Analysis of Venture Capital Investment Trends

in the North American Healthcare Industry

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Consolidation, Combination, and Concentration Will Drive Growth

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Research Team

Lead Analyst Contributing Analyst

Research Director Strategic Review Committee Leader

Dr. E. Saneesh

Research Analyst

Business & Financial Services

S. Shrikanth

Industry Analyst

Business & Financial Services

Kaushik Madhavan

Director- Research

GIC, India

Jennifer O’ Grady

Research Director

Business & Financial Services

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Contents

Section Slide Numbers

Executive Summary 5

Key Terms Used in the Study 7

Introduction 8

North American Healthcare Industry 14

External Challenges: Drivers and Restraints—Total Market 21

Historical Trends of Global VC Investments by Region and Industry 27

Historical Trends of VC Investments in the North American Healthcare Industry 32

Attractiveness Index for VC Investments in the North American Healthcare Industry 44

Outlook—Trends/Events Investors Need to Watch Out For 49

Conclusion 55

The Frost & Sullivan Story 59

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Executive Summary

Since 2006, both the volume and the value of VC investments have decreased, but the decrease in

value was considerably high. There is a clear trend showing the increase in low value deals and a good

reduction in the number of high value deals.

The early stage investments have decreased compared to late-stage funding.

VC Investments in North American Healthcare

Attractive Regions

A majority of the deals were made on the West Coast, including in Alaska, California, Hawaii, Oregon, and

Washington.

Attractive Segments

Healthcare equipment, biotechnology, and pharmaceuticals are the leading segments that received

investments both in terms of value and volume between 2006 and 2011.

Source: Frost & Sullivan analysis.

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Executive Summary (continued)

Exit Market

With the doors of IPO almost shut for the venture capital investors, they are now looking at new

routes for exits.

With the increase of strategic investments and corporate venturing in the pharmaceuticals and

biotechnology segments, mergers and acquisitions and strategic buyouts have become attractive

exit options.

Venture Capital Investment Attractiveness Index

The index compares the segment-wise attractiveness for venture capital investments in the North

American healthcare industry.

Source: Frost & Sullivan analysis.

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Complex Approval

Process Bearish Capital

Markets

Risk of Longer

Time to Market

Weak Exit

Markets

Source: Frost & Sullivan analysis.

North American Healthcare Industry—Key Restraints

Healthcare Industry: Key Restraints for Investment Opportunities, North America, 2012-2013

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Introduction—Segmentation of Healthcare Industry

Biotechnology

HC Technology

HC Equipment

Life Sciences

Pharmaceuticals

HC Providers

and Services

Source: Frost & Sullivan analysis.

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Government

Initiatives

Entrepreneurship

Ability of the

Nation

Demand for

Innovative

Technologies

Source: Frost & Sullivan analysis.

North American Healthcare Industry—Key Drivers

Healthcare Industry: Key Drivers for Investment Opportunities, North America, 2012-2013

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TEAM Methodology

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information ensures that clients have a comprehensive view of industries, markets, and technology.

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R&D breakthroughs, technology forecasting, impact analysis, groundbreaking

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global, regional, and country-specific trends, including the political,

demographic, and socioeconomic landscapes.

Application

Insightful strategies, networking opportunities, and best practices that can be

applied for enhanced market growth; interactions between the client, peers,

and Frost & Sullivan representatives that result in added value and

effectiveness.

Market

Global and regional market analysis, including drivers and restraints, market

trends, regulatory changes, competitive insights, growth forecasts, industry

challenges, strategic recommendations, and end-user perspectives.

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Contact

Britni Myers

Executive

Healthcare

(210) 477-8481

britni.myers@frost.com