Venture capital investment in the life science sector is down both in total number of venture dollars and number of deals according to the Dollar Drought Moneytree Life Sciences Report, published this month by Price Waterhouse Cooper. The report compared venture capital investment in second quarter 2012 to second quarter 2011 and found that it had dropped 39%. In addition the number of venture capital deals were down 22%. Perhaps even worse news is that the drop in investment second quarter was not an isolated event, but instead continued a slide now standing at four quarters (see Figure 1).
Figure 1: Life Science Funding Trends by Quarter
If life science venture funding is down over the past four quarters, then we have to ask why are we seeing such a decline. In the Price Waterhouse Cooper report Tracy T. Lefteroff, global managing partner of their venture capital practice said “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.” Lefteroff’s statement is consistent with the opinion of others in the life science industry that recently weighed in on a LinkedIn poll that asked, “Why biotech investment was down in 2012 by 62% from 2011.” The results showed that most respondents felt that Food and Drug Administration (FDA) delays and uncertainty was the main cause for the drop, followed by biotech venture capital returns not attractive and no exits available, public equity market dead (please see Figure 2).
Figure 2: Results of LinkedIn Poll – Biotech VC Investment is Down to $2.76 Billion in Q2, 2012, a 62% drop from the prior year. Why?