First Quarter Comeback

STACY LAWRENCE

After an active end to 2002, the early part of 2003 saw subdued financial activity in the life sciences. But by the end of the first quarter, merger-and-acquisition activity and venture capital fundings regained levels more typical of 2002. And even as total VC funding continues to suffer through this recessionary period, the life sciences sector has managed to gain a greater overall portion of funding. The industry continues to maintain about a one-fifth share of all VC dollars. In the first quarter, Hypnion, a discovery and development company that focuses on therapeutics for sleep disorders, garnered a $47.5 million second round of financing, and Peptimmune, a biotech company that specializes in the treatment of autoimmune and allergic diseases, secured $41.2 million. On the M&A front, Johnson & Johnson was active. It acquired not only Scios, which has a product for congestive heart failure, for about $2.5 billion, but also 3-Dimensional Pharmaceuticals, which develops drugs for cancer, inflammation, and metabolic and cardiovascular diseases, for $66 million.

And although the complete dearth of initial public offerings continued, follow-on financings saw substantial success in the first quarter. Amylin Pharmaceuticals, which makes drugs to treat diabetes and other metabolic disorders, raised $175 million. Antigenics, which develops treatments for diseases of the immune system, and AtheroGenics, a pharmaceutical company developing drugs for patients with chronic inflammatory diseases, brought in $62 million and $52 million, respectively, in their follow-on rounds.

Charts accompanying text include:

Historical Venture Capital Investment in U.S. Life Sciences

Fund-Raising by the U.S. Biotech Industry

Life Sciences Global M&A Announcements

U.S. Life Sciences Venture Capital Investment

Median Valuations of VC-Backed Companies