By Brian Gormley
U.S. medical startups raised a record $3.9 billion in venture
capital in the first quarter of 2015 amid rising investor interest
in biotechnology, digital health and health-care services.
The total surpassed the previous record high of $3.42 billion
invested in the second quarter of 2014, according to data provider
Dow Jones VentureSource. A strong market for initial public
offerings, growing confidence in the success of drugs in clinical
trials and acquisitions by large drug manufacturers that need to
replenish their pipelines drove the investment.
"What we are seeing is a very quick steepening of the valuation
curve," said Philippe Chambon, managing director of New Leaf
Venture Partners, which invests in health-care startups.
Biotechnology investment accounted for most of the increase in
venture funding. Investors poured $2.14 billion into biotech
companies, up 72% from the first quarter of last year.
In 2014, a record 58 venture-backed biotech companies went
public. That is attracting investors, including major companies and
investment firms, which aren't typically active in venture capital.
In January, Moderna Therapeutics Inc. said it completed a $500
million financing, the largest biotech venture round ever. The
financing included hedge fund Viking Global Investors and corporate
backers such as Merck Co.
The influx of capital is driving up prices of private biotech
financing rounds, some investors say. Valuations also are rising
because companies now have better tools to predict the success of
drugs entering clinical trials. Because of research advances,
companies can often use molecular markers, such as a particular
gene or protein, to identify patients likely to respond to a
drug.
Meanwhile, drug manufacturers are investing billions of dollars
in acquisitions. In November, Johnson & Johnson acquired
venture-backed Alios BioPharma Inc. for $1.75 billion in cash, for
example.
Interest in digital technologies applied to health care pushed
the first quarter health-care information technology total to $429
million, a 56% jump a year earlier.
Meanwhile, the $703 million pumped into health-care services
financing last quarter is nearly as much as the total for all of
last year. Investors sunk $762 million into such companies in 2014.
This year's first-quarter total was a 515% leap from the first
three months of 2014.
The jump in funding came despite declining interest in medical
devices. The $624 million invested represented a 30% drop from the
first quarter of 2014, the data show.
Write to Brian Gormley at brian.gormley@wsj.com
Access Investor Kit for Johnson & Johnson
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US4781601046
Subscribe to WSJ: http://online.wsj.com?mod=djnwires