Life Sciences VC Investing Up in Dollar Value, Down in Deal Volume

2/7/12Follow @arleneweintraub

At first glance, a report released last week by PricewaterhouseCoopers and the National Venture Capital Association seems to portend rich times for life sciences startups. Biotech companies raised $4.7 billion in 2011—more than any other sector except for software and enough to help make last year one of the top three years for venture fundraising in the past decade.

But drill down into the report, based on data provided by Thomson Reuters, and the numbers tell more of a mixed story. Total VC dollars poured into the life sciences sector, which also includes medical devices, increased 21 percent to $7.5 billion in 2011. The biotech portion of the haul marked a 22 percent increase over 2010. But the volume of biotech deals dropped 9 percent to 446. What’s more, the medical device portion rose 20 percent in dollar terms (to $2.8 billion) but dropped 2 percent in deal volume (to 339).

What it all means is that VCs in life sciences remain supportive of the sector, but uncertain about its future, says Tracy Lefteroff, global managing partner in PwC’s venture capital practice. “There are still some major challenges ahead in terms of getting the FDA to provide transparency to young companies about what they need to do to get their products out of the pipeline,” Lefteroff says. “For anything [in investing] to be sustainable, FDA issues will need to be worked out.”

Still, some investing trends last year showed clear signs of optimism in life sciences. During the fourth quarter, for example, VC investing in early-stage companies totaled $987 million—a 47 percent jump from … Next Page »

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