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Fenwick: Valuations Trended Modestly Upward in 2012
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Valuations for life science companies receiving venture capital financing during 2012 continued to trend modestly upward from 2011 levels, according to a recent report from BayBio partner Fenwick & West LLP.

Direction of Price Change, 2010-2012
Up rounds have increased over the last three years, while down rounds have decreased over the same time period.

However, total investment into venture-backed life science companies declined during 2012, and Fenwick’s analysis of fundraising trends indicates that fundraising by life science venture capitalists has continued to decline as well.

Key observations and highlights from Fenwick’s survey include the following:

  • Up rounds outpaced down rounds 52 percent to 17 percent during 2012. This represents an improvement over results from 2011, which averaged 47 percent up rounds and 25 percent down rounds.
  • The average round-to-round price increase for 2012, as measured by the Fenwick & West Life Science Venture Capital Barometer™, increased to 23 percent. For comparison, Barometer results for 2011 were 14 percent.
  • Within life science industry sub-sectors, Barometer results for biopharmaceutical companies remained in line with 2011, averaging 16 percent for both 2011 and 2012. In contrast, Barometer results for medical device companies moved up from an average of 12 percent during 2011 to an average of 30 percent during 2012.
  • Fundraising by life science venture capitalists, which fell off markedly following the 2008 recession, has continued to decline during 2012. We estimate that the percentage of VC fundraising allocable to life sciences has declined from 19 percent of funds raised in 2009 to 12.5 percent of funds raised in 2012. In absolute dollar terms, we estimate that fundraising has fallen from an average of $7.8 billion/year in 2007 and 2008 to $2.5 billion in 2012.
  • Senior and participating liquidation preferences remained a common feature of 2012 life science venture financings, appearing in 51 percent (for senior preferences) and 66 percent (for participating preferences) of the financings we reviewed, which is in line with results observed during 2011.

    Trend (Four Quarter Moving Average)  of Barometer Results, 2010-2012
    Barometer results for biopharmaceutical companies remained in line with 2011, averaging 16% for both 2011 and 2012.

The entire report is available for download here.