Five-Year Trend Ends in Health Care Venture Capital
VC watching
After five years of annual increases in the amount of venture capital funding flowing to health care companies, 2008 marked a sharp departure from that trend.
For the year ended December 31, 2008, the health care venture capital market experienced a 28% drop in funding and an 18% drop in deal volume, compared with the year-end totals for 2007. In 2008, health care companies publicly announced 396 venture capital investments totaling $7.0 billion.
Medical devices led the health care sectors during 2008, raising 32% of the funding and announcing 30% of the deals, including the largest deal of the year,a $250 million investment by GTCR in Devicor Medical Products, which was started up specifically to acquire medical device companies. The bio sectors followed, with biotechnology companies capturing 22% of both deals and dollars, and biopharmaceutical companies securing 19% of the capital in 17% of the deals. The second largest-deal of the year, a $100 million Series E led by Deerfield Management, was announced by a biotech, Pacific Biosciences, while the third-largest, a $93 million Series B led by Nomura Phase4 Ventures, was announced by a biopharma, OncoMed Pharmaceuticals.
“Venture capital investors continue to focus on identifying quality investments in the health care sectors, including companies that are intent on improving the efficiency, effectiveness or safety of health care processes or products,” commented Gretchen S. Swanson, Editor of Healthcare Corporate Finance News.
“Conserving cash and staying lean may be paramount for entrepreneurs right now, but venture capitalists are generally expected to continue investing equity in both new and existing portfolio companies.”
Stephen M. Monroe, Partner and Managing Editor of Irving Levin Associates, Inc., stated, “The recession in the overall economy is reflected somewhat in a slowdown in the health care venture capital market, but the health care markets, including M&A, have not been hit as hard as some other industry sectors.
Private, equity-backed companies with solid management and sound strategies are faring better right now than most companies that rely on credit or the public markets for operating capital.”
Healthcare Corporate Finance News reports weekly on financial events in the fast-paced venture capital, private and public equity, and merger and acquisition markets for health care companies, and provides subscribers with access to a searchable online database of health care venture capital deals.
This monthly newsletter and weekly email update is published by Irving Levin Associates, Inc., a leading financial publisher and source of market intelligence since 1948. For more information, please call 1-800-248-1668.
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Healthcare Corporate Finance News
Stephen M. Monroe, Partner
Gretchen S. Swanson, Editor
Phone: 800-248-1668
Fax: 203-846-8300
Copyright Business Wire 2009
