While Biotech VC Funding Slips in Q3, Medical Devices Funding Shows Uptick

Posted in Medical Venture Capital by Arundhati Parmar on December 2, 2013

PricewaterhouseCooper's MoneyTree Report shows that in the third quarter, biotech VC funding took a nosedive from the quarter before, but medical devices funding actually picked up.   


A new venture capital report shows that in the third quarter biotech VC funding took a nosedive from the quarter before, but medical devices funding actually picked up.

The MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association using data from Thomson Reuters shows that venture capital investment in biotech companies fell 39% from the previous quarter to $852 million, but the no. of deals increased 10% to 123. By contrast, medical device funding increased 12% to $566 million from the second quarter although the number of deals fell 8% to 65.

““The medical device segment saw strong funding levels in the quarter. The growth in the largest segment, medical
therapeutics, is particularly impressive, as early-stage funding in the subsegment grew by 83% over last year,” partner, Venture Capital and Life Sciences Industries, at PricewaterhouseCoopers

In a 12-month period, the overall life science sector showed weakness compared to other industries in terms of the amount of venture dollars it attracted in the third quarter. While the overall venture capital investment in all industries climbed 17% to $7.8 billion in the third quarter and 7% in the number of deals to 1,005, life sciences companies endured a 15% decline to $1.4 billion in VC investment year-over-year where number of deals fell 2% to 188.

It appears that VC firms were really reluctant to invest in the sector in the third quarter. The life sciences share of total venture funding pie fell significantly, to 18% in the third quarter, whereas it accounted for 27% in the previous quarter.

Here are some more salient points from the Q3 report:

  • Year over year, VC investment in
    - Medical therapeutics increased 39% to $380 million
    - Medical diagnostics increased 6% to $84 million
    - Medical/health products increased 4% to $102 million
  • Year over year, investments in early-stage companies increased 30% to $201 million.
  • Year over year late-stage funding also rose 23%, to $365 million
  • First-time deals in the life sciences sector averaged $3.2 million while follow-on funding averaged $9 million.

The report concludes by implying that life science companies will have to compete very hard with each other in order to win VC investment in the near future. This is all the more difficult as VCs are moving money away from the sector to areas like software. One data point bears out this fact - in 2009, 32% of overall VC investment went into life science companies. By the third quarter of this year, that figure had fallen to 23%.

[Photo Credit: user SaulHerrera]

-- By Arundhati Parmar, Senior Editor, MD+DI


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