NEW YORK, Sept. 30 - Venture capitalists turned their backs on privately held genomics companies during the third quarter as private-equity markets sought solace among drug discoverers and developers, according to an industry report.
Bioinformatics companies were dealt a particularly gruesome blow during the three-month period ended today as VC spending fell by 87 percent to just under $19 million among just two deals, according to VentureWire, a newsletter tracking the VC market. During the same period one year ago, companies in this space pocketed a combined total of $141 million through seven deals.
A total of four genomics and proteomics companies managed to scrounge $26 million from four deals during the third quarter, compared with $110 million raised among 10 deals during the same period last year--a 76-percent year-over-year fall.
"The summer quarter was slow, as expected, and it appears that biotech investing is finally cooling off a bit," said Ken Andersen, an editor at VentureWire. The newsletter's third-quarter roundup is due tomorrow.
By comparison, VC investments for all industries in the quarter was cut virtually in half: Some 551 deals shared just under $5 billion in the current quarter compared with nearly $10 billion spread among 1,004 deals in the same period last year.
VC investment in drug-discovery and -development companies, however, were static. According to VentureWire, 44 companies pocketed just under $500 million in the current quarter. During the same period, slightly more money went to 43 firms.
"I think this represents a fundamental shift in venture-capital strategy," said Andersen. Drug-discovery and -development companies "are becoming more stratified going forward. Secondarily there's biotech discovery tolls, and after that there's not much that VCs are interested in."
The biotech tools segment, which according to VentureWire is home to companies that make, say, DNA chips and microfluidics, as opposed to databases or SNP technologies, were not as jilted: Private-equity investment in these companies fell to just $172 million among 14 deals from $198 million among 12 deals, year over year--a decrease of only 14 percent.
According to Andersen, "there's been a shift in the business models where everyone is presenting themselves as a drug discovery company, and that's been happening for a while now. Pure genomics, proteomics, or even bioinformatics companies are relatively rare these days any way. The whole business model has really shifted to one that is really geared toward discovery."