Venture capital investment in the life sciences has fallen 39 percent over the past three years as the costly, lengthy process of getting approval for pharmaceuticals from the Food and Drug Administration has spurred companies to shift their investments to overseas markets in Europe and Asia.
According to the survey of 150 venture capital firms, more than 40 percent of companies have slashed investment in biopharmaceutical companies and another 42 percent cut investment in medical device companies. More than half of the companies surveyed said they expect to increase their investment in healthcare IT companies.
Dr. Beth Seidenberg, a partner with venture capital firm Kleiner Perkins Caufield & Byers and chairwoman of the Arlington, Virginia-based National Venture Capital Association’s MedIC Coalition, which published the report titled “Vital Signs: The Threat to Investment in the U.S Medical Innovation and the Imperative of FDA Reform,” said it confirmed a worrying trend.
“For decades, the U.S. has been the leader in delivering medical innovations to our citizens due to the thousands of startup healthcare companies that have been brought to life with venture capital funding,” she said.Now investment is shifting away from investment in “lifesaving and life sustaining products.”
According to the survey, 36 percent of respondents say they plan to boost investment in life science companies in Europe and another 44 percent say they will increase investment in Asia; only 13 percent plan to increase investment in North American companies.
Quaker Partners in Philadelphia was one of the respondents in the survey. Sherrill Neff, a founding partner with the firm, said in an e-mail: “We have significantly decreased our investment into companies with FDA regulatory risk, because of the increased expense, uncertainty and difficulties venture backed companies have had dealing with the FDA. As a result, unless they have regulatory approval in hand, and our risk becomes a commercial risk, we have shifted significantly away from biotech and medical device companies for our new investments.”
Karen Hanson, the executive director of BioStrategy Partners, a Montgomeryville, Pennsylvania-based incubator in emerging and early stage life sciences companies, said, “Our innovation leads to saving lives and if investment is too risky, then there needs to be some way of redefining the risk or managing it differently.”
Mark Heesen, president of the NVCA, tempered the criticism wielded at the FDA with a call to action for lawmakers to work with regulators to reform the approval process.