held over $10 billion in cash on their balance sheets. Tis stockpile is available to acquire emerging technologies and consolidate midtier market participants. Given the high levels of capital availability in the market, we anticipate industry consolidations will continue to be strong throughout 2013, particularly among CMOs which can offer acquirers cost sav- ings to offset the 2.3% excise tax.
Venture Capital Trough Q3 2012, venture capital investments in medical
devices and equipment represented 9.1% of the total dollars in- vested. Tis represents a significant decline from 10.7% in 2011 and 10.2% in 2010. Te decline is comparable in terms of the number of investments made as well, with YTD Q3 2012 volume experienced a decline of 17.4% from 2011. Tis decline likely reflects concern about the long time horizon for gaining neces- sary approvals and hesitancy to invest amidst an increasingly
Since 2009 there has been a significant increase in pre-
money valuations for all investment rounds. Upon review of the growth in valuation for each series of funding, one can see that Series C and Series D have exhibited the greatest growth since 2009, although Series D experienced a modest decline in 2012. Te spread between Series A and Series B, which had been contracting in recent years, began expanding in 2010 with a significant expansion in 2012. Tis spread reflects the continued risks of early stage investment, particularly in light of the market dynamics discussed previously.
Conclusion Te medical device market continues to face dynamic mar-
ket, regulatory and macroeconomic conditions. Tese changes seem poised to have the biggest impact on smaller companies and venture capital investors, while larger market players will be more capable of adapting to the changing landscape.
regulated environment. Te time horizon for getting products approved and to market, and subsequently realizing a return, seems to have stretched too long for many venture capitalists. Of the investments made in the most recent quarter, only
the Medical/Health Products sub-segment saw an increase in Q3 2012 from Q3 2011, increasing 4% to $78 million. Te Medical Diagnostics and Medical Terapeutics sub-segments both experienced declines during the same time period. How- ever, the Medical Terapeutics category still accounted for 72% of the dollars and 50% of deals in the third quarter, with $311 million going into 33 deals.
Despite the many challenges facing the industry as a whole, we anticipate that the medical device market will continue to exhibit impressive growth well into the future.
P&M Corporate Finance LLC, an investment banking firm, is a leading M&A advisor within the medical technology market. The firm specializes in providing merger and acquisition services to middle-market device and diagnostics companies in North America and Europe. P&M Corporate Finance is headquartered in Southfield, MI, with additional offices in Cleveland and Chicago.