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Medical Device VCs Raise more than Biopharmaceuticals

October 28, 2011

In the third quarter, Medical Device  companies raised more venture financing than Biopharmaceutical companies for  the first time since 1998. Sixty-eight medical device deals raised $857  million, a 15% rise in deal activity and 30% increase in capital invested from  the same period last year. In the Biopharmaceuticals sector, 78 deals raised $715  million, a drop in capital invested from the year-ago period when 71 deals  raised $865 million.

Investors put $8.4 billion into 765 deals for U.S.-based venture  companies during the third quarter of 2011, a 29% increase in investment and 8%  increase in deals from the same period last year, according to Dow Jones VentureSource. The median amount raised for a round of financing during the third  quarter was $6 million, up from the $5 million median a year earlier.

“Venture investment rose in the third quarter, putting the industry on  pace to near pre-recession investment levels by the end of the year,” said  Jessica Canning, global research director for Dow Jones VentureSource. “While  it’s unclear how long venture capitalists can continue at this pace given the  weak fund-raising and difficult environments, the increase  in deal activity, especially among early-stage start-ups, shows VCs are  optimistic they will be able to support the next generation of start-ups.

“Although the Biopharmaceuticals  sector lost its long-held place as the leader of the healthcare industry,  early-stage investment was strong, showing that investors are building a  pipeline,” Canning said. “In medical devices, investments were weighted toward the later-stage  deals, which could be a result of concerns over the clarity of the FDA’s requirements weighing more  heavily on device investors.”

Forty-two percent of biopharmaceuticals deals went to early-stage  companies and 26% of medical device deals went to early-stage companies.

Medical IT companies maintained the  strong investment numbers seen over the last year as 24 deals raised $207  million, not far from the same period last year when 24 deals collected $182  million.

Overall, the healthcare industry raised $1.9 billion for 184 deals, an 11% decline in capital invested and 9%  increase in deal flow.

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