Venture Capitalists Invested $2.8 Billion in Life Sciences in the Fourth Quarter, Reaching $8.6 Billion in 2014
Biotechnology Industry Reached Record-Level of Investment during the Fourth Quarter
NEW YORK, Feb. 12, 2015 /PRNewswire/ -- Venture capital (VC) funding for the Life Sciences sector – Biotechnology and Medical Devices – increased 49 percent in dollars but declined 18 percent in deals during the fourth quarter of 2014, compared to fourth quarter of 2013, according to the MoneyTree™ Report from PricewaterhouseCoopers (PwC) LLP and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. The report, entitled "Biotech funding surges," shows that VCs invested $2.8 billion in 202 Life Sciences deals during the quarter, versus $1.9 billion going into 245 deals in the fourth quarter of 2013 and $1.7 billion in 197 deals during the previous quarter in 2014.
Overall, investments for full year 2014 in the Life Sciences sector rose to the highest level since 2007 with $8.6 billion invested into 789 deals, a 29 percent increase in dollars but a 3 percent drop in deals compared to 2013. Biotechnology investment dollars rose 29 percent compared to 2013 to $6.0 billion, while the number of deals decreased 4 percent to 470 deals, making it the second largest investment sector for the year in terms of dollars invested, behind the Media and Entertainment sector. The Medical Devices industry finished 2014 up 27 percent in dollars to $2.7 billion, and the number of deals remained relatively flat in 2014, compared to 2013.
"The life sciences sector saw five megadeals last year, a testament to the highly innovative biotech and medical device technologies and the resulting confidence of venture capitalists in the business models of these start-ups," said Greg Vlahos, Life Sciences partner at PwC. "The biotechnology industry attracted record-high venture investments in the second quarter of 2014 and ended the year with even higher investments in the fourth quarter. In addition, the medical device industry continued to show strong growth for the year. This is in line with PwC's projection in early 2014 of a very strong year for life sciences. Given the strong level of investments in this sector and others in recent quarters, we expect continued high investment levels in life sciences in the first half of 2015."
First-Time vs. Follow-On Funding
Investments into Life Sciences companies receiving VC investment for the first time in Q4 2014 totaled $403 million – an increase of 35 percent from the same quarter in the prior year. Life Sciences follow-on funding in the fourth quarter of 2014 surged 51 percent year over year to $2.4 billion. In fact, follow-on funding for the Life Sciences sector and Biotechnology industry during the quarter achieved the highest level since 1995, when MoneyTree began reporting VC investing levels. For the full year 2014, first-time funding in the Life Sciences sector was $1.1 billion and follow-on funding was $7.5 billion, representing growth of 25 percent and 29 percent, respectively. For the full year, first-time deals in the sector averaged $7.3 million and follow-on funding deals averaged $11.8 million.
Funding by Subsegment
When compared to the fourth quarter of 2013, five of the seven Biotechnology subsegments that received investment rose during the fourth quarter of 2014. The biotech-human subsegment captured the largest share of Biotechnology funding, increasing 46 percent to $1.7 billion compared to the first quarter of 2013. In addition, pharmaceutical increased 60 percent to $115 million; biotech equipment rose 148 percent to $100 million; biotech research saw a slight 1 percent increase to $39 million; while biosensor investments increased 259% to $28 million. The two biotechnology subsegments that saw a decrease in funding in the fourth quarter compared with the same period last year were biotech-animal, down 64 percent to $10 million and biotech-industrial, declining 74 percent to $7 million.
Funding for each of the three Medical Device subsegments increased during the fourth quarter of 2014 compared to the same quarter in 2013, including medical therapeutics up 8 percent to $368 million; medical/health products rising 170 percent to $201 million and medical diagnostics increasing 216 percent to $180 million.
Investments by Region
During the fourth quarter of 2014, Boston, Chicago, the San Francisco Bay Area, New York Metro and Research Triangle received the most Life Sciences venture capital dollars. Boston, the leader of the five regions, received $959 million in funding for 32 deals during the quarter, with $928 million going into biotechnology and the remaining $31 million invested in medical devices. The San Francisco Bay Area captured $839 million, New York Metro received $175 million, Research Triangle accumulated $127 million and Chicago rounded the list with $90 million invested.
In 2014, total venture capital dollars invested in the U.S. across all industries was $48.3 billion, including $14.8 billion in the fourth quarter – the highest annual and quarterly investment totals since 2000. "The strong IPO market has played a big role in this robust performance of venture funding, and there are good signs that the trend has legs that can carry it well into 2015," Vlahos continued. "With a 33 percent increase in funding for early-stage life sciences companies in 2014, start-ups are likely to continue to do well in the year ahead."
A full copy of the report is available for download at www.pwc.com/us/lifesciencesmoneytree
About PwC's Pharmaceutical and Life Sciences Industry Group
PwC's Pharmaceutical and Life Sciences Industry Group (http://www.pwc.com/us/pharma and http://www.pwc.com/us/medtech) provides clients with audit, tax and advisory services. The firm has extensive experience in delivering industry-tailored solutions on a wide range of strategic, financial and operational issues. The Pharmaceutical and Life Sciences Industry Group is part of PwC's larger initiative for the health-related industries that brings together expertise and allows collaboration across all sectors in the health continuum. Follow PwC Health Industries on Twitter at http://twitter.com/PwCHealth.
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