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The third quarter of this year saw the lowest number of venture capital deals in the sector in more than two years.
The third quarter of this year saw the lowest number of venture capital (VC) deals in the life sciences sector in more than two years, according to a new report from PricewaterhouseCoopers and the National Venture Capital Association.
Though funding for life science companies, including biotech and medical device firms, increased more than 20% over the same period in 2010, the $1.8 billion pumped into the sector during Q3 2011 was 18% less than the Q2 total. The number of deals fell from 214 in Q2 to 170 in Q3, according to the report.
The drop comes after two consecutive quarters of growth in life science VC funding. Despite the decrease, funding for the year is still likely to increase over 2010, the report predicted. Overall, venture capital funding in all sectors increased by nearly a third in terms of dollars and by 3% in terms of deals in Q3.
In the medical device category, both the medical/health products and medical diagnostics subsegments saw steep dollar-amount declines of 51% and 38% respectively over Q3 2010. Funding for medical therapeutics, which accounted for the lion's share of dollars invested in the medical devices subcategories, grew by more than half year over year, according to the report.
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The FDA and VC funding
I recently asked industry veteran Thomas Fogarty, MD about the sorry state of VC funding. Fogarty is also a venture capitalist as well as an inventor, so he is uniquely qualified to speak on the topic. Anyway, he basically said that, in his view, the FDA was to blame for the problem. "The FDA has been a large obstruction in getting technology into the marketplace. Their interpretations of risk are usually inappropriate," he said. He went on to say that the agency doesn't have the background to determine potential risk-benefit guidelines. Fogarty also predicted that in the next three to five years that there won't be as many new products introduced because of the problems with VC funding and the FDA.