In the first quarter of 2012, dollars invested by venture capitalists in healthcare companies fell to the lowest total in five quarters.
Venture capital investment in healthcare totaled $1.45 billion on 153 deals in the quarter, according to the latest quarterly report from venture capital database CB Insights. Healthcare deal activity fell 11 percent in the quarter.
“The sentiment and chatter around healthcare continues to be mixed and so the sector will remain range-bound unless some catalyst — i.e., massive exit, regulatory change, etc. — can spur it to move,” the report stated.
Still, healthcare entrepreneurs seeking institutional funding shouldn’t be too discouraged by the number. The five-quarter low in funding follows a five-quarter high at the end of 2011 that saw VCs invest $1.9 billion in 172 deals. As always, it’s important not get swayed too far in either direction by one quarter’s numbers.
“This wasn’t a bad quarter for healthcare VC,” said Anand Sanwal, CB Insights’ CEO. “One thing that we think will have implications for healthcare VC is the exit environment, which overall, our data suggest is improving — mostly via M&A, but even IPOs in some cases.”
Overall, total venture funding fell to its lowest level ($5.9 billion) since the second quarter of 2010, but the report cautioned against getting too preoccupied with the drop. “We do not think that a single-quarter dip in funding is in any way symptomatic of any sort of correction or any sort of bubble bursting,” the report said.
Deal activity remained strong (785), with the second-highest total in nine quarters. CB Insights views deal activity as a more significant number than total funding.
The five largest healthcare deals of the quarter were: Warp Drive Bio ($125 million); Sientra ($65 million); Ariosa Diagnostics, then known as Aria Diagnostics, ($52.7 million); Apollo EndoSurgery ($47.6 million) and Mevion Medical Systems ($45 million).
[Graphic from CB Insights]