VC in biotechnology drops in second quarter

Venture capital funding in biotechnology and medical device industries decreased 39 percent during the second quarter of 2012, according to a PricewaterhouseCoopers report, “Dollar Drought.”

The VC investment equaled $1.4 billion, the lowest level since the fourth quarter of 2010. Deal volume was also down, dropping 6 percent from earlier this year to 174 deals. When compared to a year ago, the number of deals declined 22 percent – 233 deals were created in the second quarter of 2011.

 

For all sectors, venture capitalists invested $7 billion in 898 deals in the second quarter, a decrease of 12 percent in dollars invested and a 15 percent decline in deals, compared to $8 billion going into 1,057 deals in the second quarter of 2011. The Life Sciences share of total venture capital dollars invested declined to 20 percent in the second quarter, a 9 percent decrease from the first quarter to the lowest level since the third quarter of 2002.

“The long time horizon often required for a liquidity event, regulatory challenges and large amount of capital often needed to fund life science companies likely contributed to this sector’s investment decline during the past four quarters,” said Tracy T. Lefteroff, global managing partner of the venture capital practice at PwC US.

 

During the second quarter, biotechnology and medical devices each accounted for 10 percent of total funding. In comparison, during the first quarter of 2012, biotech captured 14 percent of investment in the sector and medical devices accounted for 12 percent of the total.

“It may continue to be challenging for life sciences companies to raise funds until the regulatory environment becomes transparent for biotech and medtech companies trying to move new products into the market,” said Lefteroff. “However, if merger and acquisition activity picks up during the second half of this year, investors could see a clearer path to returns, which potentially could attract more money to be invested in this sector.”