Number and Value of VC Investments
In the first quarter of 2007, venture capital investors put $2.9 billion into private U.S. healthcare companies, including $1.8 billion in biopharmaceuticals and $953 million in medical device ventures. This represents the largest stakes made in these categories in any quarter since Venture Source and Ernst & Young LLP began quarterly reporting of healthcare funding in 2000.
On an annualized basis the 2007 number is approaching $12 billion, thus 2007 could see the biggest ever infusion of venture support into health sciences and technologies. The previous record was set in 2000 at $9.8 billion. The 2007 amount will be about half more than last year’s $8.3-billion aggregate life science funding.
The increase in total dollars doesn’t mean this is easy money. The number of life science companies receiving venture funding has hovered between 150 and 175 per quarter, or about 650 per year, since 2000. That year, 838 investments were made, the highest ever. The median size of a venture investment in healthcare also has remained relatively steady. It has increased on an annual basis from $7 million in 2000 to $8 million in 2006. For the first quarter of 2007, however, the median healthcare financing jumped to more than $12 million. Specifically, in biopharma it was even higher, reaching $20 million, partially as a result of some large private equity and acquisition-related financing.
Biopharmaceutical, biotechnology, and pharmaceutical companies consistently represent almost half of the recipients and are awarded about 60% of the dollars from healthcare venture capital firms. The medical devices category remains steady at about 40% of the transactions and 33% of the money, and the rest goes to healthcare services and medical software and information technology companies.
The firms receiving the largest private support so far in 2007 include EUSA Pharma (www.eusapharma.com), developer of specialty pharmaceuticals focused on European markets, which received $175 million in acquisition capital from investors, including 3i Group, Advent Venture Partners, Essex Woodlands Health Ventures, Goldman Sachs Private Equity Group, NeoMed Management, and SV Life Sciences. CardioNet, which provides service-mobile outpatient telemetry solutions, received $110 million from private equity investors, including Foundation Medical Partners, Hambrecht & Quist Capital Management, Sanderling Ventures, and other private equity investors.
Large first-round venture capital investments in the last year include Macroflux’ (www.macroflux.com) $75 million from Nomura Phase4 Ventures, New Enterprise Associates, and HBM Partners in connection with Macroflux’ spinout from Johnson & Johnson’s Alza (www.alza.com) subsidiary. The company develops transdermal delivery technology for proteins, peptides, and vaccines. Zogenix (www.zogenix.com), a firm focused on pharmaceuticals to treat central nervous system disorders and pain, received $60 million in first-round funding from BA Venture Partners, Clarus Ventures, Domain Associates, Life Science Angels, Thomas, McNerney & Partners, and Windamere Venture Partners. Arete Therapeutics (www.aretetherapeutics.com) raised $35 million in Series A financing from Alta Partners, Frazier Healthcare Ventures, Burrill & Company, Three Arch Partners, and Altitude Life Science Partners.
The most active venture capital firms investing in healthcare over the past 18 months include Versant Ventures, Alta Partners, Domain Associates, Three Arch Partners, Polaris Venture Partners, MPM Capital, Frazier Healthcare Ventures, New Enterprise Associates, Oxford Bioscience Partners, and InterWest Partners.