Two Important Reports from the NVCA: VC Fundraising Declines 53% in Q3 2011 and U.S. Medical Innovation is in Crisis
Kelly Slone, director of the Medical Industry Group of the National Venture Capital Association (NVCA) posted an important article on October 7 on the NVCAccess blog, clearly calling out that the unintended consequences of FDA regulations have precipitated a full-blown crisis in medical innovation in the U.S. This crisis has already damaged America’s global competitiveness and slowed medical innovation in the U.S. The report “revealed that US venture capitalists are reducing their investment in biotechnology and medical device companies and shifting focus overseas to Europe and Asia, primarily due to regulatory obstacles at the Food and Drug Administration.”
In related news, Mark Heesen, NVCA President, announced today that U.S. venture capital funds raised a total of $1.7 billion, a 53 percent decrease in dollars from the third quarter of 2010 and the lowest amount since the third quarter of 2003. Heesen observed in his blog post what he expects will become apparent when Q3 2011 VC investment statistics are released next week : “you can bet the total dollars invested into start-up companies will be a multiple of the amount raised. It has been this way since 2008 when the industry began investing more than it was raising. In fact, by the end of this quarter, the venture industry will have invested at least $20 billion more than it has raised in the last 3+ years.And just like a bubble, this imbalance is not sustainable. Unless the industry begins to raise more money, we can expect investment levels to decline in the coming years in a significant way.”
Some key conclusions from the report follow:
U.S. venture capitalists have been and will continue to:
• Decrease their investment in biotechnology and medical device start-ups
• Reduce their concentration in critical therapeutic areas, and
• Shift focus away from the United States towards Europe and Asia
FDA regulatory challenges were identified as having the highest impact on these investment decisions.
We must act now or lose our leadership position in medical innovation, job creation and access to life-saving treatments in the United States. If the current situation is left unaddressed, the implications to U.S. patients and the economy are significant:
• 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 United States first, or at all.
• An estimated funding loss of half a billion dollars 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 with suffer.
For more factual background on the decades of neglect that have led us to where we are today, you may find the following links to presentation slides useful:
America’s Slipping Global Competitiveness– Implications for the Next Generation of American Emerging Growth Companies, keynote speech remarks delivered by Pascal Levensohn at ICAP Ocean Tomo conference, March 24, 2010, San Francisco
American Innovation in Crisis,Cybersecurity Applications and Technologies Conference for Homeland Security (CATCH) Conference, Walter E. Washington Convention Center Washington, D.C. Keynote Speech by Pascal Levensohn, March 4, 2009