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Healthcare’s latest prescription: more capital

The following story is part of a cover package VCJ published in its June issue about how the latest developments in gene editing and gene therapy are triggering new wave of investments. Read the main story here: Gene editing rides new investment wave. Read here about the moral implications to consider: Ethical concerns dog gene editing. The below story mentions how investing in the sector may be on the rise.

In one sense, life sciences investing remains the ignored stepchild of venture investing.

Just 18 percent of venture capital deployed last year in the United States went to companies curing disease, improving the health system and advancing aspects of medical technology, such as gene editing, according to PitchBook and the National Venture Capital Association.

That’s down from 25 percent 10 years earlier.

And yet money has been flowing into the space. Capital raised by U.S.-based VCs for healthcare investing rose to $9.6 billion last year, topping the already strong $9.1 billion of 2017, according to Silicon Valley Bank. Fundraising was $7.2 billion in 2016 and just $3.9 billion in 2013.

These figures don’t include capital from corporate venture or hedge funds, so available cash is even higher.

The generally warm welcome pharmaceutical IPOs have received on Wall Street and the quicken tempo of M&A are behind the rise.

To keep pace, VC firms are accelerating their fund cycles to sometimes 2.5 years from perhaps three or four.

“You’re also seeing partners spinning out of funds to raise their own funds,” said Jonathan Norris, a managing director at SVB.

Long-time Kleiner Perkins GP Beth Seidenberg is an example. She raised $320 million last year for her Westlake Village Biopartners.

And, “I think you’re seeing funds get bigger,” Norris added

Flagship Pioneering announced in March it raised $824 million for a new opportunities fund, almost three times the size of its 2016 opportunities fund.

One result is that round size has been growing, as it has elsewhere in venture. Last year, 146 rounds of $50 million or more took place. In 2008 just 20 did, according to the PitchBook data.

In gene editing and gene therapy, Beam Therapeutics raised a $135 million Series B financing in March from Redmile Group, Cormorant Asset Management, GV, Altitude Life Science Ventures and others.

Inscripta completed its own $105.5 million Series C in April with such backers as Venrock, Foresite, Merieux Developpement, Paladoin Capital Group, MLS Capital and NanoDimension.

Expect more hefty rounds to follow.