For Q3, a dismal record of diagnostics venture investment

For the medical diagnostics industry, 2014 is looking like a seesaw in terms of venture investment trends.

In the first quarter, only three of the top five deals hit in the double-digit, million-dollar range. One even landed below the million-dollar threshold. In the second quarter, the top 5 deals were robust, even healthy, ranging from a phenomenal $120 million to $13 million. In the 2014 third quarter, we're back to tepid, even sparse, investments, according to data from Thomson Reuters, compiled as part of the PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report.

We've heard for some time now that early stage med tech companies, and diagnostics outfits in particular, have struggled to attract substantial venture funding, as investors look for certainty that technology can gain both regulatory approval and insurance reimbursement.

The numbers for diagnostics company fundings in Q3 certainly reflect this. For the whole quarter, there were only 8 deals in the diagnostic space. Out of the top 5, only one was classified as an "early stage" investment. One was termed an "expansion" investment and the other three were later-stage companies, which are safer investment bets because they are often closer to completing their development/regulatory process or have advanced to the point where their products are already approved for use.

Contrast that with medical devices/equipment, of which medical diagnostics are a subset. The MoneyTree Report data showed VCs invested $586 million in 78 deals during the quarter. That's the same number of deals as in the previous quarter, but a 13% drop in dollars invested.

The biotech sector, in turn, attracted $1.1 billion in venture dollars during Q3 for 110 deals. That's down 45% in dollars invested and 10% in deals from the previous quarter. But as FierceBiotech pointed out, the sector is still on track to have a record-breaking VC investment year.

Not so with diagnostics. From quarter to quarter, we have some occasional signs of life, but a continuation of much lower VC investment in early stage companies, and even later-stage ones, than in previous years.

As always, be aware that the dollar amount Thomson Reuters recorded can differ from the money the companies themselves cited during the quarter. The MoneyTree report tallies money in the bank, while the company reports reflect dollars promised (which can take a while to be deposited).

Below, are the top 5 medical diagnostic venture capital deals in Q2.

1. CardioDx lands first in the Q3 diagnostics venture funding list, but its story is a complicated one. The Palo Alto, CA, company, a 2012 Fierce 15 winner, has huge hopes for its Corus CAD blood test, a gene expression diagnostic designed to help rule out coronary artery disease. As of November 2013, it delayed a planned IPO due to poor market conditions. In May, that IPO went back on track, with revived plans designed to raise as much as $92 million. A specific date on which CardioDx will go public hasn't ben set yet, so in July, CardioDx disclosed in a regulatory filing that it raised $21 million in a new round of private funding to help fuel its expansion and commercialization. According to PricewaterhouseCoopers/the National Venture Capital Association, the funding came from a variety of investors: Artiman Ventures LP, Asset Management Ventures, Kleiner Perkins Caufield & Byers LLC and Longitude Capital Management Co LLC.

2. Acutus Medical. This San Diego, CA, company lands second on our list, having raised $20.6 million from undisclosed investors, according to Thomson Reuters data. Acutus is developing a minimally invasive, 3-dimensional cardiac chamber imaging system designed to help spot the source of irregular heartbeats and guide treatment. Keep in mind that Thomson Reuters collects funding data based on how much is in the bank. Acutus announced in September that round reached $26.2 million. Plans call for using the money to continue developing Acutus' imaging system and also to broaden the company's product portfolio. This is definitely early stage funding, considering Acutus launched in June 2011.

3. Intelomed. This later-stage Wesford, PA, operation raised $3.8 million during Q2 from undisclosed investors, according to the Thomson Reuters data. The company's lead product includes its CVInsight device designed to noninvasively monitor patients and gather cardiovascular diagnostic data involving treatment success and physical conditions.

4. Freedom Meditech. Based in San Diego CA., Freedom Meditech raised $2.8 million from undisclosed investors during Q3, Thomson Reuters data points out. The company is focused on marketing a diagnostic device to scan the eye for signs of diabetes. Initial reports of the funding in late September framed the funding round as a $2 million line of credit from Silicon Valley Bank.

5. Wasatch Microfluidics. This Salt Lake City, UT, outfit lands fifth on our list, having raised $2 million during the quarter, Thomson Reuters data pointed out, to fuel the advance of diagnostic analysis platforms for biomolecular interaction analysis. Tech Coast Angels and undisclosed investors participated in the July 2014 round, according to Thomson Reuters. California news reports at the time pointed to Pasadena Angels and Kirk Ririe, founder of BioFire Diagnostics (now owned by French diagnostics giant bioMérieux) as having participated in the round. -- Mark Hollmer (email | twitter)

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