Earlier this summer Preqin reported 16% increase in both the number and value of VC deals in comparison to Q1 2012, and the largest amount of aggregate capital committed in a quarter by VC firms since Q3 2011. In the meantime, its Monthly Spotlight shows a falloff in Healthcare investment, with a major decrease in both volume and amount invested.
The data provider did not offer an explanation in the short summary in the Spotlight but several other specialist publications offer some clues. Healthcare Finance said that VC financing of healthcare companies is declining due to the “long” time it takes in this sector to achieve a liquidity event.
It also said regulatory challenges and the large amount of capital often needed to fund life science companies likely contributed to the decline during the past four quarters. Other factors include the uncertainty of macro-economic conditions such as M&A and IPO markets and the fact that strategic buyers and partners often want more clinical data and less risk as a condition to an acquisition or investment.
New US taxes may also be curtailing investments in sub-sectors of healthcare like medical devices, says Healthtechzone. (Image Source: Preqin)