The National Venture Capital Association and Pricewaterhouse Coopers say the biotech industry raised $1.1 billion in 96 deals in the third quarter of 2011, down 18% in dollars and 20% in the number of deals compared to Q3 2010. The medical device industry also saw its investment numbers slip 18% in Q3. Overall investment for the quarter dropped to its lowest volume since Q1 2005, according to the report.
The NVCA/PwC numbers come just days after a CB Insights report that blamed the long drug development process and a regulatory environment fraught with risk for the lackluster Q3 numbers. Earlier this month the NVCA released a survey that found 39% of venture groups cut their investment in life sciences companies over the last three years due to the high hurdles companies must jump in order to gain FDA approval for their products. That was followed by a report from BioWorld that noted a 60% drop in biotech investment in Q3. Additionally, Prospect Ventures announced that it wouldn't move ahead with its fourth fund and returned $150 million to investors after failing to raise the $250 million targeted for the fund.
"Challenges in the regulatory environment for Life Sciences companies are prompting VCs to look to other industries to put their money to work for a faster return on their investment as indicated by the notable increase in Software investments," remarked Tracy Lefteroff, global managing partner of the venture capital practice at PwC US. “Accordingly, over the past two quarters, we've seen a clear shift in Life Sciences investments from Seed/Early Stage companies over to more Later Stage companies." He added that VCs are supporting companies they've already invested in but aren't eager to fund new companies. Despite the less-than-impressive numbers, the life sciences sector is still expected to top the $23.3 billion raised in 2010.
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Special Report: Top 5 VC deals, H1 2011