Bloomberg News

Venture Firms Reduce Biotechnology Investment on FDA Risk

October 06, 2011

(Updates with drug approval numbers in last paragraph.)

Oct. 6 (Bloomberg) -- Venture capital firms are investing less in experimental drugmakers and medical device makers because of what they say are regulatory hurdles, a survey found.

Almost 40 percent of 150 venture capital firms that responded to the survey have decreased their investment in life sciences during the past three years, the National Venture Capital Association said today in a statement. The same proportion expect to continue to reduce their spending on these companies over the next three years, a potential $500 million loss, the association said.

“The process has gotten to be so long, and the capital required so deep, that it’s becoming more and more difficult to generate venture-type returns and therefore make it worth your while to do it,” said Terry McGuire, co-founder and general partner of Polaris Venture Partners and past chairman of the association, in an interview.

Venture firms have shifted their investments overseas, where McGuire says regulatory approvals come quicker. More than one-third of survey respondents said they would increase their spending in Europe and 44 percent in Asia, compared with 13 percent saying the same for North America.

The U.S. Food and Drug Administration is taking steps to address some of the industry’s concerns, Commissioner Margaret Hamburg said yesterday in a statement. The agency plans to streamline regulations and speed up the approval process for some drugs, among other changes.

The agency approved 25 new drugs as of Sept. 15 and at that pace, by year’s end, would clear the most new drugs in since 2004, according to Bloomberg data.

--With assistance from Anna Edney in Washington and Catherine Larkin in Indianapolis. Editors: Andrew Pollack, Donna Alvarado

To contact the reporter on this story: Ryan Flinn in San Francisco at rflinn@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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