VC firms address unmet need for treatment of central nervous system disorders

Biotechnology start-ups have raised $7.5bn already in 2023, with aims of developing novel drugs for treating degenerative neurological diseases 

In March 2023, Switzerland-based clinical-stage biotech company Noema Pharma raised CHF 103mn ($112mn) in a series B funding round co-led by venture capital (VC) firm Forbion and investment company Jeito Capital, just two years after its CHF 54mn series A. UPMC Enterprises, Gilde Healthcare, Invus, Polaris Partners, and Sofinnova Partners have also invested in the new, and in fact oversubscribed, round. 

Noema Pharma develops novel treatments of central nervous system (CNS) disorders. It plans to use the proceeds of last month’s funding to advance its mGluR5 inhibitor which is being evaluated in Phase 2b clinical trials for treating seizures in tuberous sclerosis complex and severe pain in trigeminal neuralgia. 

Start-ups with innovative platform technologies aim to follow in Noema Pharma’s footsteps and transform the industry by addressing the challenges in existing CNS therapies and helping those suffering from debilitating diseases.

The CNS market in context 

Aging populations, growing life expectancies, and increasing diagnoses of Alzheimer’s, dementia, Parkinson’s, CNS cancer, strokes, epilepsy, multiple sclerosis, and depression are driving the expansion of the CNS therapeutics market. Precedence Research forecasts the market will grow to $209.2bn by 2030 at a CAGR (compound annual growth rate) of 6.3%. 

The World Health Organization (WHO) estimates that the number of people living with dementia will rise from 55 million in 2021 to 136 million by 2050. In 2019, the global care cost of the syndrome was estimated to be $1.3tn, a figure the WHO predicts will rise to $1.7tn by 2030. The WHO also reports that 50 million people worldwide have epilepsy, making it one of the most common neurological diseases. Additionally, the pandemic served as a catalyst for raising public awareness about mental health issues and treatments. The affordability of generic neurologic drugs in developed countries is propelling the growth of the CNS market further, providing ample opportunity for investment.

Preqin’s Company Intelligence dataset shows that biotechnology start-ups have raised $7.5bn so far this year, following $47.8bn in 2022. US companies raised $4.2bn, the most funding among all countries, followed by Greater China with $1.8bn.

Here are the top 3 most active VC firms in biotech and life sciences start-ups:

1. US-based OrbiMed Advisors, which has $18bn in AUM (assets under management), led deal-making with 206 deals over the past five years. The healthcare-focused fund manager has invested in 52 series A rounds and 64 series B rounds, but is the most active series C stage investor, with 35 transactions under its belt.
2. SOSV, whose core mission is funding start-ups committed to helping human and planetary health, ranks second with 187 deals over the same five-year period. Located in the US, the VC firm has $1.5bn in AUM and is the most active seed investor, with 140 rounds.
3. Alexandria Venture Investments, also headquartered in the US, follows closely with 180 deals. The $6.5bn-AUM VC firm is the most active series A investor, with 73 rounds.

Despite low-success-rate clinical trials, with likelihood of approval (LoA) from Phase 1 around 10%, and the high cost of research, VC firms will likely continue to deploy capital in biotech start-ups that are developing ground-breaking drugs for treating debilitating CNS diseases. Biotech start-ups can be a risky endeavour for investors, but the successful ones can deliver high returns, while adding drugs to large pharmaceutical companies’ pipeline through acquisition. In July 2021, American pharmaceutical company Eli Lily and Company acquired biotech firm Protomer Technologies for $1bn, including future development and commercial milestone payments. Similarly, in March 2022, AbbVie, also based in the US, paid Syndesi Therapeutics up to $1bn, with $130mn upfront and $870mn in milestone payments. 

The continuous research and investment in biotechnology could expand the existing portfolios of established CNS therapeutics, working in combination with already-established medication treating other serious medical issues, including cancer. 

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