U.S. venture capitalists are decreasing investments in biopharmaceutical and medical device companies, reducing their concentration in prevalent disease areas, and shifting investment away from the United States toward Europe and Asia.
The report released by the National Venture Capital Association shows that more than 150 venture capital firms identified regulatory challenges from the Food and Drug Administration as the main factor driving money away from startup companies. Other factors included reimbursement concerns and an adverse financial environment.
Dr. Beth Seidenberg, partner at Kleiner Perkins Caufield and Byers called the report troubling, and a strong indication that America’s medical innovation economy is in grave danger of losing its primary source of funding.
“For decades, the U.S. has been the leader in delivering medical innovations to our citizens due to the thousands of startup health care companies that have been brought to life with venture capital funding,” said Seidenberg. “Millions of high-quality jobs have been created, and iconic companies such as Genentech, Amgen … and Lifescan have been built.”
But that leadership is now in jeopardy, she said.
“This trend is one that the venture industry, and we believe the FDA, wants to desperately reverse,” she said.
Colorado Sen. Michael Bennet has long championed changes to the Food and Drug Administration. He said there is now bipartisan concern for the regulatory environment at the FDA.
“As a driver of our global economy, the FDA should constantly examine its regulatory framework with a 21st century lens,” said Bennet. “This is an urgent issue both for giving our patients the greatest access to lifesaving therapies and for our national economic competitiveness.”
The survey found that U.S. venture capital firms have been decreasing their investments into new biopharmaceutical and medical device companies for the past three years, and further expect to curtail investment in the future. Overall, 39 percent decreased their investment and the same percentage plans further withdrawal from the market.
However, 54 percent expect to increase investment in non-FDA regulated health care services and health care information technology companies.
The companies also plan to see significant investment decreases in companies fighting highly prevalent conditions – cardiovascular disease, diabetes, obesity, cancer and neurological diseases.
“More than 100 million Americans suffer from diseases for which there are still no cures, or even meaningful therapeutic options,” said Margaret Anderson, executive director of FasterCures. “To conquer diseases, we must have a medical innovation pipeline that is as strong and robust as possible.”
The move away from pharmaceutical industries and biomedical companies is especially troubling to plans in Colorado Springs. Health care and sports medicine research was one of several industries that the 60ThirtyFive economic development plan created by Angelou Economics suggested that the city focus on in order to diversity the local economy. The Springs has always had trouble attracting venture capital – even for its high-tech start-ups. News that venture capitalists are pulling away from research companies could further hinder those plans.