Biotech companies raised $5.15 billion in the first quarter of 2012, about 15 percent less than the $6.07 billion raised in the first quarter last year. Public companies felt the pinch slightly more than private companies: The total amount raised by the former dropped about 16 percent compared to the same period last year, while the total amount raised by the latter dropped about 8 percent.

It's worth noting that biotech fundraising last year not only started strong, it finished strong with $7.27 billion raised in the fourth quarter. That in itself explains why the numbers dipped in the first quarter of 2012, according to Annette Grimaldi, managing director at BMO Capital Markets.

"I think there's a fairly regular pattern of financing for most development stage companies," Grimaldi explained. "The end of 2011 was quite a vigorous period and a lot of companies were able to eliminate the financing overhang in their stock." Thus as 2012 dawned, many biotechs were able to get back to business, focusing on spending money rather than raising it.

IPOs Boost Public Stats

That trend was perhaps most evident in biotech public offerings, which hit $3.2 billion in the first quarter of 2011 and a whopping $5 billion in the fourth quarter, but then fell to $2.5 billion in the first quarter of 2012.

Although many large public biotechs had already raised money in 2011, a handful closed large financings this year. The largest was Medivation Inc.'s $225 million public offering of convertible notes, followed closely by public stock offerings from Amylin Pharmaceuticals Inc. totaling $208 million and Vivus Inc. totaling $202.5 million. All three firms – along with many fundraisers both this year and last year – were beefing up the balance sheet for commercial activities.

While only five public offerings topped $100 million in 2012, the median for the 39 biotech deals was healthy at just over $50 million.

Grimaldi noted that 2012 has thus far supported several biotech initial public offerings (IPO), which she said points to a "receptiveness on the part of the buyers."

BioWorld Snapshots shows that four biotechs priced IPOs in the first quarter of this year, compared to six in the first quarter of last year. But only one of last year's crop – Endocyte Inc. – could be labeled true biotech; the rest were specialty pharmas AcelRx Pharmaceuticals Inc., RedHill Biopharma Ltd. (TASE) and Pacira Pharmaceuticals Inc., diagnostics firm BG Medicine Inc. and tools company Fluidigm Corp.

This year, however, all four debuts – Verastem Inc., ChemoCentryx Inc., Cempra Inc. and Merrimack Pharmaceuticals Inc. – are biotechs. And Verastem is preclinical, making its IPO all the more surprising and encouraging. But perhaps more importantly, all except Merrimack had risen above their IPO price as of the end of the first quarter.

Grimaldi said she expects to see an "increasing number" of biotechs go public in 2012.

In addition to the $2.5 billion from IPOs and follow-ons, public biotechs raised $1.88 billion through private placements, registered direct offerings, royalty monetization, at-the-market deals, loans and other such financing alternatives in the first quarter of 2012. That's down from $2.07 billion raised through such alternatives in the same period last year.

Grimaldi attributed the decrease to the robustness of the follow-on markets: If biotechs could get good terms on a follow-on, they had less incentive to pursue a PIPE or registered direct. Indeed, some biotechs, like Ironwood Pharmaceuticals Inc. and Vivus Inc., were able to complete large follow-ons with no discount or warrants.

The decrease in alternatives also is partly due to the rise of confidentially marketed or wall-cross public offerings, which BioWorld Insight lumps in with follow-ons and which have almost completely replaced registered directs.

Yet there were still some very large private placements of debt in the first quarter of 2012, with Salix Pharmaceuticals Ltd. raising $690 million and Amarin Corp. plc raising $150 million. Elan Corp. plc raised $381 million by selling off much of its holdings in Alkermes plc. But beyond a handful of such large deals, the vast majority of the alternative fundraisings by public companies were small, with a median of just $5 million.

Venturing Forward

Private biotechs raised $774.6 million in the first quarter of 2012, down about 8 percent from the $845.3 million raised in the same period last year. Those figures include all fundraising by private firms – not limited to venture capital – both in the U.S. and abroad.

Indeed, two of the four largest private biotech fundraisings in the first quarter did not fit into the U.S.-based, V.C.-backed basket. Switzerland-based ADC Therapeutics Sarl raised $50 million for antibody-drug conjugates from Celtic Therapeutics Management LLLP, Cancer Research Technology Ltd. and others, while Rockville, Md.-based Supernus Pharmaceuticals Inc. raised $42 million through a combination of royalty monetization and venture debt.

Rounding out the top four private financings of the first quarter were Celladon Corp. with a $43 million venture round and Aragon Pharmaceuticals Inc. with a $42 million venture round. The median was about $11 million.

Narrowing the view to U.S.-based, V.C.-backed financings, BioWorld columnist Cynthia Robbins-Roth found that such rounds generated $391 million in the first quarter, a 34 percent increase compared to the same period last year. Robbins-Roth found the biggest jump amongst Seed and Series A rounds, which brought in 63 percent more money in Q1 2012 versus Q1 2011. (See BioWorld Today, April 4, 2012.)

Even so, David Titus, president of the San Diego Venture Group and managing director of Windward Ventures, said he's concerned that the venture industry has been "deficit spending" – i.e. spending more money than it raises – for the past 2.5 years.

That might be less of a concern in life sciences these days, as venture firms increasingly rely on nonventure partners for additional resources. A new analysis from Burrill and Co. found nine initiatives with an expected $2.6 billion funding for translational research announced since the end of February, including the $760 million tie-up between Domain Associates and Rusnano, the Russian government's state-owned venture capital firm.

Alex De Winter, partner with Mohr Davidow Ventures, said such creative funding is a good effort to "keep innovation alive," yet he noted he doesn't pay much attention to trends in the venture industry, on the whole. Like many biotechs who've finished their fundraising, at least for the moment, he's busy focusing on the business.