Minnesota 3Q life-science investments down from 2014, but healthy pipeline points to a strong year

By Scott Wooldridge

Life-science companies had another good quarter in Minnesota, and although the 3Q numbers are under the record-breaking investments for 2014, a large number of investments in new companies suggests continued growth.

The LifeScience Alley 3Q investment report, from the Minneapolis-based trade association, finds that health technology firms raised more than $72.6 million in 3Q of 2015. This is considerably less than the $113.6 million in investments in 3Q 2014, but Cheryl Matter, PhD, director of research and intelligence at LifeScience Alley, notes that 2014 was a record-breaking year for investments in life science businesses.

“We’re on par with every year except 2014, which was really an anomaly,” Matter said. “Compared to other Q3s, [2015] is a little lower, but … investments still look good.”

One thing LSA officials stress in the new report is the influx of early stage funding. The report shows that the number of companies raising early stage funds is at the highest level since 2012, and the amount raised for this sector is the highest since the organization began tracking it in 2009. A total of $6.8 million was raised by 24 companies for early stage efforts.

“We’re seeing a lot of early stage investment,” Matter said. “There are a lot of emerging companies coming through; we’re seeing a refilling of the pipeline.”

Two sectors showing growth in the 3Q report are digital health and diagnostic companies. The diagnostic sector saw several major raises in investment leading to a seven-year high of $21.5 million invested in 3Q. In the digital health area, Minnesota saw a jump from two companies raising money in Q3 of 2014 to seven companies raising funds in 3Q 2015.

“We’ve been seeing consistent growth [in the digital sector] for the last four or five years,” Matter said. “Year-to-date we’re four percent higher in dollars invested than all of 2014. It’s kind of a continuation of the story we’ve been seeing; this sector is emerging, there’s a lot of interest, there’s money going in, and there are companies forming.”

In total, 36 companies raised money in the third quarter of 2015, led by the medical device sector with 16 companies seeing investment. In addition to the seven digital health companies raising funds; other sectors included five companies in the pharmaceutical field, five in the diagnostics sector, 2 in miscellaneous health care, and one in the research tools sector. Though the dollar amounts are smaller, the 36 companies raising money represents a 100 percent increase over the 18 companies that raised funds in 3Q of 2014.

The largest single raise in the 3Q report was the $16 million raised by EnteroMedics, a St. Paul, Minn.-based company that is developing a pacemaker-like device that treats obesity through neurometabolic therapy.

In all, $230.6 million has been raised by Minnesota companies in the life science sectors in 2015. “We’re on track to have a very solid year, “ Matter said. “We’re already nearly over some previous years with a full quarter left.”

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