Private-equity investments in genomics-related tool and technology companies shrank 25 percent in 2003 compared with 2002, according to a venture capital-tracking newsletter.
Investment in drug-discovery tools, which include microarray and genotyping technologies, fell by 5 percent in the 12-month period ended Dec. 31, 2003 — the smallest margin of all genomics technologies — while bioinformatics companies took the biggest hit, experiencing an 80-percent drop-off in total venture-capital investment last year.
Specifically, private-equity investment in drug discovery-tool shops fell 5 percent in 2003 to 21 deals totaling $236 million from 30 deals worth $249.7 million in 2002, according to the report by Venture Wire, a Dow Jones newsletter.
The report also showed that VC companies closed 13 deals totaling $150 million in genomics and proteomics companies in 2003, which represents a 44-percent decrease from 2002 when VC firms closed 16 deals worth $216.7 million.
Investment in bioinformatics companies, meantime, shriveled 80 percent in 2003 to seven deals totaling $31.7 million from eight deals worth $57.1 million one year ago, Venture Wire said.
“At the end of the day, it’s all about drugs, and solving disease,” said Alden Philbrick, president and CEO of Oxford Finance, a VC company based in Alexandria, Va. “The sectors that have the closest touch to coming up with novel new chemical entities that will be the next blockbuster drug will always be in favor.”
Philbrick said the private equity-financing cycle is in the “fun” portion of the cycle: The window for public offerings is “cracked” and “a few companies have slipped through,” he told SNPtech Pharmacogenomics Reporter during the BIO CEO conference in New York City this week. Not only have they slipped through, but their values have sustained — and in a number of cases have even increased, said Philbrick. There is still “overwhelming optimism” that would typically exist with IPO windows cracking open. “So, given that, everyone seams to be optimistic,” he said. [read complete interview, beginning page 5.]
He said the cycle is reminiscent of others experienced in the sector before it. “It’s not surprising,” said Philbrick. “There’s always ebb and flow of capital. If you look closely at the private capital that’s going into life science, it hasn’t diminished quite as dramatically as venture capital going into IT and non life-science arenas.