Q2 Contains Little Good News for Life Sci Startups

Venture capital funding for life sciences businesses plunged nearly 40% by dollar volume and fell also by the number of deals being done in the second quarter of 2012, comparing year-over-year figures, a report from PricewaterhouseCoopers and the National Venture Capital Association stated.

How much has the pace of investing in life sciences companies slowed? The business’ portion of all investing in the venture capital asset class fell to just 20% last quarter, which marks the lowest ratio for life sci VCs’ investing since the third quarter of 2002, nearly a decade prior.

The report was assembled with Thomson Reuters data.

Both compared to year-over-year figures, and the first quarter of 2012, the average deal size slipped to $8 million—this marks a 22% decrease from the second quarter the year prior, and a nominal slide of 3% from this year’s first quarter.

Breaking down by sub-sector, medical therapeutic company fundings fell by 26% to $508 million and medical diagnostics startups’ rounds plunged 44%, to just $54 million (all figures compared to the second quarter of 2011). Early stage funding for biotech companies fell 49% to $324 million and late-stage fundings fell 54% to $372 million, also comparing this year’s second quarter to last year’s.

Newer startups may be coming into favor: the decline in early stage medical device fundings fell only 10% to $274 million and for late-stage device companies, funding fell 22% to $426 million (again, comparing this year’s second quarter to 2011).

The news comes as a number of other Vcs are out fundraising for life sciences funds, with varying degrees of success. PeHUB has reported earlier this year that Versant Ventures and Pappas Ventures are among the asset class’ life sci VCs seeking new funds. Additionally—and, possibly, less likely—this website reported in 2011 that Sanderling Ventures, a longtime player in the space, would also seek out another vehicle.

It remains to be seen if—and how—life sci VCs will be able to secure more capital and do more deals, or if the PwC-NVCA report is a harbinger of things to come for the industry. Many venture capitalists admit that it has become increasingly difficult to corral limited partners for their dedicated funds. Still, the pace of M&A exits has picked up for life science venture capitalists, which could indicate that LPs disappointed by West Coast tech and Internet startup funds will make a comeback. Only time will tell.

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