Report: Venture capital in life sciences sector trailing other industries
Venture capital funding for the life sciences sector, which includes biotechnology and medical devices, declined in 2013 by 1% in dollars invested and 3% in number of deals, compared to 2012, according to a new PwC U.S. report, Medtech Slowdown, which includes data from the MoneyTree Report from PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters.
VCs invested $6.6 billion into 778 life sciences deals in 2013, compared to $6.7 billion in 800 deals in 2012.
On a quarterly basis, life sciences investments rose 19% to $1.8 billion in the last quarter of 2013, compared to $1.5 billion during the prior quarter. The number of life sciences deals rose 21% from 188 in the third quarter to 228 in the final quarter of 2013. Despite the quarterly uptick, the life sciences share of total venture funding declined from 25% in 2012 to 23% in 2013.
“The fourth quarter and 2013 year-end numbers show there is continued interest in biotechnology even as medical devices slowed down during the year,” said Greg Vlahos, life sciences partner at PwC. “With the strong exit markets for biotechnology in 2013, 2014 is set up for renewed interest in life sciences. In fact, first-time funding witnessed a strong finish to the year, increasing 48% in 2013. The enduring interest in early-stage opportunities will continue to drive investments in the sector.”
Biotechnology companies raised $4.5 billion in 470 deals during 2013, placing it as the second-largest investment sector behind software, which drew $10.9 billion in 1,523 deals in 2013. Investments in biotechnology for the year increased by 8% in value, while volume declined by 2%. Investments in biotechnology increased 43% in dollars and 10% in deals, with $1.3 billion flowing into 134 deals during the fourth quarter of 2013, compared with $928 million in 122 deals in the third quarter.
In the last quarter of 2013, VCs invested $460 million into 94 medical device deals, a 19% decrease in dollars but a 42% increase in deals compared to the previous quarter. The medical device industry was down overall for the full year, experiencing a 17% decrease in dollars invested and a 4% decline in the number of deals, compared with 2012.
In 2013, first-time funding for life sciences companies increased 48% in dollars invested to $1 billion going into 154 companies, compared to the $664 million invested into 148 companies in 2012. In the fourth quarter of 2013, $409 million went into 48 companies receiving VC investment for the first time, representing a 161% increase in dollars from the prior quarter and a 7% increase in deals.
Four of the eight biotechnology sub-segments showed growth in the fourth quarter of 2013 compared to Q4 2012. The biotech animal sub-segment rose 122% to $35 million, biotech industrial rose 35% to $26 million, biotech equipment rose 11% to $8 million and pharmaceutical rose 8% to $70 million. Funding for three sub-segments decreased while one sub-segment, biotech other, received no investments during the final quarter of 2013.
The top five metropolitan regions receiving the most life sciences venture capital funding during the fourth quarter of 2013 were San Francisco Bay ($550 million), Boston ($382 million), Seattle ($186 million), San Diego Metro ($95 million) and New York Metro ($83 million).
The top five regions accounted for 73% of the dollars invested in life sciences companies in the fourth quarter. Biotechnology investments accounted for 85% of the dollars invested in life sciences deals in the top five metro regions.