Biotech Startup Fundraising Fell in 2022

"Biotechnology entrepreneurs recalibrated in 2022 as their financing options narrowed, a reversal from years in which life-sciences startups were flush with capital.

With just two weeks left in the year, U.S. biotechs had raked in $29.7 billion for 2022, compared with the record -- $38.7 billion -- deployed in all of 2021, according to market tracker PitchBook Data Inc.

Biotech venture funding had jumped in the years leading to 2022 as the pandemic showcased the sector and the market for initial public offerings surged. That momentum carried into early 2022, with biotechs closing financings at a similar clip as the previous year, said Josh Seidenfeld, a partner with law firm Cooley LLP.

But after the first quarter, things began to change. Venture funding retreated as the number of IPOs dwindled. Later-stage biotechs still closed venture rounds, but often on terms that favored their new backers, Mr. Seidenfeld said, as capital got harder for startups to secure.

For instance, new investors leading financings sought the right to receive twice what they invested before other shareholders saw any return, Mr. Seidenfeld said.

"The way the pie is being sliced has shifted toward the new capital coming in," he said.

This year, biotech venture firms gave priority to their best portfolio companies to ensure they were well-funded for the next 1 1/2 to two years, said Dennis Podlesak, chief executive officer and managing partner of Axcelius, a biotech incubator of venture firm Canaan Partners. That came at the expense of other startups, which consequently found it harder to attract new backers.

"Companies are talking to the ecosystem of investors, and the reality is the majority of that ecosystem was not looking to deploy new capital to outside investments," Mr. Podlesak said. "Hence there was a dramatic slowing in new investments, both into public and private biotechs, and we're still in that zone to some extent right now."

Austin, Texas-based Triumvira Immunologics Inc., a startup developing cellular therapies for cancer, in March said it had extended an early-stage round of financing, a Series A, to about $100 million.

Now raising a Series B, the company has support from insiders, but is looking for an investor to lead the new round, CEO Paul Lammers said.

"I've had several investors tell me, 'Paul, I love the technology, I love the team, I love the progress, but I have five portfolio companies that have a definite need for cash, I'm focusing on my internal portfolio first,' " he said.

South Rampart Pharma LLC, a New Orleans-based developer of non-opioid analgesics, operates in a difficult market -- venture investors have gotten burned by clinical-trial failures of new pain medications, co-founder and CEO Hernan Bazan said. That, and the tougher financing climate, prompted the company to streamline its near-term ambitions.

Eighteen months ago, South Rampart planned to develop a drug in oral and intravenous formulations to address three conditions: postoperative pain, pain from damaged or injured nerves and patients having wisdom teeth pulled, he said.

Now, it plans to advance the drug first as an oral medicine for just one group of patients, those having wisdom teeth extracted, he said." [1]

1. Banking & Finance: Biotech Startup Fundraising Fell in 2022
Gormley, Brian.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 23 Dec 2022: B.8.