April 2009 | Issue 38
A survey of 2008 San Francisco Bay Area life science venture capital financings reveals that 22% of such financings were down rounds, as compared to 12 % in 2007. A down round is defined as a transaction in which the price is lower than that of the previous round of financing. The survey covered 81 biopharm and medical device company financings, and was carried out by Fenwick & West LLP, a global law firm specializing in services to high technology and life science clients.
Overall, of the 81 transactions from 2008 that were covered, 59% were up rounds, 22% were down rounds, and 19% were flat. The corresponding results from 2007 were 79% up, 12% down, and 9% flat.
The down round trend seemed to accelerate as 2008 wore on, with down rounds exceeding up rounds 39% to 30% in the fourth quarter of 2008.
The magnitude of price changes in 2008 life science financings also underwent a downward shift as compared to 2007. The average overall price increase in 2008 up rounds was 54%, as compared to 63% for 2007. The down rounds were also deeper, averaging 48% below the previous financing in 2008, as compared to 37% in 2007. Overall, the average 2008 price increase was 27%. This compares to 45% in 2007.
A copy of this report is available here.