Biotech boom drives blockbuster VC investments in Boston, San Francisco

The venture boom that funneled billions of dollars into life sciences companies last year included a big surge in first-time deals, according to a fresh analysis of the numbers for 2014. And the boom in venture investing looks set to continue well into 2015, according to the analysts at PricewaterhouseCoopers and the National Venture Capital Association, working with data provided by Thomson Reuters to put out the MoneyTree report.

2014 fell just short of 2007 with $8.6 billion invested in the entire life sciences sector (combining biotech and med tech). Biotech venture funding alone jumped to $6 billion, a 29% spike over a healthy 2013, when the industry boom was beginning to take shape as the IPO window finally cranked all the way open after a long fallow period.

Zeroing in on just the fourth quarter, venture groups put $403 million into first-time funding for life sciences companies, an increase of 35%. But the year offered a bonanza at just about every level, with follow-on funding soaring 51% to $2.4 billion in the fourth quarter. For the full year first-time funding hit $1.1 billion, up 25%, while follow-on funding rose 29% to $7.5 billion.

While San Francisco has often outranked Boston in terms of quarterly biotech investing, there was no mistaking where the bulk of the cash headed in the final three months of the year. 

Boston topped all the big life science clusters, with $959 million in 32 deals during the quarter; $928 million going into biotechnology and the remaining $31 million invested in medical devices. The San Francisco Bay Area came in as a close runner-up, capturing $839 million. The Big Apple came in a surprising third place, with $175 million, while Research Triangle gained $127 million and Chicago made the cut with $90 million invested. Equally surprisingly, San Diego didn't land a spot in the top 5.

"The life sciences sector saw five megadeals last year, a testament to the highly innovative biotech and medical device technologies and the resulting confidence of venture capitalists in the business models of these start-ups," said Greg Vlahos, life sciences partner at PwC, in a statement. "The biotechnology industry attracted record-high venture investments in the second quarter of 2014 and ended the year with even higher investments in the fourth quarter. In addition, the medical device industry continued to show strong growth for the year. This is in line with PwC's projection in early 2014 of a very strong year for life sciences. Given the strong level of investments in this sector and others in recent quarters, we expect continued high investment levels in life sciences in the first half of 2015."

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