* VC U.S. investment in devices, biotech falling
* Europe, Asia win more VC investment in medical areas
By Sarah McBride
Oct 6 Venture-capital dollars have helped make
the United States a top developer of medical technology, but a
new report shows venture investors are cutting back,
potentially resulting in the United States losing some of its
luster in medical innovation.
A survey of 150 firms from the National Venture Capital
Association, released on Thursday, shows that VCs have been
cutting back on their investments in biopharmaceutical and
medical-device companies over the past three years and expect
to further cut those investments in the future.
They blame regulatory hurdles at the Food and Drug
Administration as the underlying cause, even as the FDA is
recognizing its need to foster innovation, particularly in
On Wednesday, the FDA issued a 40-page report, "Driving
Biomedical Innovation," calling for steps such as streamlining
regulations and creating a rapid drug-development pathway for
The changes may come too late for many in the industry who
say that much investment is moving to Europe and Asia. Many
devices and drugs receive approval in other jurisdictions long
before they receive FDA approval in the United States, such as
transvascular-implanted aortic valves for heart disease and
Esbriet from InterMune ITMN.O, a drug to treat pulmonary
Many venture capitalists are effectively pulling away from
early-stage medical investing in the United States, ceding the
field to innovators in other countries, said Terry McGuire, a
partner at Polaris Venture Partners and a veteran life science
"Fewer healthcare breakthrough ideas will be funded," he
Investing in medical devices last year fell to $2.38
billion, down from $2.62 billion in 2009 and $3.52 billion in
2008, even as overall venture-capital investing managed to rise
19 percent from 2009 to 2010, statistics from the National
Venture Capital Association and PricewaterhouseCoopers show.
Biotech investing in 2010, at $3.78 billion, was up just
slightly from 2009's $3.72 billion, but well down from 2008's
robust $4.57 billion.
Over the next three years, 40 percent of venture-capital
firms said they planned to decrease investments in
biopharmaceuticals, and 42 percent said they planned to
decrease medical-device investments, the NVCA said.
More than one-third of firms said they planned to increase
investment in life-sciences companies in Europe, and 44 percent
said they would increase investment in Asia.
Venture capitalists are focusing on U.S. medical
investments that do not require so much cutting-edge
technology, such as health-care services and information
They say they appreciate the FDA's safety role, but believe
there are ways the agency could maintain high standards while
making its process more efficient. McGuire of Polaris suggested
that the FDA engage earlier in the approval process with
companies, and lay out a clearer path for them to follow.
In a call with reporters on Wednesday, FDA Commissioner
Margaret Hamburg appeared to acknowledge the difficulties.
"Timelines are long, costs are high, and the rates of failure
are "distressingly high," she said.
(Reporting by Sarah McBride in San Francisco and Alina Selyukh
in Washington D.C., Editing by Tim Dobbyn)