Venture capital funding in the life sciences sector, which includes the biotechnology and medical device industries, captured the highest percentage of venture capital dollars invested during the first quarter of 2010, according to a report by PricewaterhouseCoopers.
The report, based on data from Thomson Reuters, shows that life sciences funding for Q1 2010 totalled USD1.3bn in 160 deals, which represents 28 per cent of all venture dollars invested and 23 per cent of total deals during the quarter.
Despite capturing the largest percentage of total dollars invested, life sciences investments dropped when compared to Q4 2009, when USD1.8bn was invested into 202 deals. This represents a decline of 26 per cent in dollars and 21 per cent in deals from Q4 2009.
The first quarter of 2010 reversed an upward trend in deal activity, which had grown for three previous quarters.
"This quarter marked a period of slow economic recovery and political uncertainty for the life sciences sector," says Tracy T. Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers. "It’s too early to say that the first-quarter decline in sector funding represents a trend, since a decline in first-quarter funding is not unusual. Looking back, we see that funding has declined in the first quarter as compared to the prior quarter in ten out of 15 years. Funding activity typically increases in the fourth quarter when venture capital firms try to meet their investment allocation targets."
For all sectors, venture capitalists invested USD4.7bn in 681 deals in the first quarter, a decline of nine per cent in terms of dollars and 18 per cent in terms of deals, compared to the fourth quarter of 2009 when USD5.2bn was invested in 832 deals.
Life sciences has been the number one sector for venture capital investing since Q2 2005, with biotechnology being the absolute single-industry leader in dollars invested over the past four quarters.
The investment split for the life sciences sector in the first quarter of 2010 remained consistent with previous years. Biotechnology accounted for 61 per cent of dollars with USD825m going into 99 deals, while medical devices claimed 39 per cent of dollars with USD517m going into 61 deals.
Both early and later-stage funding decreased in terms of dollars from the previous quarter. In Q1, later-stage funding decreased by 11 per cent, and early-stage investments decreased by 36 per cent from the prior quarter. Early-stage deal volume also declined from the last quarter of 2009 to the first quarter of 2010.
Early-stage investments in the biotechnology sector outpaced later-stage funding, continuing a four-quarter trend. For the medical device industry, later-stage funding fared better, increasing 16 percent from the prior quarter to USD359m.
