Investment in Minnesota life science companies saw a significant increase in the second quarter of 2014, according to a report from the state’s largest med-tech association.
The Minnesota Life Science Investing Report, Q2 2014, finds a 65% increase in life science investments over the second quarter in 2013, with companies raising $110.5 million in 2Q, up from $75 million in the first quarter of this year. The report is released on a quarterly basis by LifeScience Alley, Minnesota’s trade association for med-tech and life science businesses.
According to Cheryl Matter, PhD, director of research and intelligence with LifeScience Alley, the numbers show continuing improvement in the med-tech investment area for this year.
“2014 looks like it’s going really well, and we’re on pace to exceed what happened in 2013,” she said. “Two major [deals] are driving the majority of this, and that’s Holaira and Inspire Medical.”
Holaira is a Plymouth, Minn.-based company that closed a $42 million venture financing round in April. The company is developing a catheter-based system for treating chronic obstructive pulmonary disease. Inspire Medical, based in Maple Grove, Minn., completed a Series E financing round that raised $40 million in May. The company is developing a small, implantable system that treats sleep apnea. Their device completed a medical trial at 22 medical centers in January of this year.
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Health information technology companies also saw good numbers, led by Red Brick Health, based in Minneapolis, which raised $7.5 million in 2014’s second quarter.
Aside from the bigger names and deals, Matter said that it’s the smaller ventures bubbling up from underneath that indicate a healthy future for the industry, especially in med-tech.
“In med tech, the vast majority of the companies are raising under $200,000, when you look at the median deal size,” she said. “It’s probably a reflection of a healthy ecosystem, where you have a higher number of seed stage, or early stage companies, pushing more bets at lower costs, and then as you go up in deal size, you see fewer and fewer.”
Matter said that in technology-based industries, where there is a lot of risk, a high number of startups is a good thing. “What it demonstrates is that there are a lot of innovative, early–stage ideas that are attracting funding,” she said. “In many cases, in the early stages there is the highest risk, and you have to anticipate there’s going to be attrition.
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“It’s more of a higher-shot-on-goal approach. By having a number of seedlings out there, you’re actually planting the seeds for the big wins,” she said.
Matter notes that if trends continue, 2014 will easily outpace 2013 in investments in Minnesota life science companies.
“We’re really happy with these numbers,” she said. “It reflects the resilience and quality of our community, and hopefully it’s an indicator of positive momentum, especially within the medical device area.”
