According to a recent Dow Jones press release, investment in medical device companies in third quarter 2011 exceeded investment in biopharmaceutical companies:
In the third quarter, Medical Device companies raised more venture financing than Biopharmaceutical companies for the first time since 1998. Sixty-eight Medical Device deals raised $857 million, a 15% rise in deal activity and 30% increase in capital invested from the same period last year. In the Biopharmaceuticals sector, 78 deals raised $715 million, a drop in capital invested from the year-ago period when 71 deals raised $865 million.
"Although the Biopharmaceuticals sector lost its long-held place as the leader of the Healthcare industry, early-stage investment was strong, showing that investors are building a pipeline," according to Jessica Canning, global research director for Dow Jones VentureSource. "In Medical Devices, investments were weighted toward the later-stage deals, which could be a result of concerns over the clarity of the FDA's requirements weighing more heavily on device investors."
Forty-two percent of Biopharmaceuticals deals went to early-stage companies and 26% of Medical Device deals went to early-stage companies.
Medical device investments have steadily shifted toward later stage investment as investors have sought to minimize risk. Whether investors view the FDA's lack of clarity as a new source of that risk is uncertain. What is at least more likely is that the FDA has not acted in a way that has stimulated investment in medical devices.
One might readily conclude from this is that, even with lower investment in early stages, medical device companies now represent a better overall investment than biopharma companies.