Medtech Funding Still in the Doldrums in Minnesota

The situation in one of the United States' great medtech hubs signals just how hard it has been for medical device venture capital funding to return to pre-Great Recession levels.

Nancy Crotti

First-quarter 2015 medical device funding fell sharply in Minnesota compared to last quarter and to the same period last year, when it reached a record high, according to a report by the trade group LifeScience Alley.

Minnesota's medtech companies raised $35.6 million during the first quarter of 2015, a deep dive from the fourth-quarter 2014 total of $97.3 million. This year's first-quarter results also represented a slide from the nearly $49.7 million in invested in the same quarter of 2014, as well as the $49.3 million raised in the first quarter of 2013, the trade group said.

Although the group maintained that the first quarter 2014 number was an anomaly, the first quarter 2015 figure may still signal that medtech has yet to truly recover from its post-Great Recession venture capital slump.

Nationally, fourth quarter 2014 medical device and equipment investments nearly hit $748 billion, according to the MoneyTree report that Thomson Reuters compiles for PricewaterhouseCoopers and the National Venture Capital Association. National medical device funding for Q3 2014 reached $586 million, a 13% percent increase compared with the same quarter of 2013, MoneyTree reported. It has not released its first quarter 2015 figures yet.

Despite their poor showing in last quarter, Minnesota's med tech companies attracted millions more in investment dollars than the state's other life science companies in Q1 2015, LifeScience Alley said. Thirteen med tech companies raised 87% of the quarter's total $41 million in life science investments. Two of those companies led the way. Osprey Medical Inc. (Minnetonka, MN) drew $13 million, and Sunshine Heart Inc. (Eden Prairie, MN) garnered $10.3 million, the report said.

Osprey raised the $13 million in private funding in March in anticipation of next year's launch of AVERT, a device designed to prevent kidney damage from injected dye during heart procedures, according to a report in the Minneapolis-St. Paul Business Journal.

Sunshine Heart went to Silicon Valley to borrow the money. Its flagship product, C-Pulse, is a heart-failure prevention device that has not been approved by the FDA.

The total Minnesota life science investment for Q1 2015 was down sharply from the $75.4 million raised in the same quarter of 2014, but comparable to the first quarter of 2012.

The first-quarter 2014 investment total was an anomaly, according to Cheryl Matter, PhD, vice president of intelligence and research for LifeScience Alley. Third quarters traditionally yield the highest investment numbers in the life sciences in Minnesota, she said.

Quarterly medical device venture capital funding has been between $500 million and $750 million nationwide since 2011, and has never returned to the more than $1 billion amounts seen before the Great Recession, according to a 2014 MoneyTree report. 

Nancy Crotti is a contributor to Qmed and MPMN.

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