Venture investment in the medical device sector has held remarkably steady over the course of 2018 according to the PwC/CB Insights Healthcare MoneyTree report. According to the report, medical device companies took in $750 million in venture investment in Q3, 2018, nearly the same amount as in Q1 and Q2 ($772 million and $780 respectively). That is consistent with investment in the sector in 2017 which averaged $771 million a quarter.
However, investment in the sector was bumpier in 2017, ranging from a low of $534 million in the fourth quarter, to a high of $958 million in the third quarter. Still, over overriding message is that the medical device sector has seen a very stable and steady rate of venture investment for nearly two years running.
Deal volume has been a bit more dynamic. There were 48 deals in the medical device sector in the third quarter of this year, down from 68 in the second quarter but up from 53 in Q1. In 2017, Q2 and Q3 both posted 62 deals while Q4 came in with 60. In the first quarter of 2017 there were 72 deals reported.
As a whole, the healthcare sector has also enjoyed stable levels of private investment in 2018, ranging from a high of $5.4 billion in the most recent quarter to a low of $5.3 billion in the second quarter. However, year-over-year there has been significant growth. Year-over-year, Q3 funding for all healthcare companies increased 32 percent from $4 billion in the third quarter of 2017 to $5.4 billion Q3 2018.
Top Investors are Making MedTech Bets
Of the five most active healthcare venture investors in the third quarter, four made medtech investments in Q3.
- Alexandria Venture Investments topped the list of most active investors in the quarter participating in 10 deals including a round that went to genomic testing company Orig3n.
- Polaris Partners made nine investments including participating in a $120 million Series B round for Ajax Health.
- Novartis Venture Funds participated in seven investment rounds over the course of the quarter, including Seventh Sense Biosystems‘s late stage round for $18.5 million.
- ARCH Venture Partners made six investments in the quarter including a Series B round for DNA sequencing company OmniOme for $60 million.
OrbiMed Advisors rounded out the list of most active venture firms for the quarter, but they did not make any device investments in the quarter.
Silicon Valley Takes the Lead in Healthcare Investments
The report does not breakout regional investment by subsector, but it does state that the Silicon Valley dominated healthcare investment in the third quarter accounting for $2,150 million of investment in 44 deals. New England, which had been jostling with the Silicon Valley for first place over the past four quarters, raised $1.3 million in the third quarter, a 15 percent decrease over Q2.
Doug Limbach is a registered patent attorney in Silicon Valley representing early stage medical device companies, the entrepreneurs who found them and the investors who fund them. He has represented more than 50 such companies, including TheraSense (acquired by Abbott Laboratories), Archus Orthopedics (acquired by Facet Solutions), Facet Solutions (acquired by Globus Medical), Novare Surgical (acquired by a major robotic-assisted surgery company), Aragon Surgical (acquired by Aesculap), Tibion (acquired by AlterG) and Xlumena (acquired by Boston Scientific). Mr. Limbach has been working in patent law since 1991.
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