Life Science Financings Show Uptick in Valuations in 2012 and Increased Activity by Corporate Investors

by Fenwick & West Life Sciences Group

[author: Matthew Rossiter]

Times are tough in the life science financing environment, as underscored by numerous recent news stories as well as quarterly statistics from Dow Jones VentureSource and The MoneyTree Report.

However, Fenwick’s First Half 2012 Life Science Venture Capital Survey highlights a few potential bright spots as well. In particular, while the number of life science financings declined significantly during the first half of 2012, our survey indicates that valuations have improved modestly, and we also see evidence that large biopharma and medical device companies are increasing their support of startup ventures.

Fenwick’s latest survey analyzes venture financings for 186 U.S.-based life science companies over the first half of 2012. One metric used to assess the health of the life science funding environment is to look at the change in share price from one round of funding to the next. In 2012, the trend has been positive, with average price increases of 19% and 26% for Q1 and Q2, in comparison to average price increases of 4% and 11% for Q1 and Q2 of 2011.

Another way to look at the data is to measure how many funding rounds occurred where the price per share increased (up rounds) or decreased (down rounds) from the previous round. For the first half of 2012, up rounds outpaced down rounds 53% to 19%, with 28% flat. This is a modest improvement over results from 2011, which averaged 47% up rounds and 25% down rounds, with 28% flat.

It is important to put these valuation trends in context: fewer life science financings are occurring, and the life science valuation figures trail those of other industries covered by our Silicon Valley Venture Capital Survey. However, the upward trend in valuations is an indication that startups are continuing to develop promising technologies that can justify a step up in valuation – in other words, there is a healthy supply of promising new ideas.

Likewise demand for new ideas with demonstrated potential, in the form of acquisitions of life science startups by large life science companies, also continues to be strong. A recent report from Silicon Valley Bank, as well as blog posts by Bruce Booth (Atlas Ventures) and Bijan Salehizadeh (NaviMed Capital), highlight the continuing strength of the current life science M&A market.

But while these supply and demand factors continue to be strong, there is currently less funding available to life science startups that seek to develop and advance new ideas. So it is perhaps unsurprising that we also see large biopharma and medical device companies – who continue to rely on acquisitions of startups to help refill their product pipelines – becoming more involved in providing funding to the life science startup sector, and more creative in the means by which they do so. For example:

  • The venture arms of larger corporations have always played a role in the life science sector, but participation has been increasing recently, with the National Venture Capital Association and Thompson Reuters reporting that corporate venture capitalists participated in 17.5% of all life science financings during the 2011 through 1H 2012 period, up from 15.3% of all financings during the 2010 through 2011 period.
  • In addition, some large corporations are partnering with established venture capital firms, both by making direct investments into venture capital funds and by forming innovative collaborations that combine corporate and venture capitalist resources and expertise, to identify and develop promising early stage technologies. Recent examples of this trend include collaborations between Merck and Flagship Ventures (2012), Johnson& Johnson, GlaxoSmithKline and Index Ventures (2012), and Shire Pharmaceuticals and Atlas Ventures (2011).
  • And in some cases, large corporations are providing funding and resources directly to early stage companies, such as Johnson& Johnson’s recent announcement that it would establish “innovation centers”in San Francisco and three other cities.
The increased involvement of large life science companies in supporting early-stage innovation in the sector is a welcome development. However, even with more involvement from large life science companies, the overall shortage of funding for life science startups is likely to continue for some time, and therefore capital efficient development strategies and creative business and financing models will continue to be of paramount importance.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Fenwick & West Life Sciences Group | Attorney Advertising

Written by:

Fenwick & West Life Sciences Group

Fenwick & West Life Sciences Group on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.