Venture Capital Dollars Invested in Biotechnology and Medical Device Companies
Falls 14% as Investors Turn to Less Capital-Intensive Industries
NEW YORK, May 15, 2013 – Venture capital (VC) funding in the Life Sciences sector, which includes the Biotechnology and Medical Device industries, dropped in volume and value during the first quarter of 2013 according to a new PwC US report, "Capital Crunch," that includes data from the PricewaterhouseCoopers LLP/National Venture Capital Association MoneyTree™ Report, based on data from Thomson Reuters.
Venture capitalists invested $1.4 billion in 167 Life Sciences deals during the first quarter of 2013. When compared with the same quarter of last year, that performance represented a drop of 14 percent in dollars and 16 percent in the number of deals. Quarter-over-quarter life sciences funding suffered a greater drop of 28 percent in dollars and 23 percent in deals. The first quarter of 2013 marks the lowest number of Life Sciences deals since the first quarter of 2009.
“As the number of venture capital funds continued to shrink, less capital-intensive industries — notably, software — attracted a greater share of the limited dollars available,” said Tracy T. Lefteroff, global managing partner of the venture capital practice at PwC US. “The high level of funding needed, comparatively long time to market, and regulatory uncertainty can hinder the ability of life sciences companies to attract venture capital, especially during times of limited fundraising. Capital-efficient companies that have shorter time frames to a liquidity event — whether that is M&A or IPO — are often more successful in these times in attracting the attention of investors.”
For all sectors, venture capitalists invested $5.9 billion in 863 deals in Q1 2013, a decrease of 12 percent in dollars invested and a 15 percent decline in deals from the previous quarter. The Life Sciences share of total venture capital dollars invested declined from 29 percent during the last quarter of 2012 to 24 percent during the first quarter of 2013.
Biotechnology dropped 33 percent in dollars and 30 percent in deals compared to the prior quarter, with $875 million going into 96 deals, placing it a distant second in dollars raised behind the Software industry, which drew $2.3 billion in 329 deals. On a year-over-year basis, Biotechnology investing fell 2 percent in dollars and 19 percent in deals.
In Q1, Medical Device investments dropped 20 percent in dollars and 10 percent in deals, with $509 million going into 71 deals, compared with $635 million in 79 deals during the previous quarter. On a year over year basis, dollars invested fell 29 percent while deals dropped 12 percent.
During the first quarter of 2013, only 20 Life Sciences companies received venture capital funding for the first time, capturing $98 million. This was the fewest number of companies receiving venture capital funding since the second quarter of 1995. This represents a decrease of 52 percent in dollars invested and 46 percent in the number of deals compared to the fourth quarter of 2012. This was the lowest quarterly amount since the third quarter of 1996 and only the fourth time in survey history that the total fell below $100 million in a single quarter.
Funding by Subsegment
Four of the eight Biotechnology subsegments exhibited growth in the first quarter of 2013 compared to the first quarter of 2012. The Biosensors subsegment rose 152 percent to $43 million, the Animal Biotech subsegment rose 110 percent to $40 million and the Biotech Research subsegment rose 37 percent to $7 million. Additionally, the Human Biotechnology subsegment grew slightly, up only 1 percent, and captured the largest share in the first quarter with $731 million going into 66 deals. Funding for all other subsegments decreased while one subsegment received no investments during the first quarter of 2013.
Within the Medical Device industry, only the Medical/Health Products subsegment saw an increase in Q1 2013 compared to the same quarter of 2012, increasing 193 percent in dollars to $129 million. Despite a drop of 41 percent in dollars over the same time period, the Medical Therapeutics subsegment captured the most funding within the Medical Device industry at $369 million going into 45 deals.
Investments by Region
The top five metropolitan regions receiving Life Sciences venture capital funding during Q1 2013 were San Francisco Bay ($427 million), Boston ($273 million), San Diego Metro ($122 million), New York Metro ($106 million) and the Washington Metroplex ($100 million).
Three of the five regions saw double-digit increases in investing in Q1 2013 when compared to Q1 2012 with SF Bay rising 57 percent, NY increasing 66 percent, and Washington Metro growing 53 percent. The top five regions captured 74 percent of the dollars invested in Life Sciences companies in the first quarter of 2013. Biotechnology companies accounted for 68 percent of the dollars invested in Life Sciences deals in the top five metro regions.
A full copy of the report is available for download at www.pwc.com/us/lifesciencesmoneytree
About PwC's Pharmaceutical and Life Sciences Industry Group
PwC's Pharmaceutical and Life Sciences Industry Group (http://www.pwc.com/us/pharma and http://www.pwc.com/us/medtech) provides clients with audit, tax and advisory services. The firm has extensive experience in delivering industry-tailored solutions on a wide range of strategic, financial and operational issues. The Pharmaceutical and Life Sciences Industry Group is part of PwC's larger initiative for the health-related industries that brings together expertise and allows collaboration across all sectors in the health continuum. Follow PwC Health Industries on Twitter at http://twitter.com/PwCHealth.
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