Biopharm firms scoop US VC pool

Investment in biopharmaceutical companies by US venture capitalists increased by 20 per cent in 2004 over the previous year, a new report has shown.

US VC investments swelled 8 per cent to at least US$20.9 billion in 2004, and biopharma recorded the highest median investment of all industry categories, as well as a 20 per cent increase in total investment across the sector.

This was despite an overall drop-off in venture capital investment in the fourth quarter of 2004, according to the Quarterly Venture Capital Report released by Ernst & Young and VentureOne, a unit of Dow Jones Newswires.

The upswing ends a three-year decline since the high-point of 2000, when $94.6 billion was invested during the technology boom.

Median investments in biopharmaceutical companies were $12 million over the year, and $15 million in the fourth quarter, the report found. There were 228 biopharmaceutical deals and $4.3 billion was invested, the highest amount in four years and nearly equal to the amount invested in 2000.

The largest healthcare investment of the fourth quarter was the $52 million later-stage investment in California's Alexza Molecular Delivery, a developer of specialty pharmaceuticals delivered via inhalation. The largest healthcare investment of the year remains the first quarter's $250 million investment in Jazz Pharmaceuticals, a developer of pharmaceutical products for use in targeted therapeutic areas.

The San Francisco Bay area continued to be venture capital's hot-spot, home to 638 deals and $7.1 billion of investment in 2004.

The quarterly MoneyTree survey released by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association -- which also tracks venture capital investment -- found that there was an increase in later-stage investments.