The health care venture capital market grew to nearly $7.3 billion invested in 2005, up 5% from 2004, a financial healthcare news group reported. The 2005 figure dwarfs the amount invested in 2003 by 32%, according to the authors of the research, Healthcare Corporate Finance News.
The total number of health care venture capital deals increased by 11% in 2005, compared with 2004.
Biopharmaceuticals accounted for the greatest amount of venture capital invested in a single sector, with nearly $2.1 billion committed during the year, based on 102 deals with disclosed prices. Medical Devices and Pharmaceuticals each accounted for approximately $1.4 billion in venture capital. There were 97 investments with disclosed prices in Medical Devices, and 70 in Pharmaceuticals. Biotechnology secured nearly $1.3 billion in 86 venture capital transactions announced during 2005.
The median investment size was $11.3 million in 2005, representing a slight decrease from 2004, when the median investment size was $12 million. However, the median investment size increased by nearly 19% in 2005, compared with 2003.
“Strategic corporate investors account for some of the health care venture capital funding recorded last year,” commented Stephen M. Monroe, senior editor. “The IPO market may be lackluster, but big pharma is hungry for novel, proprietary therapies.”
Results for the fourth quarter indicate that more health care venture capital deals were closed during the fourth quarter of last year than in either of the corresponding quarters of the two preceding years. For the quarter ended December 31, 2005, there were 108 health care venture capital investments announced, representing an 11% increase over both the previous and year-ago quarters. The amount of total dollars invested during the fourth quarter of 2005-more than $1.7 billion-shows an increase of 6%, compared with the year-ago quarter, but almost no change compared with the third quarter of 2005.
“Investments in biotechnology are trailing off as more pharmaceuticals are developed using biological compounds and processes or biotechnology platforms, leading to a proliferation of investments in the development of biopharmaceuticals,” said Gretchen S. Swanson, associate editor, “but the health care market in general is still appealing to venture capitalists and even spawning new venture firms.”
The publication reported that MPM Capital led the top ten venture firms by number of investments in 2005, having participated in 17 investments, followed by Alta Partners, Domain Associates and HealthCap, each with 15 investments. The most active venture capital investors in the health care sectors during the fourth quarter ended were 3i Group and Abingworth Management, each with five investments.