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Venture Capital for Genomics Sinks Amid Upswing in Overall Biotech Funding in 2002

NEW YORK, Jan. 3 - While private investment in biotechnology rose in 2002, the growth marked a shift to funding drug discovery companies at the expense of genomics and tool concerns, according to an audit by a private-equity tracking firm.

 

Overall, private USbiotech companies raised $3.2 billion in 262 financing rounds in 2002, up slightly from $3 billion in 219 rounds in 2001, according to a report by VentureWire.

 

The growth, while slight, bucked the trend: venture capital flowing to startup companies was $20.3 in 2002, down from $37.7 billion in 2001. Enterprisesoftware, wireless, semiconductors and medical device sectors all registered a downturn in financing.

 

Drug discovery and development companies took in $2.4 billion in 170 deals in 2002, compared to $1.8 billion in 121 rounds in 2001, according to VentureWire. Drug delivery technology companies similarly saw an upswing in financing, scooping up $205 million in 16 deals in 2002 versus $58 million in seven deals the previous year.

 

Funding for the bioinformatics, genomics and proteomics sector, however, dropped to 23 deals worth $231 million in 2002 versus 49 deals valued at $730 million the previous year. Investment in biotech research tool companies, which include microarray and microfluidic producers, decreased to $301 million in 38 deals in 2002 compared to $449 million in 37 rounds the previous year. 

 

"The stand alone business model of bioinformatics, genomics and proteomics didn't really play out," in 2002 said Ken Anderson, editor of VentureWire. "Lack of having a number of successful stand-alone companies in these areas made VCs switch gears towards discovery. Most of the activity now for VCs is going into discovery and development. Even formerly genomics companies are trying to refashion themselves as drug discovery companies."

 

The venture capital firms doing the most deals in 2002 - New Enterprise Associates, Intel Capital, and JPMorgan Partners, all did fewer deals than in 2001. Life sciences specialist Alta Partners, taking the number four spot in deals for 2002, did slightly more deals than the previous year, according to VentureWire.

 

Silicon Valley remained home to the most companies receiving private funding in 2002, followed by Boston, New York, the East Bay of San Francisco, and Washington, D.C.

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