Medical device venture capital funding took a harsh turn for the 3rd quarter of 2012, with a 37% drop in dollars spent since the previous quarter, according to a PricewaterhouseCoopers report.
The medtech sector fell from its 2nd place seat for sectors collecting the most VC dollars to 6th, with funding lower than it’s been since 2004.
The industry collected $434 million over 65 deals in Q3 2012, a 42% year-over-year decline in spending and a 27% drop in the number of deals.
Funding in the lifesciences sector grew 16% quarter-over-quarter, driven by a 64% spike in biotechnology dollars, which pulled that sector up to take 2nd place behind funding for the software industry.
"The gains in biotechnology funding can be attributed to some big follow-on rounds. It’s unclear whether the biotechnology industry can maintain these gains through the end of the year," PwC U.S. venture capital practice global managing partner Tracy Lefteroff said in prepared remarks. "Despite regulatory uncertainty and a long path to exit, venture capitalists are still willing to invest in the life sciences sector, but they are cautiously looking for innovative products targeting unmet needs."
Although on the right track, the 3rd-quarter gains didn’t do much to revive the sector from a year-long decline. VC spending in Q3 2012 was still 12% lower than in Q3 2011, and the number of deals declined by 8%.
"The 16% gain for the life sciences sector reversed a 4-quarter decline,"Lefteroff said. "Yet the sector won’t outpace 2011 unless it gets a boost during the final quarter. Regulatory uncertainty, capital intensity, and investment time horizons remain challenging issues for would-be investors in the sector."
The mixed bag of lifesciences funding comes amid an overall decline in VC investment. Total VC spending in Q3 2012 was 10% lower year-over-year and the number of deals declined 12%, according to the report.
Lifesciences funding represented a 26% share of all VC spending during Q3, a 6% larger portion than last quarter when the lifesciences share was at its lowest in almost a decade.
