Venture capital investment in medical devices takes a nosedive in third quarter

Venture capital investment in medical devices pretty much fell off the cliff in the third quarter.

The PricewaterhouseCoopers MoneyTree Report found that medical device companies received a combined $434 million from 65 deals in the third quarter, which marks a 37 percent drop in dollar amount and a 27 percent decline in the number of deals from the second quarter.

It’s hard to believe that just one quarter ago, the medical device industry ranked second in terms of venture investment into all industries; in the third quarter, it fell to sixth place. In fact, the third-quarter investment marks the lowest amount that the device industry pulled in since 2004.

While the medical device industry sank to the bottom, overall, the life sciences sector showed signs of improvement, driven by a big influx in capital in the biotech industry, which saw a 64 percent increase from the same quarter a year ago.


The life sciences group saw a total investment of $1.7 billion in the third quarter through 181 deals, which represented a 16 percent increase in the amount of dollars invested from the previous quarter, although the number of deals declined 2 percent from the second quarter of 2012.

However, investment in life sciences companies in the third quarter continues a downward trajectory given that the dollar amount invested and the number of deals fell 12 percent and 8 percent respectively from the third quarter of 2011.

“The 16 percent gain for the life sciences sector reversed a four-quarter decline,” said Tracy T. Lefteroff, global managing partner of the venture capital practice at PwC U.S., in a news release. “Yet, the sector won’t outpace 2011 unless it gets a boost during the final quarter. Regulatory uncertainty, capital intensity and investment time horizons remain challenging issues for would-be investors in the sector.”

In the third quarter, venture capitalists invested a total of $6.5 billion, representing 890 deals, a decline of 10 percent in dollars invested and 12 percent in the number of deals compared with the third quarter of 2011, when VCs invested $7.3 billion in 992 deals.

Here are some additional details from the report concerning life sciences companies in the third quarter:

  • Thirty two got first-time funding totaling $170 million, a 30 percent drop in dollars invested from the third quarter of 2011, but no change in deal number
  • First-time deals averaged $5.3 million, down from $7.5 million in the third quarter of 2011
  • The top five metro areas for life sciences investing are San Francisco/Bay Area ($366 million) , Boston ($344 million), San Diego ($183 million), Chicago ($106 million) and Philadelphia ($99 million)

[Photo Credit: Declining dollar from Big Stock Photo]

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