New England was a standout in an otherwise lackluster fourth quarter for venture capital investing nationwide, as the Boston metro area saw a surge in the number of deals and in dollars invested.

The healthcare industry, particularly biotech, continued to be the region’s major draw for venture investors.

The Boston area reported 90 financing deals last quarter, up from 81 in the third quarter and 75 in the fourth quarter of 2012.

The region garnered total financing of $1.13 billion in the quarter, up from $700 million in the third quarter and $657 million a year earlier.

By contrast, the San Francisco/SiliconValley region, always the top draw in venture funding, posted a year-over-year drop in both the number of companies financed and total dollars invested in the final quarter.

For the full year, Boston saw 325 companies receive funding, up 4% from 312 in 2012. Total investments were down 5%, to $3.57 billion in 2013. But a single energy-industry deal had inflated the 2012 total by $420 million. Excluding that, the 2013 funding total was up 7%.

Biotech, a mainstay of the region’s economy, saw its deal numbers leap: 19 Boston-area biotech firms got venture funding last quarter, up from 14 in the third quarter and 10 in the final quarter of 2012.

Total venture dollars pumped into the region’s biotech sector rose to $548 million in the quarter, up 165% from $206.8 million in the third quarter and up 254% from a year earlier.

New England healthcare firms overall received $1.56 billion in venture financing last year, accounting for 46% of the region’s total venture dollars. By contrast, healthcare accounted for 26% of venture investments nationwide.

"The biotech sector is hot, and it feels like people are still pretty bullish," said Bill Sweeney, regional director at City National’s Technology Group in Boston.

Leading the fourth-quarter capital flows to biotech were two separate fundings for Cambridge-based Moderna Therapeutics, a 3-year-old pioneer in so-called messenger RNA therapeutics. The technology aims to produce human proteins or antibodies inside patient cells -- essentially turning the body into a drug factory to target specific diseases.

Moderna received $110 million in third-round financing from a group led by Flagship Ventures. That was followed by $125 million in capital from Alexion Pharmaceuticals. Most of the Alexion investment secures options to develop drugs on Moderna’s platform.

Another big biotech deal brought $45 million in eighth-round financing to Zafgen Inc., another Cambridge firm. The company, founded in 2005, is developing new therapies for treating obesity. Zafgen’s venture investors in the latest round were led by RA Capital Management, Brookside Capital, Venrock, and Alta Partners.

Besides the large cash inflows to New England biotech firms last year, VC firms based in the region raised about $5 billion in fresh capital from investors in 2013, Sweeney said.

"That’s a very good sign for the Massachusetts market," he said.

EQUITY FINANCINGS FOR BOSTON AREA VENTURE-BACKED COMPANIES*

  4 Q 2013 3 Q 2013 2 Q 2013 1 Q 2012 4 Q 2012
Number of Financing Deals 90 81 80 74 75
Amount Invested ($M) $1,130.2 $700.1 $827.7 $718.3 $657.1
 

TOP 10 DEALS IN BOSTON

COMPANY NAME DESCRIPTION CITY ROUND TYPE RAISED ($MM) INVESTORS
Moderna LLC Messenger RNA therapeutics Cambridge Corporate $125 Alexion Pharmaceuticals
Moderna LLC Messenger RNA therapeutics Cambridge Third Round $110 Flagship Ventures, individual investors, undisclosed venture investor(s)
Ogin Inc. Wind turbines Waltham Early Stage $55 New Zealand Superannuation FUND
Zafgen Inc Obesity-treatment therapeutics Cambridge Eighth Round $45 Alta Partners, Brookside Capital LLC, individual investors, RA Capital Management LLC, Venrock
uTest Inc. Software-as-a-service marketplace Framingham Fifth Round $43 Egan-Managed Capital, Goldman Sachs Ventures, Longworth Venture Partners, Mass Ventures, Mesco Ltd., Questmark Partners, Scale Venture Partners
Editas Medicine Therapeutics based on human genome editing technologies Cambridge First Round $43 Flagship Ventures, Partners Innovation Fund, Polaris Partners, Third Rock Ventures LLC
Catabasis Pharmaceuticals Inc. Medicines to treat inflammatory and metabolic diseases Cambridge Third Round $32.4 Advanced Technology Ventures, Clarus Ventures LLC, Lightstone Ventures, Medimmune Ventures, SV Life Sciences Advisers LLC
Sideris Pharmaceuticals Inc. Drugs to treat transfusion-related iron overload Boston First Round $32 Hatteras Venture Partners, MPM Capital, Osage Partners
Aileron Therapeutics Inc. Peptides for treatment of cancer and other diseases Cambridge Sixth Round $30 Apple Tree Partners, Excel Venture Management LLC, Lilly Ventures, Novartis Venture Fund, Roche Venture Fund, SR One Ltd.
Reflexis Systems Inc. Web-based workforce-management solutions Dedham Later-stage $28.4 Sageview Capital LP
 

 

*Equity financings include cash investments by professional venture capital firms, corporations, other private equity firms, and individuals into companies that have received at least one round of venture funding.

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