No. of life science start-ups receiving VC money for first time in 2012 was lowest since 1995

decline, fall

Life science venture capital activity may have picked up in the last quarter of 2012, but it still wasn’t enough to overwhelm the dismal showing in the first half of the year.

A new Pricewaterhouse Coopers  Money Tree Report found that the number of life science start-ups that received venture capital for the first time in 2012 was the lowest since 1995. Only 135 start-ups got first-time VC money last year.

Those companies attracted only $664 million, a 44 percent drop from 2011. The average deal was $4.9 million, compared with $6.3 million in 2011.


Overall, the story wasn’t any better. Compared with 2011, when VCs invested, $7.7 billion in 836 deals, last year both deal volume and deal dollars fell with $6.5 billion invested through 779 deals. That’s a 14 percent decline in dollar value and a 7 percent decline in deal volume.

Biotechnology companies and medical device firms make up the life science sector in the report.

“The pickup during the third quarter for Biotechnology and for [biotech and medical devices] during the fourth quarter wasn’t enough to outpace lower funding levels during the first half of 2012,” said Tracy Lefteroff, global managing partner of the venture capital practice at PwC US, in a statement. “Global economic uncertainty, capital intensity, regulatory risk, and more discriminating investors were all potential factors that weighed on sector performance for the year.”

In 2012, there were 466 deals done in biotechnology companies that pumped in $4.6 billion. Although the deal volume was flat, the amount invested fell 15 percent from 2011. Medical device firms pulled in $2.4 billion through 313 deals in 2012, a drop of 13 percent in dollar terms and 15 percent in number of deals done compared to the year before.

But the medical devices sector had a dramatic turnaround in the fourth quarter with a 32 percent increase in venture capital invested from the prior quarter and a 9 percent rise in deal volume. That translates to $581 million invested through 74 deals.

“Several recent developments bode well for the life sciences sector when it comes to venture investing during 2013,” Lefteroff said. “Product approvals at the FDA reached a 16-year high for the calendar year 2012. Products targeting critical unmet needs are getting approved, and at a quicker pace. And with the renewal of the user fee legislation last year came several improvements to the regulatory process that should start yielding greater efficiency.”


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