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New research predicts biotech will continue increasing its share of venture investment

Biotechnology will continue increasing its share of venture investment and firmly establish itself as one of the most vibrant sectors in the industry over the next two to three years, according to new research published today by AltAssets.

Delivering on Discovery - Private Equity Investing in Biotechnology says that strong medium-term prospects for the biotech industry are underpinning unprecedented private equity and venture capital interest in the sector and promise to attract more institutional investment.

Although the dire state of public markets presents a significant problem for all investors at the moment, the long-term drivers of the biotech industry are fundamentally sound and guarantee strong demand for investment in the sector.

‘Biotech has traditionally been an important niche sector for private equity investment but the industry's increasingly bright commercial prospects are pushing it firmly into the venture capital mainstream,' said Chris Davison, head of research at AltAssets.

‘The current dismal state of public markets, however, stands as stark warning of how important it is for private equity investors to have genuine scientific expertise coupled with proven venture experience,' he added.

The research also dismissed claims that some sort of venture bubble was inflating in the biotech sector. It said the industry would continue to provide a wealth of attractive investment opportunities and had been historically under-funded.

The number of private equity firms with a significant focus on the biotech sector has grown significantly in recent years - a combination of established firms returning to the sector after years of concentrating on TMT and a recognition of the opportunities being created by scientific progress, the report said.

There are now more than 250 venture firms and private equity firms that allocate at least 25 per cent of their capital to biotech and the figure is expected to grow to around 350 over the next two years, it said. There will be some retreat, mainly from the less specialised firms, but the high barriers to entry mean that only a small number of genuinely non-viable firms will raise capital in the first place.

The report, which includes a directory of more than 600 venture investors in biotech, also found strong interest among institutional investors in the sector and a growing appetite for significant exposure within a diversified venture portfolio.

The report is available to order online. For further information, please click here

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