
raised in the same year, this is counted as two seprate company financing events in the same year.
Average # of
Companies/Year
Disease Area
Novel Drug R&D
Drug Improvement R&D
Total Funding
10 Year Average
2004-08
2009-13
2004-08
2009-13
2004-08
2009-13
2004-2013
Oncology
49
60
8
8
57
68
62
Neurology
22
27
15
14
37
41
39
ID
31
28
5
6
36
33
35
Other
15
16
0
0
23
25
24
Platform
21
23
3
4
24
27
26
CV
15
10
6
7
21
17
19
Endocrine
12
9
6
8
18
17
18
Metabolic
11
12
1
1
12
13
12
Ophthalmology
9
11
3
5
12
16
14
Immunology
14
10
1
1
15
11
13
Respiratory
8
7
3
2
11
9
10
Hematology
7
7
0
1
8
8
8
GI
5
4
4
1
9
5
7
Psychiatry
5
5
1
1
6
6
5
Table A2. Number of companies per year receiving funding for a specific round. In the rare case where two different rounds (for example, B and C
rounds) were raised in the same year, this is counted as two seprate company financing events in the same year.
BIO Industry Analysis | 45
Novel Drug R&D
Indication
Drug Improvement R&D
Total Funding
2004-08
2009-13
2004-08
2009-13
2004-08
2009-13
2004-13
$3,932
$3,869
$958
$370
$4,890
$4,239
$9,129
-13%
CV - Hypercholesterolemia
$50
$78
$19
$58
$70
$136
$206
96%
CV - Hypertension
$52
$16
$19
$46
$71
$62
$133
-13%
$897
$606
$310
$171
$1,207
$777
$1,984
-36%
CV - Multiple Indications
$50
$0
$7
$49
$57
$49
$106
-14%
ID - Antimicrobial g+
$301
$369
$85
$25
$386
$394
$780
2%
ID - Antimicrobial g-
$79
$78
$10
$56
$89
$134
$223
51%
ID - Antimicrobial broad
$461
$222
$117
$3
$578
$225
$803
-61%
ID - Anti-fungal
$66
$114
$85
$34
$151
$148
$298
-2%
ID - Antiviral - other
$135
$208
$70
$32
$205
$240
$445
17%
ID - HCV
$500
$101
$0
$0
$500
$101
$602
-80%
ID - HIV
$285
$101
$0
$2
$285
$102
$387
-64%
ID - Vaccine
$238
$267
$11
$48
$249
$315
$564
26%
ID - Other Indication
$0
$1
$29
$6
$29
$7
$35
-76%
ID - Multiple Indications
$0
$0
$0
$0
$0
$0
$0
Immunology - Arthritis
$224
$80
$36
$18
$260
$98
$357
-62%
Immunology - Psoriasis
$60
$24
$0
$0
$60
$24
$84
-59%
Immunology - Other Indication
$238
$362
$40
$62
$277
$425
$702
53%
Immunology - Multiple Indications
$256
$138
$30
$0
$286
$138
$424
-52%
Endocrine - T2D
$589
$111
$86
$377
$675
$488
$1,163
-28%
Endocrine - T1D
$56
$11
$103
$30
$160
$40
$200
-75%
Endocrine - Other Indication
$317
$262
$269
$184
$586
$446
$1,032
-24%
$0
$0
$0
$0
$0
$0
$0
$95
$172
$76
$0
$171
$172
$343
0%
Metabolic - Genetic Disorder
$288
$595
$0
$0
$288
$595
$883
107%
Metabolic - Other Indication
$236
$425
$21
$23
$257
$448
$704
74%
Metabolic - Multiple Indications
$253
$0
$0
$0
$253
$0
$253
-100%
Psychiatry - Schizophrenia
$129
$39
$52
$0
$181
$39
$220
-78%
Psychiatry - Depression
$132
$108
$21
$43
$152
$151
$304
-1%
$205
$55
$50
$56
$255
$111
$366
-56%
$0
$0
$0
$0
$0
$0
$0
Oncology - Oncology
CV - Other Indication
Endocrine - Multiple Indications
Metabolic - Obesity
Psychiatry - Other Indication
Psychiatry - Multiple Indications
Chart A3. Average amount raised by round (since 2003). “D or Later” includes all subsequent financings beyond the C round.
46 | BIO Industry Analysis
Change %
Novel Drug R&D
Indication
Drug Improvement R&D
Total Funding
2004-08
2009-13
2004-08
2009-13
2004-08
2009-13
2004-13
Neurology - Pain
$323
$237
$719
$495
$1,042
$732
$1,774
-30%
Neurology - Parkinson's
$103
$27
$0
$62
$103
$89
$192
-14%
Neurology - Alzheimer's
$149
$211
$35
$4
$184
$215
$399
17%
Neurology - MS
$362
$78
$21
$11
$384
$88
$472
-77%
Neurology - Other Indication
$602
$388
$347
$91
$950
$478
$1,428
-50%
$87
$51
$139
$73
$226
$124
$350
-45%
Respiratory - Asthma
$266
$71
$32
$29
$298
$101
$399
-66%
Respiratory - COPD
$66
$142
$6
$60
$72
$202
$275
180%
$264
$139
$220
$1
$484
$140
$624
-71%
$0
$0
$12
$49
$12
$49
$61
306%
$332
$139
$0
$4
$332
$143
$475
-57%
$79
$40
$30
$25
$110
$65
$175
-41%
$253
$281
$0
$30
$253
$311
$564
23%
$9
$6
$0
$0
$9
$6
$15
-30%
$325
$142
$56
$0
$380
$142
$523
-63%
$0
$0
$90
$0
$90
$0
$90
-100%
$107
$16
$85
$0
$191
$16
$207
-92%
GI - Ulcerative Colitis
$10
$14
$4
$6
$14
$20
$34
40%
GI - Other Indication
$140
$127
$12
$6
$152
$133
$285
-13%
$0
$0
$0
$1
$0
$1
$1
$633
$715
$175
$170
$807
$885
$1,693
10%
$1,095
$1,150
$81
$116
$1,176
$1,266
$2,443
8%
$31
$12
$0
$0
$31
$12
$43
-60%
Other - Dermatology
$132
$266
$97
$139
$229
$405
$634
77%
Other - Renal
$310
$195
$0
$105
$310
$300
$610
-3%
$87
$133
$0
$0
$87
$133
$220
53%
Other - Other Indication
$222
$260
$124
$91
$346
$351
$697
2%
Other - Multiple Indications
$155
$81
$195
$150
$350
$232
$581
-34%
Neurology - Multiple Indications
Respiratory - Other Indication
Respiratory - Multiple Indications
Hematology - Blood Stimulator
Hematology - Coagulation
Hematology - Other Indication
Hematology - Multiple Indications
GI - IBS
GI - GERD
GI - Crohn's
GI - Multiple Indications
Ophthalmology
PLATFORM
Other - Allergy
Other - Chemo/Rad side effects
Change %
Chart A3 – Continued. Average amount raised by round (since 2003). “D or Later” includes all subsequent financings beyond the C round.
BIO Industry Analysis | 47
Authors
David Thomas, CFA
Director, Industry Research & Analysis
Biotechnology Industry Organization (BIO)
Chad Wessel
Manager, Industry Research & Policy Analysis
Biotechnology Industry Organization (BIO)
Acknowledgements
We would like to acknowledge BIO’s Emerging Companies Section staff for their review and contributions to this
report: Charles Crain, Shelly Mui-Lipnik, Matt Stross, Aqila Zafar.
About BIO
The Biotechnology Industry Organization (BIO) is the world’s largest trade association representing biotechnology
companies, academic institutions, state biotechnology centers and related organizations across the United States
and in more than 30 other nations. BIO members are involved in the research and development of innovative
healthcare, agricultural, industrial and environmental biotechnology products. BIO also produces the BIO
International Convention, the world’s largest gathering of the biotechnology industry, along with industry-leading
investor and partnering meetings held around the world. BIOtechNOW is BIO’s blog chronicling “innovations
transforming our world” and the BIO Newsletter is the organization’s bi-weekly email newsletter. More information
on BIO and the biotechnology industry can be found at www.bio.org.
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