Biotech VC doubled last year: report

Australian private equity and venture capital investment in biotech was AUD$33 million in 2004, up from $16 million in 2003, according to a new report released by the Australian Venture Capital Association (AVCAL).

The report , based on statistics for the financial year ended June 30, 2004, shows that overall VC investment was solid in 2004, a year in which $822 million was raised -- 60 per cent more than in 2003. Much of the $822 million was expansion capital rather than early-stage or pre-seed funding, the report said.

There were seven new investments in biotechnology companies between July 2003 and June 2004, and a further seven investments in medical and health companies, compared to two and eight investments in 2003 respectively.

In the medical and healthcare sectors, a few large investments -- believed to be in aged care and hospital services -- caused a "distinct spike", raising $1.082 billion.

Meanwhile, European venture capital investment in 2004 has shown the first symptoms of following the US-led venture-capital recovery, stabilising at 3.5 billion euros (AUD$5.8 billion), nearly the same amount that was invested in 2003. The European Venture Capital Report released by VentureOne and Ernst & Young, noted a 42 per cent increase in the amount invested in seed and first rounds.

The median amount invested in 2004 financing rounds rose to 1.6 million euros. The report recorded 176 biopharmaceutical deals in 2004, up from 186 in 2003. Medical devices deals numbered 73, compared to 94 in 2003. Overall, this included 1.226 billion euros invested in biopharmaceuticals in 2004, up from 952 million euros in 2003. More than 194 million euros was also invested in medical devices.

"Some of the factors which contributed to recent growth in US venture capital investment are now being observed in Europe," said Gil Forer, head of Ernst & Young's global VC advisory group. "In 2004, Europe saw significantly higher M&A valuations and the most VC-backed IPOs in three years, creating a clearer path to quality exits for investors which was likely an important dynamic in the stabilisation in European funding levels last year.

"Since venture capital investment in Europe generally lags the US trend by approximately two quarters, there is reason to be cautiously optimistic that European investment will take up the US trend and shift from stabilisation to improvement in 2005."

The Ernst & Young and VentureOne Quarterly Venture Capital Report for the US -- released earlier this month -- revealed that investments swelled 8 per cent to at least US$20.9 billion in 2004. The upswing ended a three-year decline since the high-point of 2000.