Five Years of Growth in Venture Capital Industry

 

FOR IMMEDIATE RELEASE Stephen M. Monroe, Partner
Gretchen S. Swanson, Associate Editor
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Five Years of Growth in Health Care Venture Capital, According To Healthcare Corporate Finance News

Norwalk, CT - January 14, 2008 - For the fifth year in a row, venture capital funding increased in the health care industry, with more total dollars invested and more deals announced in 2007 than the previous year. Health care companies announced 481 deals totaling $9.7 billion in venture capital last year, achieving an almost 13% increase in funding compared with 2006. Deals were made at a brisk pace, with the number of deals increasing by approximately 4% in both 2006 and 2007. The quarterly and year-end deal and dollar totals for these years are displayed in the chart below.
 
Health Care Venture Capital Deal and Dollar Volume, 2006 to 2007
Quarter/Year
Number of Deals
Total Funding, in Billions
Q1:06
136
$2.2
Q2:06
97
$2.0
Q3:06
110
$2.2
Q4:06
120
$2.2
Year-End Total, 2006
                463
                          $8.6
Q1:07
134
$2.8
Q2:07
117
$2.3
Q3:07
121
$2.5
Q4:07
109
$2.1
Year-End Total, 2007
                481
                          $9.7
 
“Health care venture capital investments have increased steadily over the last five years and lately, we are seeing more of these deals tied to mergers, acquisitions and collaboration agreements,” commented Stephen M. Monroe, Managing Editor. “In addition, we continue to see new venture capital firms being formed and new funds launched to focus on health care sectors.”

Some of the top venture capital firms in health care in 2006 doubled their investment activity in 2007, including Domain Associates and Alta Partners. Furthermore, in 2006, no venture capital firms announced more than 12 health care deals, while in 2007, 12 firms had 13 or more investments. The top health care venture capital firms for the quarter and the year ended December 31, 2007, based on number of investments, are listed in the chart below.
 
Most Active Health Care Venture Capital Firms
Fourth Quarter,                            Ended December 31, 2007
Number of Investments
Year Ended                          December 31, 2007
Number of Investments
Johnson & Johnson Development
7
Alta Partners
21
HBM BioVentures
5
Domain Associates
20
New Enterprise Associates
5
Sofinnova
18
Domain Associates
4
Novartis funds
17
ProQuest Investments
4
Frazier Healthcare
16
Sofinnova Partners
4
Johnson & Johnson Development
16
Vivo Ventures
4
Polaris Venture Partners
15
 
 
HBM BioVentures
14
 
 
InterWest Partners
14
 
 
MPM Capital
14
 
 
New Enterprise Associates
14
 
 
Versant Ventures
13
 
“From what we hear, venture capital investors anticipate 2008 will be another busy year for health care,” noted Gretchen S. Swanson, Editor of Healthcare Corporate Finance News.  “What remains to be seen is the level of impact that political and economic forces will have on the financial markets in the coming year, and whether these forces will encourage or dampen deal flow.”

The results of the fourth quarter of 2007 are not quite as impressive as the results for the entire year—but the fourth quarter has historically not been the most active quarter of each year.  During the three months ended December 31, 2007, approximately $2.1 billion of venture capital financing was provided to health care companies in a total of 109 rounds.   In the same period, the median deal size increased to $16 million, up from $11.5 million in Q4:06.  The chart below offers a view of quarterly investment activity for the year, broken down by sector.
 

 

 
 
Quarterly Health Care Venture Capital Deal And Dollar Volume, By Sector, 2007
Sector
Q1:07
Q2:07
Q3:07
Q4:07
Deals
$Billions
Deals
$Billions
Deals
$Billions
Deals
$Billions
Biopharmaceuticals
23
$727.4
27
$686.4
20
$472.5
17
$457.1
Biotechnology
27
$392.9
25
$368.8
26
$358.2
33
$479.8
e-Health
9
$52.3
5
$35.9
12
$106.3
5
$19.0
Health Care Services and Other
13
$245.1
6
$119.5
8
$503.0
9
$192.0
Medical Devices
43
$726.1
35
$733.4
34
$622.7
27
$600.9
Pharmaceuticals
19
$660.4
19
$352.2
21
$390.5
18
$396.9

Zosano Pharma announced the largest venture capital financing of any health care company during the last quarter of 2007, with a $90 million round.  Including that deal, six rounds of $50 million or more apiece were announced during Q4:07, accounting for about 18% of all funding for the period.  The health care services sector produced two of those deals, even though the sector accounted for only a small percentage of the number of deals announced.  Reliant Renal Care and Simplex Diabetic Supply each raised $50 million rounds.  As one might expect, the rest of the largest investments were made in pharmaceutical, medical device and biopharmaceutical companies.


Healthcare Corporate Finance News 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.