Life Sciences Venture Capital Investments Soar In Q2 To Highest Level Since 2007, According To The MoneyTree Report
Venture Capital Dollars in Biotechnology Companies Increases Nearly 40 Percent, Strongest Second Quarter Since 1995
NEW YORK, August 25, 2014-- Venture capital (VC) funding for the Life Sciences sector, which includes Biotechnology and Medical Devices, reached $2.5 billion in 195 deals for the second quarter of 2014, according to a new report, "Biotech soars to record high," which includes data from the MoneyTree™ Report from PricewaterhouseCoopers (PwC) LLP and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. While this quarter was the highest Life Sciences investment since the second quarter 2007, it was also the strongest second quarter since 1995, which is the earliest data recorded by the MoneyTree.
During the second quarter of 2014, VC funding for Life Sciences increased 25 percent in dollars invested, while the number of deals was flat compared to the same period last year. Dollars flowing into Life Sciences companies accounted for 19 percent of total VC dollars invested in Q2, compared to 28 percent in the second quarter of 2013. The decrease is due, in part, to the increase in the number of megadeals (investments of $100 million and more) occurring in the Software sector. The average deal size for Life Sciences companies was $12.8 million for the second quarter of 2014, an increase of 26 percent year-over-year and 35 percent quarter-over-quarter.
"The uptick in VC investing in Q2 is a direct reflection of the activity we're seeing in the public markets," said Greg Vlahos, Life Sciences Partner at PwC. "As VCs take advantage of the open initial public offering window and the high valuations in the mergers and acquisitions market to exit, they are putting capital back to work for a new cycle of investments. The competition for dollars among the next generation of life science businesses remains, and businesses looking to attract VC investment need to have compelling stories and a roadmap for their product strategies to showcase their path forward."
The Biotechnology industry had the strongest second quarter since at least 1995, with $1.8 billion flowing into 122 deals and captured the second largest investment total behind the Software industry. Even after excluding two large Biotechnology deals, the sector saw a nearly 40 percent jump in investment dollars over the previous quarter. Biotechnology captured 74 percent of total Life Sciences investment during the second quarter of 2014, identical to the same period last year but higher than the 64 percent Life Sciences investments represented in the first quarter of 2014. Two of the top 10 deals in Q2 were investments in Biotechnology companies and together accounted for $320 million.
Investments in Medical Device companies reached $649 million in 73 deals for the quarter, which represented a 23 percent increase in dollars invested but a five percent decrease in the number of deals. On a quarter-over-quarter basis, funding increased 69 percent for Biotechnology and 23 percent for Medical Devices. On a year-over-year basis, Biotechnology and Medical Device investments increased by 25 percent and 23 percent, respectively, in terms of dollars invested.
First-Time and Follow-on Funding
First-time funding for the Life Sciences sector in Q2 2014 decreased by 20 percent to $267 million while the number of deals decreased by 18 percent to 32 deals, when compared to Q2 2013. However, follow-on funding for the Life Sciences sector increased 34 percent to $2.2 million and the number of deals increased 3 percent to 163 deals, during the second quarter of 2014, when compared to the same period of last year.
"Follow-on funding for biotechnology was the highest since at least 1995 as VCs continue to support companies in their portfolio," Vlahos continued. "Despite the dip in companies receiving an investment for the first time, VCs continue to see high growth potential for the industry thus the overall increase in dollars invested in the second quarter."
Funding by SubSegment
Compared to the second quarter of 2013, four of the eight Biotechnology subsectors saw an increase. The Biotech-Human subsegment once again saw the largest amount of funding at $1.4 million, an increase of 36 percent. Biosensors captured the second largest total at $132 million, which represented an increase of 154 percent. Biotech-Animal and Biotech-Industrial also saw increases in funding from the prior quarter, capturing $80 million and $68 million, respectively. The three Biotech subsectors showing a decrease in funding compared to the second quarter 2013, were Pharmaceutical, Biotech Equipment, and Biotech Research which declined 67 percent, 47 percent and 9 percent, respectively. Funding for all Medical Device subsegments increased on a year-over-year basis, with Medical/Health Products seeing the largest increase of 199 percent to $156 million, while Medical Diagnostics and Medical Therapeutics increased 15 percent and 2 percent, respectively.
Investments by Region
The top five metropolitan regions receiving the most Life Sciences venture capital funding during the second quarter of 2014 were San Francisco Bay Area, Boston, San Diego Metro, New York Metro and Great Lakes. San Francisco Bay Area companies received $866 million going into 54 deals. Boston Metro received the second highest total at $540 million in Q2. San Diego Metro, NY Metro, and Great Lakes captured $167 million, $125 million, and $123 million, respectively.
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 Pharmaceutical and Life Sciences Industry Group (http://www.pwc.com/us/pharma and http://www.pwc.com/us/medtech) provides clients with audit, tax and advisory services. The firm has extensive experience in delivering industry-tailored solutions on a wide range of strategic, financial and operational issues. The Pharmaceutical and Life Sciences Industry Group is part of PwC's larger initiative for the health-related industries that brings together expertise and allows collaboration across all sectors in the health continuum. Follow PwC Health Industries on Twitter at https://twitter.com/PwCHealth.
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