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US VC Spending Dips 3 Percent in Q3 as Bio-Clusters Endure Big Declines

NEW YORK (GenomeWeb News) - Private equity destined for biotechnology and pharmaceutical companies nationwide contracted 2.7 percent in the third quarter due in part to a dip in seed and series A venture capital financing, according to Ernst & Young and Dow Jones VentureOne.
The survey, which also showed significant declines in some life science clusters, found that VC spending nationwide fell to 66 deals totaling almost $1.42 billion in 22 sub-regions from 73 deals totaling around $1.46 billion year over year.
Though the survey did not break down the industry by vendor discipline, such as genomic or proteomic tool shops, fluctuations in how the broader life-science industry is capitalized typically spill over into the vendor segment.

Looking at bio-clusters, E&Y showed that two of the nation’s top three life-science regions posted declines in third-quarter VC financing. Most notably, private-equity investment in companies in San Diego, the West Coast’s second-largest life-sciences cluster, plummeted almost 90 percent during the third quarter to $28 million spread among six deals, compared with $221 million in eight deals a year earlier.

Also drubbed was the Boston region, the East Coast’s top life sciences cluster, in which third-quarter life-science investment fell by nearly half to $56 million from $98.3 million year over year
E&Y officials stressed that the declines in Boston and San Diego will have no long-term effect on their standing among the nation’s top biotech clusters.
Not all regions saw declines. VC spending in San Francisco Bay Area companies increased 7.6 percent to $190.6 million among 14 deals from $177.08 million among 13 deals a year ago.
“If you look at where most of the investments are in this industry, they’re pretty much Boston, San Francisco, and San Diego,” according to Scott Sarazen, market leader for E&Y’s Global Biotech Center. “At any particular time, depending on what technology is hot, that’s where the investments are going.”
Those clusters also finished in the top three among life science regions analyzed by PricewaterhouseCoopers. Leading PwC’s charge was the “Silicon Valley” region that includes San Francisco, whose take-home inched up 1 percent to $299 million in 22 deals from $296 million in 25 deals recorded this time last year. That was followed by San Diego, whose investments surged nearly 60 percent to $195 million in 11 deals from $122 million in seven deals year over year. Lastly, investments in “New England,” dominated by the Boston-Cambridge, Mass., region, declined 42 percent to $145 million in 25 deals from $250 million in 19 deals one year ago, according to PwC.

The complete version of this article appears in the current BioRegion News, a GenomeWeb Daily News sister publication.

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