Competing in biotech's Premier League requires deep pockets, long term planning and the risk appetite to pursue novel technologies or targets that don't always pan out. BioCentury's 12th annual European Iceberg survey reveals that for the first time, the difference between the U.S. and Europe's privately held Premier League clubs has all but disappeared.
Not only did private European biotechs raise more money in 2013 than ever before, the average raised by companies in the top 10% matched the average raised by top decile players in the U.S.
What has qualified these star players to raise a larger share of funds is a combination of highly differentiated - and higher-risk - technologies and assets, and experienced managers with a track record of success.
About half the top raisers in Europe are platform companies that offer unique capabilities, and the rest have first-in-class or best-in-class assets. The majority are helmed by repeat entrepreneurs who are star players.
For both private and public companies, accessing U.S. investors will likely be necessary to play in the Premier League, and to avoid relegation. Indeed, almost all of Europe's top decile private companies tapped at least one U.S. investor. On the public side, the companies raising the largest rounds have courted U.S. investors, either on NASDAQ or on their home exchanges.
U.S. investors especially will be key for the expanding glut of Phase II companies in Europe - whose aggregate average annual demand for funding is close to the total actually raised by all private European biotechs in each year from 2008-12.
For Phase II players that show Premier League attributes, it is finally possible the public markets could meet some of the demand.
Piper Jaffrey banker Neil Mackison expects more European IPOs are coming as long as the markets remain receptive, and potentially for companies as early as Phase II. "The general trend is towards companies with at least Phase II programs and strong data, proof of concept ideally," he told BioCentury.
Other investors point out that even a complete turnaround in the European IPO markets could do little more than dent the enormous demand.
Whoever turns out to be right, it is abundantly clear that European companies that woo U.S. investors have far greater access to capital.
Should the markets hold, bankers and VCs who spoke to BioCentury expect more European companies to pursue IPOs on NASDAQ. In addition, some companies that went public on European exchanges may consider a move to the U.S.
Companies that have reached across the Atlantic to new investors say the increased travel and additional financial reporting burdens are worth it in exchange for better liquidity and access to a deeper capital pool with more sophisticated investors.
For as long as BioCentury has been comparing U.S. and European financing data, it's been a tale of two markets. Europe still lags the U.S. in both the absolute number of offerings and the absolute amount of money collected.
But for the first time, the 2014 Iceberg survey show the regions converging in both the proportion of companies participating in the industry's latest refinancing over the past two years, and the amounts being raised by the top performers.
Since the beginning of 2012, 349 U.S. public companies have completed 701 equity financings worth $28.2 billion. In Europe, 127 biotechs raised $5.3 billion in 234 equity rounds. For each region, roughly half the public biotechs tracked by BioCentury raised money.
Excluding debt, the money raised last year by public European companies was $1.8 billion, 60% over 2012, while the U.S. total was $11.6 billion, a 41% increase over the prior year.
The average amount collected also increased vs. 2012, up 33%