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Life Sciences Investing Rebounds in Q2 2010, Rising 52% from the Prior Quarter, According to PricewaterhouseCoopers

Wednesday, August 4, 2010 Corporate News J E 4
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NEW YORK, Aug. 4 Venture capital (VC) funding in the Life Sciences sector, which includes the biotechnology and medical device industries, captured the highest total of VC dollars invested during the second quarter of 2010, according to a new PwC report, "Quarterly Recovery," that includes data from the PwC/NVCA MoneyTree Report, based on data from Thomson Reuters. Life Sciences funding for Q2 2010 totalled $2.1 billion in 234 deals, which represents an increase of 52 percent in dollars and a 36 percent increase in deals from the prior quarter, reversing the performance seen in the first quarter of 2010 when sector investment dropped 27 percent in dollars and 15 percent in deals from Q4 2009.

For the first half of 2010, Life Sciences investments totalled $3.4 billion, a 26 percent increase from the first half of 2009. The total number of Life Sciences deals rose 18 percent to 406 in the first half of 2010 from 345 in the first half of 2009.

"The rise in companies lining up to go public in the Life Sciences space was likely a driver of this strong second quarter rebound," said Tracy T. Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers. "It takes several quarters to establish a clearly sustainable growth trend, but the data looks good so far."

For all sectors, venture capitalists invested $6.5 billion in 906 deals in the second quarter, an increase of 34 percent in terms of dollars and 22 percent in terms of deals, compared to the first quarter of 2010 when $4.9 billion was invested in 740 deals. Life Sciences has been the number one sector for VC investing since Q2 of 2005, with Biotechnology being the absolute single-industry leader in dollars invested over the past five quarters.

The investment split for the Life Sciences sector in the second quarter of 2010 remained consistent with previous years. Biotechnology accounted for 63 percent of dollars with $1.3 billion going into 139 deals, while Medical Devices claimed 37 percent of dollars with $755 million going into 95 deals.

Investments by Stage of Development

Early Stage funding increased in terms of dollars and deals from the previous quarter and rose year over year while Later Stage dollars and deals saw a decline from the prior quarter and year over year. Early Stage investing saw a significant jump in Q2, rising to $751 million, an 83 percent jump from the prior quarter and a 33 percent increase compared to the second quarter of 2009.

Later Stage funding decreased by 7 percent from Q1 2010 to $402 million. The number of Later Stage deals also saw a decline, falling to 44 deals in Q2 2010, a 6 percent decline from the prior quarter and a 17 percent drop when compared to the second quarter of 2009.

Early Stage investments in the Biotechnology sector outpaced Later-stage funding, showing a 68 percent increase in the number of deals and a 55 percent jump in dollars invested in the second quarter when compared to Q1 2010. For the Medical Device industry, one-third of the dollars in the second quarter went to Later Stage companies, while 34 percent of the deals were Early Stage companies.

Funding by Subsegment

Nearly all of the seven Biotechnology subsegments exhibited growth in the second quarter both over the prior quarter and over the second quarter of 2009. The Human Biotechnology subsegment captured the largest share in the second quarter with $774 million going into 81 deals, a 21 percent increase in deals and a 48 percent increase in dollars from Q1 of 2010. The Pharmaceutical subsegment jumped 45 percent in deals and 125 percent in dollars from the Q1 2010 to $320 million going into 29 companies. The Industrial Biotechnology subsegment showed the greatest growth with $120 million going into 10 deals in the second quarter of 2010, a 150 percent jump in deals and 66 percent rise in dollars from the prior quarter and more than a 200 percent increase in dollars and deals compared to the second quarter of 2009.

Funding for Medical Device subsegments increased from the previous quarter with the exception of Medical/Health Products, which declined year over year and quarter over quarter. The Medical Therapeutics category captured 58 percent of the deals and 68 percent of the dollars with $514 million going into 55 deals in Q2. This represents a 41 percent increase in deals and a 74 percent increase in dollars over the prior quarter.

"At a time when a number of drugs have been taken off the market and blockbuster patents are expiring, venture capitalists are putting money into new drug development," added Lefteroff. "The demand for innovative products is not expected to stop."

Investments by Region

The top five metropolitan regions receiving Life Sciences venture capital funding during Q1 2010 were San Francisco Bay ($698 million), Boston ($314 million), San Diego Metro ($138 million), Orange County ($108 million), and the Southeast's Research Triangle ($72 million).

San Francisco Bay, Orange County and Research Triangle all saw increases in dollars invested from the prior quarter, rising 175 percent, 83 percent and 34 percent, respectively. Boston and San Diego Metro experienced drops in funding from Q1, falling 13 percent and 5 percent in the second quarter of 2010. Only the San Diego Metro region experienced a drop in the number of deals, falling 6 percent in the second quarter from the prior quarter.

A full copy of the report is available for download at http://www.pwc.com/us/lifesciencesmoneytree.

About PricewaterhouseCoopers Pharmaceutical and Life Sciences Industry Group

PricewaterhouseCoopers Pharmaceutical and Life Sciences Industry Group (http://www.pwc.com/us/pharma) provides clients with audit, tax and advisory services. The firm has extensive experience in delivering industry-tailored solutions on a wide range of strategic, financial and operational issues.. The Pharmaceutical and Life Sciences Industry Group is part of PricewaterhouseCoopers' larger initiative for the health-related industries that brings together expertise and allows collaboration across all sectors in the health continuum. Follow PwC Health Industries on Twitter at http://twitter.com/PwCHealth.

About PricewaterhouseCoopers

PricewaterhouseCoopers (http://www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 163,000 people in 151 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

"PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.

Đ 2010 PricewaterhouseCoopers LLP.

SOURCE PricewaterhouseCoopers
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