Medical Device Funding Jumps for All Areas in Second Quarter

August 21, 2015

More details have emerged about investments in the medical device sector during the second quarter of 2015, with the official release of a report from PricewaterhouseCoopers and the National Venture Capital Association.

According to the PwC/NVCA MoneyTree report, based on data from Thomson Reuters, medical device investments jumped 22 percent in terms of dollars over the same period last year.

Medical diagnostics funding saw the biggest gain, 88 percent to $140 million, while medical therapeutics rose 29 percent to $500 million.

Medical/health products, however, saw a decline of 16 percent to $174 million versus the same period last year.

Funding Stages

Early-stage Funding for devices rose 59 percent to $264 million in 33 deals. That compares with $167 million in 24 deals for the same time period last year.

Late-stage funding also grew — 10 percent to $549 million in 42 deals. During the second quarter of 2014, the total was $500 million across 53 deals.

Growing Confidence

The report notes that the average deal size for late-stage medical device transactions was $13.1 million versus $8 million for early-stage deals.

“In the second quarter early-stage investments grew significantly year-over-year for both biotechnology and medical devices,” says Greg Vlahos, life sciences partner at PwC.

“It’s another sign of confidence in the sector.”

Vlahos sees a lot of investor optimisim about the device arena, particularly as more companies look to file initial public offerings.

“We’ve seen a strong medical device IPO market over the past few quarters in addition to an increase in VC investing,” he says.

“We expect that VC investing in medical device companies will at least match the dollars invested in 2014, if not exceed it.”

The two firms released figures in July, showing that investors pumped more than $800 million into private companies.

That figure represents an increase of about 70 percent over the first quarter of the year.

For the two quarters, medical device companies have taken in about $1.29 billion — slightly ahead of the halfway mark of 2014, when the total stood at $1.26 billion (IDDM, July 24).

More Cash

Overall, second-quarter investments in the life sciences sector — biotechnology and medical devices combined — accounted for about $3.1 billion going into 201 deals, a 41 percent increase in dollars, but flat in terms of deals, versus the first quarter of the year.

Calhoun Vision, a Pasadena, Calif.-based company that is developing a light adjustable intraocular lens, was the leader, bringing in nearly $69 million in financing.

The next largest monetary injection went to San Jose, Calif.-based Outset Medical, which reeled in $51 million, according to the company.

The report attributes the uptick in funding to changes in the investor ecosystem. New sets of investors are stepping in, such as private equity firms that have evolved into venture capitalists.

That has led to billion dollar rounds — a reality that didn’t exist in early 2014.

To read the life sciences section of the report, visit www.fdanews.com/082415-pwc-report.pdf. — Elizabeth Hollis