The venture capital numbers are in for 2012. According to PWC’s Money
Tree report, total venture capital investment was down for the first time in three years.
Nationally, 15 of 17 industry sectors experienced declines in investment, including biotechnology, medical devices, clean tech, Internet-based, business products and electronics and instrumentation. The silver lining was the software industry, in which investment rose by 10 percent to $8.3 billion.
For the Massachusetts life sciences industry, performance has usually tracked better than that of the national life science industry. The 2012 venture numbers, however, present a mixed bag.
Massachusetts biotechnology companies received $838 million in venture capital. While this is the second highest tally of any state in the nation, it is down from a record high of $1.07 billion in 2011 and good for only fifth best biotech venture capital year for Massachusetts. Venture investment in biotech companies fell 20 percent in Massachusetts, compared with a national decline of 15 percent.
The medical device industry in Massachusetts, however, had a stellar year. In fact, 2012 was the best VC year ever for Massachusetts medical device companies, as they tallied $417 million in 36 funding deals. While VC investment in medical devices nationally was down 13 percent, it jumped by a whopping 29 percent in Massachusetts.
Combining medical device with biotechnology, total life sciences VC investments in 2012 came in at $1.26 billion, the third best performance ever (coming off its best year in 2011).
On the biotech side, Warp Drive Bio, an early stage Cambridge genomics company, led the way as the recipient of $125 million in financing. Cambridge’s Bluebird Bio (gene therapy), Moderna (messenger RNA), as well as Rhythm Pharmaceuticals of Boston, which is focused on diabetes and obesity, and the regenerative medicine company Histogenics of Waltham, each received more than $40 million in financing in 2012.
In medical devices, Conformis, a Bedford company developing knee replacement systems, received $89 million, while the surgical equipment company OmniGuide, of Cambridge, and Tewksbury’s Mitralign, focused on catheter technologies, each received $30 million or more.
Massachusetts tends to outperform the nation when it comes to the percentage of VC fundin g for start-up to early stage biotechs. In 2011, for example, more than 81 percent of biotech financings were at the seed to early stages, compared with 51 percent nationally.
Such investment has been seen as a key differentiator for Massachusetts, speaking to the strength of the start-up culture here. In 2012, however, only 65 percent of all biotech financing went to start-up to early stage companies in Massachusetts. In the med device space, just 25 percent of financings are at these stages.
State Start-Up Funders
For this reason, we can appreciate the state programs that provide some assistance at the critical early stages of life science company development. The Massachusetts Life Sciences Center’s Accelerator Program, for example, provides loans to early stage companies with promise for rapid growth. The loan is non-traditional, not tied to receivables and can provide up to $1 million to companies. To date, 24 companies have received more than $15 million in Accelerator loans. While $15 million doesn’t come close to comparing to VC financing levels, the Accelerator is a good assist for start-ups and it complements other programs, such as the Emerging Technology Fund (ETF). MassDevelopment’s ETF provides low cost debt financing – as much as $2.5 million in past years – to pre-cash flow companies on the cusp of commercialization.
In Vivo Therapeutics, the Cambridge-based neuroplasticity technology company, made use of both the Accelerator loan (which it paid off) and the Emerging Technology Fund.
“The Accelerator helped propel us toward going public, and the ETF has helped fund our capital expenditures,” states Sean Moran, In Vivo’s finance director. “These funds don’t take the place of private or venture capital, but as supplement vehicles are very smart plays by the state.”
Single years do not make trends. We hope that 2012 is an anomaly for biotech VC investment, the start of a sustained growth period in medical device investment, and an affirmation of the prudent use of state programs to help fill bridge companies in times of capital market uncertainty.
Peter Abair is director of economic development and global affairs at the Massachusetts Biotechnology Council (MassBio).
