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VC Funding in Life Sciences Plummets in Q2, Report Finds

NEW YORK (GenomeWeb News) – Venture capital investments into the life sciences dropped sharply in the second quarter compared to a year ago, according to a report this week from PricewaterhouseCoopers and the National Venture Capital Association.

VC funding into the life sciences sector, which includes biotechnology and medical devices, was down 39 percent year over year in dollar amounts and down 22 percent in the number of deals. A total of $1.4 billion was invested into 174 life science deals in the second quarter, the report said.

The decline was the fourth straight quarter in which VC funding in life sciences was down.

"The long-time horizon often required for a liquidity event, regulatory challenges, and large amount of capital often needed to fund life science companies likely contributed to this sector's investment decline during the past four quarters," Tracy Lefteroff, global managing partner of the venture capital practice of PwC US, said in the report, which is based on data provided by Thomson Reuters.

Total funding into biotechnology fell by 52 percent year over year on a dollar basis and 30 percent on a deal-number basis, while medical devices funding was down 17 percent in dollars and 11 percent based on the number of deals. The average size of each investment into the life sciences shrank, as well, by 22 percent compared to a year ago, to $8 million.

Regardless of the funding stage, VC firms were more reluctant to make investments compared to last year, the report found. Early-stage funding was down 36 percent to $598 million, and the 98 deals in the quarter represented a 16 percent decrease from a year ago.

Companies looking to rope in VC funding for the first time in their history had an especially difficult time of it, the report found. Initial investments fell to $130 million in the quarter, down 61 percent from a year ago.

"The drop in early-stage funding could have implications for the life sciences sector into the future," Lefteroff said. "If the number of new venture funds continues to contract as it has in recent years, there may be less capital available to support start-ups."

Late-stage funding also saw a significant drop — 41 percent year over year — to $798 million, while the 76 deals in the quarter represented a 28 percent decline from a year ago.

"It will continue to be challenging for life sciences to raise funds until the regulatory environment becomes transparent for biotech and medtech companies trying to move new products into the market," Lefteroff said.

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