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Biotech Venture Capital Could Finally Be Heating Up Again -- Maybe

Q1 Biotech Venture CapitalBiotech execs who found venture money tough to come by in the first quarter of 2010 may have better luck in the second quarter, if the first few weeks of April are any indication.

The first quarter numbers were dismal no matter how you slice it. Dow Jones VentureSource reported $619 million in venture capital raised by U.S. biopharmas, a 20 percent drop from the first quarter of 2009 -- which wasn't so hot to begin with. Meanwhile Thomson Reuters data show U.S. biotechs raising $825 million in this year's first quarter and BioWorld Insight puts the worldwide figure at about $1.1 billion, including venture debt.

That's bad news because today's privately-held biotechs are increasingly dependent on venture money to sustain their massively cash burning research and development operations. Their only other significant fundraising options are an initial public offering that gives them access to the public markets (not likely these days, even for later-stage biotechs) or a lucrative deal with big pharma (again, hard to come by unless you are later stage or very lucky).

Now for the good news: BioWorld Insight shows privately-held biotechs had already raised $290 million in the first two weeks of April, which puts this month on track to be bigger than any so far this year or in all of last year.

Who's getting the money? Some is going to start-ups: big Series A rounds so far this year include Catabasis Pharmaceuticals' $39.6 million to target inflammatory pathways in diabetes and Eleven Biotherapeutics' $35 million for protein engineering, as well as Altheos' $20 million for glaucoma.

But the bulk of the money appears to be going into mid-stage Series B and some Series C rounds. Among the biggest so far are AiCuris' $75 million Series B for anti-infectives, Achaogen's $56 million Series C for antibiotics and NGM Biopharmaceuticals' $51 million Series B for diabetes.

And it looks like the venture numbers will continue to get better. In Vivo Blog reports that 5AM Ventures and Orbimed recently closed new venture funds, while Third Rock Ventures is raising one. All of this even without the hoped-for return of the IPO window (not that it won't happen eventually... just that the few biotech IPOs to price thus far, with one or two notable exceptions, have not been particularly awe-inspiring.)

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Pile of Cash photo by Flickr user aresauburn, CC.
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