Medical Devices Get Most Funding in Slow Stretch for VC: Mid-Year Results from Healthcare Corporate Finance News

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Mid-year results reveal that the last time the health care venture capital market experienced such a slow six-month stretch was the second half of 2005. During the six months ended June 30, 2008, based on deals with disclosed prices of $1 million or more, 208 health care venture capital deals were announced totaling $3.58 billion. The second quarter ended June 30, 2008 produced 105 deals totaling $1.66 billion.

Investment in certain sectors of the health care market is being driven by the need for new technology that addresses the limitations of currently available treatment

Medical device companies captured an impressive share of the dollars and deals, as displayed in the following chart, which breaks out by sector the total number of deals and total amount of funding, for both the quarter and the first six months of the year.

Health Care Venture Capital Investment Totals By Sector Sector Second Quarter Ended June 30, 2008   Six Months Ended June 30, 2008 Number of Deals   Dollar Total, In Millions Number of Deals   Dollar Total, In Millions Medical Devices 29   $430.2 63   $1,098.7 Biotechnology 26   $467.8 51   $853.4 Biopharmaceuticals 23   $332.4 40   $709.3 Pharmaceuticals 10   $213.7 26   $614.0 e-Health 9   $57.3 17   $110.2 Health Care Services & Other 8   $156.1 14   $234.4 Total 105   $1,657.5   211   $3,620.0 Biotechnology and biopharmaceutical companies also continue to attract a major portion of the venture capital funding devoted to health care. "The downturn in funding and deal volume is, to some extent, a reflection of the broader markets, which presently feature uncertainty related to economic and regulatory forces," remarked Gretchen S. Swanson, Editor of Healthcare Corporate Finance News. "In addition, the current lack of demand for venture-backed IPOs is giving investors and entrepreneurs a reason to focus on intensifying efficiency and consider alternate strategic options for accessing capital."

"Investment in certain sectors of the health care market is being driven by the need for new technology that addresses the limitations of currently available treatment," commented Stephen M. Monroe, Managing Editor. "Companies with commercial-stage products and growth prospects are among the most desirable investment opportunities for venture capitalists."

The most active venture capital firms in the health care sectors during the first half of 2008 are listed below, with figures for both the quarter and the six months ended June 30. Number of investments refers to the number of times the firm contributed to a financing announced during the given period.

Most Active Health Care Venture Capital Firms The Second Quarter,

Ended June 30, 2008

  Number of Investments   The Six Months Ended June 30, 2008

  Number of Investments Domain Associates   5   Domain Associates   11 PTV Sciences   5   Versant Ventures   10 Pequot funds   4   Kleiner Perkins Caufield & Byers   8 Versant Ventures   4   Polaris Venture Partners   6 Atlas Venture   3   PTV Sciences   6 HBM funds   3   Delphi Ventures   5 NLV Partners   3   Flagship Ventures   5 Psilos Group   3   Forbion Capital Partners   5 Three Arch Partners   3   MPM Capital   5     Sofinnova funds   5     SV Life Sciences   5     Three Arch Partners   5 Healthcare Corporate Finance News (http://www.hcfnews.com) reports weekly on financial events in the fast-paced venture capital, private and public equity, and merger and acquisition markets for health care companies, and provides subscribers with access to a searchable online database of health care venture capital deals. This monthly newsletter and weekly email update is published by Irving Levin Associates, Inc., a leading financial publisher and source of market intelligence since 1948. For more information, please call 1-800-248-1668.

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