Venture Funding Focusing on Improving Existing Drugs

Despite gain in recent years, venture funding for pharmaceutical innovation still lags behind prerecession levels, according to a new BIO report that also tracked a move away from developing novel therapies in favor of improving on existing ones.

Total venture equity funding for research-based companies was $3.6 billion in 2013, up sharply from a 10-year low of $2.8 billion in 2010, but well below the period high of $5 billion in 2007, BIO reports.

Most of that funding (78 percent) went toward the development of new therapies. Oncology drugs, by far the biggest chunk of the pie at 24 percent of all funding for the last decade, saw nearly 85 percent of that money go to novel treatments.

But the report also notes a shift toward funding research into new uses or improved formulations of approved drugs rather than developing brand new therapies. Of the 14 disease categories studies, new drug R&D declined in nine. Diabetes, psychiatry, gastrointestinal, respiratory and cardiovascular disease all saw sharp drops in the amount of venture funding directed at original drugs.

For example, three times as much venture funding went to bettering available pain medications than went into funding development of novel therapies for Alzheimer’s disease. Within pain drugs, just one-third of venture funding since 2004 has gone toward brand new treatments; the majority has focused on already-approved drugs, the report says.

The report attributes the shift to a variety of factors, including perception of unmet need and obstacles to innovation. Venture capitalists tend to pull back from areas that have unfavorable or unpredictable regulatory and reimbursement hurdles, it says.

Shifts also occurred between small molecule drugs and biologics. Venture funding for biologic therapies, including vaccines, accounted for 50 percent of total venture capital in 2013, up from 27 percent in 2004, the report shows, with most of that increase coming in the last three years.

BIO President and CEO Jim Greenwood attributes the gain in part to the 12 years of patent exclusivity promised biologics under the 2010 Affordable Care Act and the still being development biosimilars approval pathway.

More than half of all venture funding went toward early-stage drug development — one third (34 percent) to preclinical development alone and 20 percent to companies in phase I trials.

BIO released the report last week to coincide with its investor conference in New York City. Read it at www.fdanews.com/02-09-15-DrugVentureFunding.pdf. — Bryan Koenig