Medical device VC shrank by 17% in Q2, PwC says

Venture capital funding for medical device firms shrunk 17% in the second quarter, according to PricewaterhouseCoopers, part of a 39% year-over-year drop in life sciences investments for Q2.

Devicemakers pulled in $700 million on 84 investments in Q2, PwC reports, a 17% decline in dollar value and an 11% drop in number of deals from the same period in 2011. Compared to Q1, dollar value remained flat in the second quarter while the number of deals declined by 11%.

Makers of "medical/health products," a sector that includes monitoring equipment and handicap aids, saw a 111% year-over-year increase in funding, reaching $137 million on the quarter. However, diagnostics investments shrunk 44% to $54 million, and investments in therapeutic devices (including implants and surgical techs) dropped 26% to $508 million, PwC reports.

As for the whole life sciences industry, its share of total U.S. VC fell to 20%, the lowest it has been since 2002, according to PwC. And while nationwide venture value dropped by 12% year-over-year, life sciences' Q2 struggles outpaced other industries, PwC managing partner Tracy Lefteroff said.

"The long time horizon often required for a liquidity event, regulatory challenges and large amount of capital often needed to fund life science companies likely contributed to this sector's investment decline during the past four quarters," Lefteroff said in the report.

For devicemakers seeking a silver lining, how about this: While Q2 was tepid on the investment front, it was worse for biotech. In Q1, device firms pulled in about 45% of life sciences funding, compared to biotech's 55%. In the second quarter, the pie got split about 50-50, thanks to a 52% year-over-year drop in funding for biotech firms, which grossed $697 million in VC for Q2.

- check out PwC's report (reg. req.)
- here's the firm's release

Special Report: Top 10 VC Device deals of H1 2012

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