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Venture capital investment in the New England health industries16/05/2007. Source: PricewaterhouseCoopers, NVCA.
 Last year was a near-record year for venture capital investment in New England biotechnology, healthcare services & technology and medical devices & equipment companies, says PricewaterhouseCoopers, with $1.26bn invested in 119 deals, a robust 44 per cent increase in dollar value and a 21 per cent increase in deal volume over 2005.
The data were included in the PricewaterhouseCoopers 2006 Annual Report on Venture Capital Investment in the New England Health Industries, released today.
"The robust venture capital funding totals during 2006 confirmed New England's leadership in biotechnology and other health industries," said Gerry McDougall, leader of PricewaterhouseCoopers Health Sciences practice. "The combination of leading university research centers, outstanding teaching hospitals and a super-cluster of talent makes the region a magnet for the health industries, especially in biotechnology and medical devices, and has helped fill the gap caused by funding declines in other industries. Although other states are investing in their life sciences capabilities, New England is competitively well-positioned to remain a national leader, and is even attracting manufacturing and other operations beyond research and development."
Biotech Firms Garner Two-Thirds of all Healthcare-Related Venture Investment
The biotechnology industry led all sectors in venture capital funding for the full year of 2006, with two-thirds of all healthcare-related investment in New England going to biotech companies. Biotech firms received $831.3 million in 68 deals, driven by a strong showing in companies developing therapeutics and tools designed to improve drug development.
With an active mergers and acquisitions exit environment, New England medical devices & equipment companies received $327.3 million in 38 deals, the best since the record high of $404.4 million in 2000. Investment largely went to companies that develop medical technologies such as surgical instrumentation and drug delivery systems.
After a lull in 2005, investment in healthcare services & technology firms rose in 2006 with $102.7 million in 13 deals, especially in companies that assist in the operation and management of healthcare companies and outpatient care centers.
The $1.26 billion in New England health industries venture capital investment during 2006 approached the record $1.27 billion set in 2000. However, while healthcare-related investment was 11 percent of total venture capital investment at the peak of the dot-com boom in 2000, it was 42 percent of the total in 2006, a record share and proof that the region continues to benefit from the intellectual capital generated by its academic and medical research institutions.
Rhode Island Firms See Record Level of Venture Dollars
While the lion's share of health industries venture capital funding in 2006 went to Massachusetts-based companies, which received $1.14 billion for 108 deals, Rhode Island firms are coming on strong. Rhode Island biotech and medical device companies received a record $103.5 million in five deals, a 109 percent increase in dollar total over 2005 and 30 percent higher than the previous record high of $79.5 million, set in 2001.
Connecticut companies outside of the New York metropolitan area received $3 million for one deal; New Hampshire companies received $6.2 million for two deals; and Maine firms received $7.1 million for three deals. No Vermont health industries companies received venture capital funding in 2006.
Total Connecticut investment, including funding for New York metropolitan area companies not counted in New England totals, was $144.6 million in 10 deals.
Fourth Quarter of 2006 Dips After Strong First Three Quarters
After a number of large deals during the first three quarters, New England health industries VC funding slipped in the fourth quarter (October-December) of 2006, totaling $305 million for 29 deals, a 14 percent decrease in dollar value and a 15 percent decrease in deal volume compared to the third quarter of 2006. The 29 deals during the fourth quarter had an average deal value of $10.5 million.
"The increase in funding can be attributed to venture capitalists putting more money into companies they have been backing, getting them ready for exits, and putting to work money they have raised recently," said James Connolly, PricewaterhouseCoopers partner and Boston Life Sciences Assurance practice leader. "Regardless of the cyclical nature of venture funding, the amount of investment in young New England life sciences companies is impressive, and bodes well for the industry's success."
National Health Industries Venture Capital Scores Highest Total Since 2000
Nationally in 2006, health industries companies attracted $7.83 billion of VC investment in 833 deals, a 17 percent increase in dollar volume and a 10 percent increase in the number of deals compared with 2005. The dollar total was the highest in the health industries nationally since the record $9.55 billion in 2000, and the number of deals was the highest since the 923 recorded in 2000.
California's Silicon Valley led all regions with 29 percent of national health industries venture capital funding ($2.24 billion in 205 deals), followed by New England, which ranked second in both funding received and number of deals. However, the dollar value of New England's investments grew 44 percent in 2006, compared to 15 percent growth in Silicon Valley and 10 percent growth in all of California.
The National Venture Capital Association represents approximately 480 venture capital and private equity firms. Their mission is to foster greater understanding of the importance of venture capital to the U.S. economy, and support entrepreneurial activity and innovation.
The PricewaterhouseCoopers Private Equity & Venture Capital Practice is part of the Global Technology Industry Group.
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