Midwest Healthcare Investment Outpaces National Growth

Venture investment in Midwestern healthcare start-ups grew 21% in the third quarter of 2005, compared to a national rise of 4% during the period, according to recent data from BioEnterprise (Cleveland). According to the group’s quarterly venture investment report, companies in the Midwest saw investments of $144 million, up from $119 million in the second quarter.

BioEnterprise’s Shah: Strong deal flow.

“The numbers continue to demonstrate strong deal flow in the Midwest region,” says Baiju Shah, president of BioEnterprise, an organization that supports the growth of the region’s bioscience companies. “Of particular interest this quarter was the number of biotechnology financings in the region, where medical device deals are viewed as the primary strength. These included Cerenis Therapeutics in Michigan, and two Missouri deals—Kereos and Isto Technologies.”

During the third quarter, investment in biotech operations represented about $65 million, or 45%, of total deals. Investment in medical device operations represented about $43 million, or 30% of the deals. Year-to-date, biotech deals are also in the lead, accounting for about 35% of total investments compared to medtech’s 33%.

According to Shah, these figures deviate from the expectations of investors across the nation in regard to healthcare investment in the Midwest. In a recent survey designed to gauge perceptions of the Midwest’s healthcare market, BioEnterprise found that investors expected deals in the medical device sector to account for between 50 and 60% of investment, with biotech attracting only between 10 and 30%.

The $144 million in Midwest healthcare investments represents a rebound from a slow second quarter. The first quarter of 2005 saw investment levels equal to those of the third. These quarterly reports, conducted by BioEnterprise to measure investment in 10 Midwest states and western Pennsylvania, exclude private, angel-financed healthcare deals.

Shah also noted that there were two healthcare initial public offerings in the region during the quarter. Device manufacturer Atricure Inc. (Cincinnati) raised $52 million, and biopharmaceutical company Advanced Life Science Holdings (Woodridge, IL) raised $32 million.

Year-to-date, Minnesota, Ohio, and Missouri lead the region in venture healthcare investment, with $135 million, $75 million, and $72 million respectively. These figures fall in line with the previous research done by BioEnterprise, in which investors rated Minneapolis, Cleveland, and Pittsburgh as having the greatest potential for healthcare deals.

© 2005 Canon Communications LLC

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