Insight journal - Deals and alliances

VC spend in life sciences grew in 2011

Posted on 06 February 2012

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Published by MassDevice.

Venture capital investors spent 21% more backing life science startups in 2011 than in 2010, according to PricewaterhouseCoopers; also, VCs in the Valley lose confidence; Greenway Medical prices IPO; does Abbott need a new CEO?; and analysts' ups and downs. 

Venture capital funding of life science startups, including biotech and medical device enterprises, rose by 21% last year, according to PricewaterhouseCoopers.

VCs dropped $7.5 billion on 785 life sciences deals during the year, according to a PwC report, "Zigzagging Upward," compiled using data from the PricewaterhouseCoopers LLP/National Venture Capital Assn. MoneyTree Report and Thomson Reuters.

Life science investment rose by 34% during the 4th quarter, compared with Q4 2010, but the number of deals fell off by 5%. VCs spent $1.7 billion on 184 deals during Q4 2011.

"Life sciences investments in the fourth quarter outperformed total venture investment, when compared with the same quarter of 2010," Tracy Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers, said in prepared remarks. "We did see the IPO window crack slightly during the fourth quarter of 2011 and life sciences companies claimed three of the 11 venture-backed IPOs. However, at this point in time, M&A deals continue to offer more exit opportunities for life sciences companies than IPOs."

Medical device investment jumped 20% from 2010 to 2011, although the number of deals stayed flat at $2.8 billion for 339 deals.

A survey of Silicon Valley venture capitalists showed that they're less confident for the 3rd straight month.

The survey, conducted by Mark Cannice of the University of San Francisco, revealed that the confidence of Left Coast VCs "in the future high-growth venture environment" in the Bay Area is at its lowest ebb since the financial crisis began in 2008.

"The life science sector, in particular, was weighed down again by a difficult regulatory regime. The uneven exit environment and the lackluster performance of some firms that did exit recently also added to a generally cautious outlook," according to the report.

Greenway Medical Technologies announced the pricing of its initial public offering of about 6.7 million shares, at $10.00 per share. The shares are expected to begin trading on the New York Stock Exchange under the ticker symbol "GWAY" today.

As Abbott prepares to spin out its research pharmaceuticals business, some Wall Street wags are wondering if it's time to part ways with chairman & CEO Miles White.

"Since taking over the Chicago-area company in 1988, White has put up a big goose egg on the investor scoreboard. As Forbes recently pointed out, Abbott’s stock is at about $50, the same price it was when White took over. What’s more, dividends haven’t even kept pace with inflation," according to InvestorPlace columnist BNarry Cohen.


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