U.S. biopharma, medical device firms take an investment hit
Biopharmaceutical and medical device companies are receiving fewer investments from U.S. venture capitalists, according to a survey conducted by the National Venture Capital Association (NVCA), which indicated that investors plan to decrease the amounts they spend on start-ups and shift focus toward Europe and Asia. The survey cited FDA regulatory challenges as having the highest impact on investment decisions.
The survey, "Vital Signs: The Crisis in Investment in U.S. Medical Innovation and the Imperative of FDA Reform," was conducted online between July and September and drew responses from 156 NVCA member firms investing in healthcare sectors. For the past three years, venture capital firms have decreased investments in biopharmaceuticals and medical device companies, the survey found, and they plan to continue decreasing funds in the future.
Overall, 39 percent of respondent firms have decreased their investments in U.S. life sciences companies over the last three years, and the same number expect to continue that trend into the next three years, increasingly so. While 40 percent of firms expect to decrease investment in biopharmaceuticals and 42 percent in medical device companies, others are opting to increase investments in non-FDA regulated healthcare services and IT companies.
Of the respondents, 61 percent indicated regulatory challenges as having the highest impact on their investment decisions, followed by reimbursement concerns, financial markets and capital requirements. Respondents believed these challenges were related to an imbalance in risk/benefit assessment and unpredictability at the FDA.
European and Asian markets may benefit from the decreasing investment in American companies, according to the survey, as 36 percent of respondents indicated plans to increase investment in life science companies in Europe and 44 percent planned to increase investment in Asia. In contrast, only 13 percent plan to increase investment in North America. Meanwhile, 31 percent of firms plan to decrease investment in life sciences companies in North America and only 7 percent plan to decrease in Europe. None of the respondents indicated intent to decrease investment in Asia.
Almost all of the respondents indicated that FDA reform—better predictability and increased efficiency—would have a positive impact on their investment in the U.S.
“For decades, the U.S. has been the leader in delivering medical innovations to our citizens due to the thousands of startup healthcare companies that have been brought to life with venture capital funding,” Beth Seidenberg, MD, chair of the MedIC Coalition, said in a statement. “This report confirms what has been suspected for some time, which is that venture capitalists are shifting investment capital away from lifesaving and life-sustaining products and into areas less regulated by the FDA as well into other countries. This trend is one that the venture industry and, we believe, the FDA wants desperately to reverse.”
The survey indicated the following possible implications should the situation be left unaddressed:
The survey, "Vital Signs: The Crisis in Investment in U.S. Medical Innovation and the Imperative of FDA Reform," was conducted online between July and September and drew responses from 156 NVCA member firms investing in healthcare sectors. For the past three years, venture capital firms have decreased investments in biopharmaceuticals and medical device companies, the survey found, and they plan to continue decreasing funds in the future.
Overall, 39 percent of respondent firms have decreased their investments in U.S. life sciences companies over the last three years, and the same number expect to continue that trend into the next three years, increasingly so. While 40 percent of firms expect to decrease investment in biopharmaceuticals and 42 percent in medical device companies, others are opting to increase investments in non-FDA regulated healthcare services and IT companies.
Of the respondents, 61 percent indicated regulatory challenges as having the highest impact on their investment decisions, followed by reimbursement concerns, financial markets and capital requirements. Respondents believed these challenges were related to an imbalance in risk/benefit assessment and unpredictability at the FDA.
European and Asian markets may benefit from the decreasing investment in American companies, according to the survey, as 36 percent of respondents indicated plans to increase investment in life science companies in Europe and 44 percent planned to increase investment in Asia. In contrast, only 13 percent plan to increase investment in North America. Meanwhile, 31 percent of firms plan to decrease investment in life sciences companies in North America and only 7 percent plan to decrease in Europe. None of the respondents indicated intent to decrease investment in Asia.
Almost all of the respondents indicated that FDA reform—better predictability and increased efficiency—would have a positive impact on their investment in the U.S.
“For decades, the U.S. has been the leader in delivering medical innovations to our citizens due to the thousands of startup healthcare companies that have been brought to life with venture capital funding,” Beth Seidenberg, MD, chair of the MedIC Coalition, said in a statement. “This report confirms what has been suspected for some time, which is that venture capitalists are shifting investment capital away from lifesaving and life-sustaining products and into areas less regulated by the FDA as well into other countries. This trend is one that the venture industry and, we believe, the FDA wants desperately to reverse.”
The survey indicated the following possible implications should the situation be left unaddressed:
- Many promising medical therapies and technologies will not be funded and therefore will not reach the patients that need them.
- Those that are funded may not be brought to market in the U.S. first, or at all.
- An estimated funding loss of $500 million over the next three years will cost America jobs at a time when we desperately need employment growth.
- The U.S. leadership position in medical innovation will be placed in further danger and economic growth will suffer.