Life Sciences Venture Capital Investments Hit Record Levels in 2007

In 2007, the medical device and biotechnology industries attracted $9.1 billion in venture capital investment across 862 deals. According to the PricewaterhouseCoopers–National Venture Capital Association MoneyTree Report, based on data from Thomson Financial, these figures represent an all-time record for annual venture capital investment in the combined life sciences, as well as a notable increase over 2006 investments of $7.6 billion across 786 deals.¹

Although medical devices and biotechnology both experienced double-digit gains over the prior year, the most significant growth was seen in the medical device industry. In 2007, venture capital investments in medical device companies rose 40% over 2006 figures.

“In 2007, the number of deals for medical devices in total dollars was at an all-time high and reached 57% above the bubble peak of 2000,” says Kelly Slone, director of the National Venture Capital Association Medical Industry Group ( Arlington, VA). During 2007, says Slone, medical device companies were involved in 385 deals with an investment total of $3.9 billion.

For the year, life sciences firms—medical device and biotechnology companies combined—accounted for 31% of all venture capital invested, also an all-time high.

Across all industries, venture capitalists invested $29.4 billion in 3813 deals in 2007, marking the highest annual investment total since 2001. The 2007 total represents a 10.8% increase in dollars and a 5% increase in deal volume over 2006 figures.

“The annual increase in venture capital investment in 2007 was extremely rational, as the industry is now investing in a mix of sectors that is much more capital intensive than it has been in the past,” said Mark Heesen, president of the National Venture Capital Association. “And despite the capital needs of industries such as clean technology and life sciences, we only saw a single-digit increase in deal volume, which suggests that a fair amount of discipline is being applied to investment decisions.”

Across all industries, first-time financings reached their highest levels since 2001, with 1267 companies receiving $7.2 billion in venture capital in 2007. Industries receiving the most dollars in first-time financings in 2007 were software (with 250 deals valued at $1.14 billion), industrial-energy (with 141 deals for $1.08 billion), and biotechnology (with 134 deals for $982 million).

In 2007, 114 medical device companies received first-time financing, representing a slight decrease compared with the 118 medtech companies receiving first-time financing in 2006. However, the aggregate amount invested in first-time medtech financings in 2007 was $838 million, a 43% increase over the $587 million invested in first-time medtech financings in 2006.

Not surprisingly, a similar trend was seen in the number and size of investments being made in seed and start-up medical device companies. In 2007, $223 million was invested across 46 seed and start-up medical device financings. In 2006, $164 million was invested across 44 deals. So although the number of such deals grew by less than 5%, the total invested in seed and start-up medical device endeavors grew by nearly 36%.

Reference

1. "The PricewaterhouseCoopers–National Venture Capital Association MoneyTree Report" (New York City: PricewaterhouseCoopers, 2008); available from Internet: www.pwcmoneytree.com/MTPublic/ns/moneytree/filesource/exhibits/National_MoneyTree_full_year_Q4_2007_Final.pdf.

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