There were a couple of interesting articles on various aspects of biotech funding out there today. Firstly, Pharmalot related that VC funding for biotechs was actually up 16% in 2011 over 2010 despite all articles about it being unavailable. Q4 was actually up 90% YOY from 2010 and 160 deals closed in 2011 compared to 153 in 2010. What is apparently true are there are a lot more early stage spin-outs from Universities and all of these can't (aren't) be funded with current mechanisms. The question is do they all deserve funding? Probably not. Bottom line, biotechs received $3.5 B in funding in 2011 with an average round raking in $21.8 M versus $19.7 M in 2010. So much for a no funding perception.
Secondly, Life Sci VC blog talks about the milestone payouts that are actually being achieved in these M&A deals with relatively small upfronts and big backend milestone payout schedules. Data for this analysis is hard to come by by the blog's author (Bruce Booth) has estimated the results on 35 deals where public info (or his network) was available for period 2005-2009. The deals represented in $4.3 B in upfront payments with milestones promising up to another $7.0B. The results?
- At least 24% ($1.7 B) in milestones have paid out
- Approximately 40% ($2.8 B) may still pay out in part or total -- though some milestones may have already been missed
- And 37% of milestones are dead as the projects have been killed. That results in $2.6 B worth of no pay out
- Only 3 of the milestones were actually paid for product approvals (Salmedix, Ovation and Gloucester).
The data is incomplete and the author is asking those in the know to help build a better picture through crowd sourcing. Until then, the amount being paid on backend milestones in biotech M&A deals will remain somewhat murky.
Posted by Bruce Lehr Feb 23rd 2012.