Device industry sees more investment, fewer deals

There's some good news for hopeful start-ups. Venture capital funding in the life sciences sector, which includes medical devices, was up 37% during the second quarter. But while medical device investments increased 9% in dollars, they declined 17% in deals compared with the same period last year, according to a new PwC US report, "High-dollar deals." 

"The rise in venture capital investment going into Life Sciences during the second quarter can be attributed, in part, to an increase in exit activity," noted Tracy Lefteroff, global managing partner of the venture capital practice at PwC. "The exit market for biotech and medical device companies has been more active over the past year, and exit activity allows venture funds to achieve liquidity in their portfolios. This liquidity enables venture funds to return dollars to their limited partners and make additional funds available to support the rest of their portfolios."

As the report also notes, funding for two of the three device subsegments decreased in Q2 2011, compared with the same quarter last year. Medical/health products fell 57% and diagnostics dropped 7% in dollars. However, dollars invested in the medical therapeutics category increased by 33%, according to a PwC release.

With $841 million going into 90 deals, this was the highest level of funding for the device industry since the Q3 2008 and the seventh highest quarterly funding during the last 16 years.

There have been some concerns plaguing the industry, impacting potential funders. These concerns include the much debated changes to the 510(k) system. Also, government reimbursement for medical devices is uncertain due to healthcare reform, according to Dan Carr, president and CEO of the Collaborative, as quoted by the Star Tribune.

- check out the PwC release
- see the Star Tribune story

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