Venture Capital Dollars in Biotechnology and Medical Device Companies Increases 15% Over First Quarter of 2013
First Time Funding Increases to $258 Million, Average Deal Size for Early-Stage Medical Devices Highest on Record
NEW YORK, May 20 2014 – Venture capital funding for the Life Sciences sector, which includes Biotechnology and Medical Devices, increased 15 percent in value during the first quarter of 2014, compared to first quarter of 2013, according to a new PwC US report, “Biotech Deals Rising,” which includes data from the MoneyTree™ Report from PricewaterhouseCoopers (PwC) LLP and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. Venture capitalists invested $1.7 billion in 173 Life Sciences deals during the quarter, compared to $1.4 billion in 173 deals during the same period in 2013. While there was an increase in Life Sciences investments, the category still underperformed the $9.5 billion in total venture capital investments made in the first quarter, and is now at the lowest proportion of total investments since 2001.
During the first quarter 2014, Biotechnology companies attracted $1.1 billion, or 64 percent of total dollars invested and 22 percent in deal value over the first quarter 2013. The Biotechnology industry logged 112 deals, compared with 99 during the first quarter of 2013, a 13 percent increase in deal volume. The Medical Devices industry finished up 5 percent in dollars, but deal volume decreased by 18 percent to 61 deals for the first quarter of 2014, capturing $588 million.
“Life sciences and biotechnology investments are off to the strongest start of the year since the recession,” said Greg Vlahos, Life Sciences Partner at PwC. “A strong IPO market has contributed to increased venture capital investments. We’re continuing to see interest in these businesses, especially in the early stages of their development. Venture capitals ability to monetize their earlier investments and source early-stage investments is a positive sign for ongoing investments in life sciences.”
While first quarter 2014 overall Life Sciences deal value and volume decreased 10 percent and 28 percent respectively compared to the fourth quarter 2013, average Life Sciences deal size rose 15 percent to $9.5 million from the same time last year and increased 24 percent compared to fourth quarter 2013. In addition, the average deal size for Medical Devices investments was $9.6 million – the highest since the last recession.
“There is a lot of competition for capital and venture funds are being selective in their investments, which explains why life sciences underperformed total venture capital investments,” Vlahos continued. “There is still a lot of interest in the space but investors recognize that these deals have longer durations and higher capital requirements. The increase in average deal value and early stage investments tells us that investors have a growing appetite for risk and are placing bigger bets on a smaller number of life sciences companies in hopes of generating outsized returns.”
First-time funding investments for Life Sciences increased exponentially in the first quarter of 2014 to $258 million, a 108 percent jump compared to the same period last year. The number of first time deals rose 57 percent to 36. However, compared to the fourth quarter 2013, the Life Sciences sector experienced a decline of 38 percent in first-time funding investments and 32 percent decline in deal volume. Average deal size for early-stage Medical Devices transactions in the first quarter of 2014 was the highest ever, at $8.6 million.
Funding by SubSegment
When compared to the first quarter of 2013, two of the eight Biotechnology subsegments rose during the first quarter of 2014. The biotech-human subsegment captured the largest share of Biotechnology funding, increasing 26 percent to $876 million compared to the first quarter of 2013, despite a 24 percent decrease from the fourth quarter of 2013. The biotech-industrial subsegment received $120 million in the first quarter of 2014, up from $11 million in the first quarter of 2013.
Investments by Region
The top five metropolitan regions receiving the most Life Sciences venture capital funding during the first quarter of 2014 were San Francisco Bay, Boston, New York Metro, San Diego Metro and Orange County, which replaced Seattle to round out the top five. The leader, San Francisco Bay companies, received $479 million with $277 million going into Biotechnology companies and the remaining $201 million going into Medical Devices. San Francisco Bay companies closed 47 deals, or 27 percent, during the first quarter of 2014, with an average deal size of $10.2 million.
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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