According to an article in The New York Times in October: "Internet companies with funny names, little revenue, and few customers are commanding high prices. And investors, having seemingly forgotten the pain of the first dot-com bust, are displaying symptoms of the disorder known as irrational exuberance."
While The Times focuses more on information technology companies like Facebook, Yahoo, and Google, the evidence points to a burgeoning number of VCs snapping open their checkbooks and waving them in the direction of biopharmaceutical companies.
In a study of venture fund activity throughout the first three quarters of 2007, Healthcare Corporate Finance reports that the medical device sector topped the list of life sciences companies gaining the most venture funding, with 25% of the quarterly dollar total for all sectors combined. "The second-largest deal of the quarter, a $110-million Series E financing for Globus Medical, a developer of spinal implant systems and biomaterials, was led by Clarus Ventures. Neuromed Pharmaceuticals, a biopharmaceutical company developing drugs for chronic pain, announced the largest deal among pharmaceutical, biopharmaceutical, and biotech companies, with a $53.3-million Series E financing led by MPM Capital," says the report.
WHY ALL THE FUSS?
The life sciences sector hasn't seen this big a pipeline since 2001, when venture firms turned away from Internet companies and toward biopharmaceutical companies in a desperate bid to stem the losses incurred when vast armies of dotcom dinosaurs went belly-up. The fact that, as The Times points out, the rise in venture funding in the life sciences market this year coincides with the rise in venture funding in the Internet market, is somewhat worrisome. After all, it was only six or seven years ago when an estimated $1.5 billion was lost by venture capital firms. Shouldn't they be worried about history repeating itself?