Device Companies Lead Midwest Healthcare Investment in 2005

Medical device start-ups in the Midwest reported a greater level of venture investments during 2005 than their counterparts in the biopharmaceutical and healthcare software and service sectors, according to a report released by BioEnterprise (Cleveland). Overall, medtech companies in the region reported $205 million in investments last year, or 37% of the total investments reported for all three sectors.

BioEnterprise’s Shah: Midwestern attraction.

“The device deals continued to attract coastal investors to the Midwest, including such leading medical device venture groups as Domain Partners, Morgenthaler, New Enterprise Associates, Polaris Ventures, Versant, and Investor Growth Capital,” says Baiju Shah, president of BioEnterprise, an organization that supports the growth of the region’s bioscience companies.

Shah also notes that several Midwestern device companies made their initial public offerings (IPOs) or were involved in significant acquisitions during 2005. “In the IPO category, AtriCure in Ohio and Ev3 Inc. in Minnesota—both cardiovascular-focused companies—completed successful offerings in the summer of 2005,” he says. “As for major acquisitions, Velocimed in Minnesota was purchased by St. Jude, and Bio-logic Systems was acquired by Natus Medical.”

For all healthcare investment sectors, Minnesota, Ohio, and Missouri reported the greatest levels of investment, with respective totals of $151 million, $86 million, and $80 million. Minnesota and Ohio also led in investments specific to medical device companies. Minnesota medtech firms reported $109 million in investments, with Ohio firms reporting $36 million in funding. These states also led in terms of deal volume, with Minnesota’s total distributed among 13 deals and Ohio’s total distributed among seven. Illinois, with $13 million between two deals, reported the third greatest level of investment in medical devices.

“Midwest states and institutions have made concerted efforts over the last few years to capitalize on the tremendous healthcare research and industry base that exists in the region to grow new healthcare enterprises, and those efforts are starting to bear fruit,” Shah says.

The BioEnterprise report includes venture investment data from 10 Midwestern states and western Pennsylvania. The Midwest Health Care Venture Investment Report includes only publicly disclosed numbers. Therefore, the amount raised by private healthcare companies may actually be higher because some companies choose to keep their fundraising efforts confidential, Shah says.

The largest medical device investment recorded in the Midwest in 2005 was the $22.9 million financing of CHF Solutions Inc. (Brooklyn Park, MN), a medical device manufacturer that produces a system designed to quickly remove excess fluid from patients with fluid overload. The financing, which is intended to help complete a major clinical trial and expand marketing of the company’s system, was led by MPM Capital and SV Life Sciences (formerly Schroder Ventures Life Sciences).

© 2006 Canon Communications LLC

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