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VC funding in life sciences down slightly in 2013, but Q4 up from Q3

Venture capital funding in 2013 for the life sciences sector, which includes biotechnology and medical devices, declined by 1 percent in dollars invested and 3 percent in number of deals compared to 2012, according to a newPricewaterhouseCoopers US report.

The report, "Medtech Slowdown," showed that VCs invested $6.6 billion into 778 life sciences deals in 2013, compared to $6.7 billion in 800 deals in 2012.

“Medtech Slowdown” includes data from the MoneyTree Report from PwC and the National Venture Capital Association based on data provided by Thomson Reuters.

San Diego was one of the top five metropolitan areas in terms of life science VC funding received in the fourth quarter of 2013. The San Francisco Bay Area unsurprisingly claimed the top spot with $550 million, followed by Boston raking in $382 million, Seattle with $186 million, San Diego at $95 million and the New York Metro area rounding out the list with $83 million. These five regions accounted for 73 percent of dollars invested in life science companies in the fourth quarter, with biotech investments representing 85 percent of these monies.

On a quarterly basis, life sciences investments rose 19 percent to $1.8 billion in the last quarter of 2013, compared to $1.5 billion during the prior quarter. The number of life sciences deals rose 21 percent from 188 during the third quarter to 228 during the final quarter of 2013. Despite the quarterly uptick, the life sciences share of total venture funding declined from 25 percent in 2012 to 23 percent in 2013.

"The fourth quarter and 2013 year-end numbers show there is continued interest in biotechnology even as medical devices slowed down during the year," said Greg Vlahos, life sciences partner at PwC. "With the strong exit markets for biotechnology in 2013, 2014 is set up for renewed interest in life sciences. In fact, first-time funding witnessed a strong finish to the year, increasing 48 percent in 2013. The enduring interest in early-stage opportunities will continue to drive investments in the sector."

Biotechnology companies raised $4.5 billion in 470 deals during 2013, the second-largest investment sector behind software, which drew $10.9 billionin 1,523 deals. Investments in biotechnology for all of 2013 increased by 8 percent in value, while volume declined by 2 percent.

The medical device industry was down overall for the full year, experiencing a 17 percent decrease in dollars invested and a 4 percent decline in the number of deals compared with 2012. However, in the last quarter of 2013, VCs invested $460 million into 94 medical device deals, a 19 percent decrease in dollars but a 42 percent increase in deals compared to the previous quarter.

Though overall funding for life science companies dropped slightly in 2013, first-time fundings were on the rise. First-time financing for life sciences companies increased 48 percent in dollars invested to $1 billion going into 154 companies, compared to the $664 million invested into 148 companies in 2012. In the fourth quarter of 2013, $409 million went into 48 companies receiving VC investment for the first time, representing a 161 percent increase in dollars from the prior quarter and a 7 percent increase in deals.

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