Life Sciences Venture Capital Funding Drops 14 Percent During 2012, According to the MoneyTree Report
Number of Life Sciences Companies Receiving VC for the
First-time in 2012 Reaches Lowest Level Since 1995
NEW YORK, February 7, 2013 – US venture capital (VC) funding
in the life sciences sector, which includes the Biotechnology and
Medical Device industries, dropped 14 percent in dollars and 7
percent in deals during 2012 according to a new PwC US report,
“Double-digit dip” that includes data from the
MoneyTree™ Report from PricewaterhouseCoopers LLP and the
National Venture Capital Association based on data provided by
Thomson Reuters. Venture capitalists invested a total of $6.6
billion in 779 Life Sciences deals during the year, compared with
$7.7 billion in 836 deals during 2011. The number of Life Sciences
companies receiving VC funding for the first time reached the
lowest level since 1995 with only 135 companies receiving funding
in 2012.
Compared to the prior quarter, Life Sciences venture funding rose
11 percent in Q4 2012 to $1.9 billion. Deal volume also increased,
rising 12 percent to 187 deals compared to the prior quarter.
For all sectors, VCs invested $26.5 billion in 3,698 deals in 2012,
a 10 percent drop in dollars and 6 percent decline in deals from
the prior year. Venture investors funneled $26.5 billion into 3,698
deals during 2012. While total investments saw a decline for the
year, Deal volume in Q4 2012 rose 5 percent compared to the prior
quarter. However, dollars invested did decline 3 percent over the
same time period to $6.4 billion in 968 deals.
“The 2012 investment levels came in lower than what we saw
during 2011,” said Tracy T. Lefteroff, global managing
partner of the venture capital practice at PwC US. “The
pickup during the third quarter for Biotechnology and for both
industries during the fourth quarter wasn’t enough to outpace
lower funding levels during the first half of 2012. Global economic
uncertainty, capital intensity, regulatory risk, and more
discriminating investors were all potential factors that weighed on
sector performance for the year.”
Investments in Biotechnology companies in 2012 fell 15 percent in
dollars while the number of deals was flat, with $4.1 billion going
into 466 deals. For the fourth quarter of 2012, $1.3 billion went
into 135 Biotechnology companies, an increase of 3 percent in
dollars and 13 percent in deals from the third quarter when $1.2
billion went into 119 rounds.
Medical Device investments fell 13 percent in dollars and 15
percent in deals in 2012, finishing the year with $2.4 billion
going into 313 deals. For the fourth quarter, Medical Devices saw
an increase of 32 percent in dollars and 9 percent in deals from Q3
2012 with $581 million going into 74 deals. The Life Sciences
sector accounted for 25 percent of all venture capital dollars
invested in 2012 compared to 26 percent in 2011.
“Several recent developments bode well for the life sciences
sector when it comes to venture investing during 2013,”
Lefteroff said. “Product approvals at the FDA reached a
16-year high for the calendar year 2012. Products targeting
critical unmet needs are getting approved, and at a quicker pace.
And with the renewal of the user fee legislation last year came
several improvements to the regulatory process that should start
yielding greater efficiency. At the same time, significant
challenges remain. The time and cost and uncertainty of new product
development have increased substantially over the course of several
decades, and the willingness of healthcare systems in the US and
around the world to pay for innovative new products is an area of
concern for the future. Despite the challenges, venture capitalists
will continue to seek out the most innovative companies with the
business models and products to meet the growing demand for better
health outcomes and higher value to the healthcare
system.”
First-Time Financing
First-time funding for life sciences companies fell 41 percent in
dollars to $664 million going into 135 companies in 2012. This
marked the lowest number of companies receiving funding for the
first time since 1995. First-time deals in the life sciences sector
averaged $4.9 million for 2012, compared to $6.3 million in 2011
companies. The Biotechnology industry accounted for 54 percent of
first-time financings in the Life Sciences sector in 2012.
Funding by Sub-segment
Three of the seven Biotechnology subsegments exhibited growth in
the fourth quarter of 2012, compared to the prior quarter. Dollars
invested in the Biosensors, Biotech Research, and Biotech-Human
subsegments rose 415 percent, 58 percent, and 41 percent,
respectively. The Biotech-Human subsegment accounted for the
largest share of dollars in the fourth quarter at $1.1 billion. For
the full year 2012, Biotech-Human also led in funding at $3.2
billion, but, like all of the Biotechnology subsegments, it
experienced a decline in funding when compared to 2011.
For the full year 2012, all three of the Medical Device subsegments
recorded a decline in funding. The Medical Therapeutics subsegment
captured the majority of the investments in the Medical Device
industry in 2012, accounting for 61 percent of the deals and 80
percent of the dollars. In Q4, only the Medical Therapeutics
subsegment experienced an increase, jumping 65 percent over the
prior quarter to $520 million.
Investments by Region
The top three metropolitan regions receiving Life Sciences venture
capital funding during 2012 were San Francisco Bay ($1.7 billion),
San Diego Metro ($709 million), and NY Metro ($415 million). In Q4,
the top five metropolitan regions receiving funding were San
Francisco Bay ($588), Boston ($278), NY Metro ($214), San Diego
Metro ($142), and the Great Lakes ($94 million). Investments in
Biotechnology deals accounted for 71 percent of the dollars
invested in the top five regions in Q4 2012.
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 Pharmaceuticals and Life Sciences Industry Group
(www.pwc.com/us/pharma and www.pwc.com/us/medtech) is dedicated to
delivering effective solutions to the complex strategic,
operational, and financial challenges facing pharmaceutical,
biotechnology, and medical device companies. We provide
industry-focused assurance, tax, and advisory services to build
public trust and enhance value for our clients and their
stakeholders. More than 180,000 people in 158 countries across our
network share their thinking, experience, and solutions to develop
fresh perspectives and practical advice.
About PwC US
PwC US helps organizations and individuals create the value they're
looking for. We're a member of the PwC network of firms in 158
countries with more than 180,000 people. We're committed to
delivering quality in assurance, tax and advisory services. Tell us
what matters to you and find out more by visiting us at
www.pwc.com/US.
Learn more about PwC by following us online: @PwC_LLP, YouTube, LinkedIn, Facebook and Google +.
? 2013 PricewaterhouseCoopers LLP, a Delaware limited liability
partnership. All rights reserved. PwC refers to the US member firm,
and may sometimes refer to the PwC network. Each member firm is a
separate legal entity. Please see www.pwc.com/structure for further
details.
# # #
Posted: February 2013
