In a shaky economic climate, where fund raising has become tight and there are decreasing opportunities to exit the market, venture capital (VC) firms have become extremely cautious in choosing their investments. This has lead to the trend of low value deals. However, segments like healthcare equipment have got sizeable injections of new funding, with such positive trends set to continue.
New analysis from Frost & Sullivan (financialservices.frost.com), Analysis of Venture Capital Investment Trends in the European Healthcare Industry, notes that drug delivering technologies and those focusing on product life cycle management of existing drugs are expected to attract VC investments.
"Patent expiration and lengthy approval times have increased the costs of drug development," says Frost & Sullivan Financial Analyst Dr. E. Saneesh. "This, coupled with a slowing economy, has made VC investors reluctant to invest more in new drug development. Instead, they have focused on enhanced drug delivery technologies and product life cycle management technologies."
While investments in pharmaceuticals and biotechnology decreased from 2010 to March 2012, healthcare equipment displayed sustained investments.
"Healthcare equipment is attracting VC investments because the innovations in this segment reduce the healthcare delivery costs, making the delivery easier," explains Dr. Saneesh. "Shorter product development cycles result in faster returns and, moreover, product approvals here are not as complex as those required for drugs."
However, regulatory variations across countries present a barrier for companies wanting to access VC funding. This has also affected fund raising efforts by VC firms.
Another concern is that the high costs and extended approval times related to drug development have decreased the chances of an early exit for VCs expecting a faster return on their investments.
"With the doors of IPO almost shut for them, VCs are now looking at new routes for exit," states Dr. Saneesh. "With the increase of strategic investments and corporate venturing in pharmaceuticals and biotechnology segments, mergers and acquisitions and strategic buyouts have become attractive exit options."
Technologies which reduce healthcare costs and enable safer and faster healthcare delivery are set to attract VC investments. New taxation laws and proposals to establish uniform EU-wide regulations for VC funds will further boost confidence levels.
If you are interested in more information on this study, please send an email with your contact details to Anna Zanchi, Corporate Communications, at anna.zanchi[.]frost.com
Analysis of Venture Capital Investment Trends in the European Healthcare Industry is part of the Financial Benchmarking in the Business and Financial Services Industry subscription, which also includes research services in the following markets: Venture Capital Investment Trends in Financial Services industry, Aerospace and Defense Industry, Automotive Industry. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.
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