US venture capital funding in the life sciences sector jumped 37% during second-quarter 2011, PricewaterhouseCooper (PwC) has reported.
Venture capitalists invested $2.1 billion in 206 US life sciences deals during the quarter, says the study, which includes data from the PWC/National Venture Capital Association MoneyTree Report, based on data from Thomson Reuters. While this represents the seventh best quarter since MoneyTree Report began collecting data in 1995, the dollars invested in life sciences during the second quarter of the year declined 3% when compared with the same period of 2010.
Deal volume also decreased year-on-year, by a greater margin of 21%, although volume was up 12% compared to first-quarter 2011.
“The rise in venture capital investment going into life sciences during the second quarter can be attributed, in part, to an increase in exit activity,” noted Tracy Lefteroff, global managing partner of the venture capital practice at PwC. “The exit market for biotech and medical device companies has been more active over the past year, and exit activity allows venture funds to achieve liquidity in their portfolios. This liquidity enables venture funds to return dollars to their limited partners and make additional funds available to support the rest of their portfolios,” he says.
Biotechnology investing declined 9% in dollar terms and dropped 24% in deals in second-quarter 2011 compared with the like, year-earlier period, and 44 life sciences companies received venture capital funding for the first time, capturing $283 million, which is down 27% on the number of companies and a small drop in investment compared with the second quarter of 2010. But first-time deals in the life sciences sector averaged $6.4 million, which is up 36% on second-quarter 2010 and significantly higher than the average first-time deal size of $4.8 million for all industries during the quarter.
“Average first-time deal size increased by 36% year over year, in part because of the longer timeframes that venture capitalists believe they will need for their portfolios to achieve significant milestones. These milestones could lead to a window of opportunity for additional financing, or an exit,” says Mr Lefteroff.
Of the seven biotechnology subsegments tracked by the report, human biotechnology captured the largest share during the second quarter of this year, with $819 million going into 70 deals. However, this represents a 2% decrease in dollars and a 21% fall in terms of deals compared to second-quarter 2010, the report notes.
