Of particular concern is an ongoing decline in investment in the biotechnology and medical device sectors. When comparing total dollars invested and deals completed for the first nine months of 2012, there has been a 19 percent drop in dollars and a 12 percent drop in total deals from the same time period in 2011. However, even greater concern is the startlingly low number of first time fundings in both biotech and medical device companies. At just 32 new companies funded this quarter, we are on track to have the lowest level of first time fundings in biotechnology and medical device companies since 1995. The fact that first time investments in life sciences companies aren't being made raises even greater concern for the future of the medical innovation pipeline.

That is why NVCA and MedIC continue to advocate for policies that will help drive down the time and cost of drug and medical device development which will provide greater certainty and encourage more first time investments once again. Most of these newly funded companies fall into the early stages where they are taking on the challenge to develop new treatments and cures that solve the unmet needs of patients.

It is critical that the FDA implements, as fully and quickly as possible, the FDA Safety and Innovation Act signed into law in July so that entrepreneurs can have more certainty around their approval pathways and medical innovation can be brought to market more effectively.

However, we all need to come together as stakeholders in preserving America's leadership in medical innovation and work to turn this crisis around for the betterment of patients and economic growth. There remains a tremendous amount of promise within the life sciences sector with more discoveries being made in critical therapeutic areas than ever before. We are optimistic that improvements can be made, but we all must be vigilant in making certain we are committed to ensuring that medical innovation is a priority.

For more VC investment data, please see:

National data charts including industry sectorss, stage of development and first fundings

Regional data charts including state breakouts

Top 10 deal list for Q3 2012

NVCA is pleased to announce that the annual review of our model legal docs is now complete and the revised documents have been posted to our website.  You can find the docs here.

There were very few changes this year, mostly because these documents have now undergone years of road-testing, fly-specking and legal review.  To call out a few of the updates: Foreign Corrupt Practices Act and Data Privacy reps were added to the SPA, in response to changes in the business landscape, and an alternative “lite” Open Source rep was also included.  Because Delaware Chancery Court arbitration has been called into question in a recent case, that is no longer included as a suggested method of dispute resolution. 

This year, for the first time, the working group responsible for revising the documents prepared a memo summarizing the changes it considered (submitted by other attorneys), and the changes it ultimately adopted.  Click here to view the memo, which provides a helpful roadmap to the revisions for those who are interested. This memo has also been added to the model legal docs landing page.

NVCA wishes to thank the large number of expert law firm attorneys across the country in-house counsel at VC firms who have shaped these valuable documents over the years, and a particular thanks this year to Sarah Reed (Charles River Ventures), Jeffrey Engerman (Gunderson Dettmer), David Armstrong (Foundation Capital), Kathi Rawnsley (Lowenstein Sandler), David Jargiello (Flywheel Ventures), and Steve Bigler (Richards Layton & Finger) for their work on finalizing the 2012 revisions.

Comments and suggestions for future revisions are always welcome and can be sent to me at jmetzger@nvca.org.

The situation is no better on the acquisitions side as anecdotally I have been hearing from many investors and acquirers that the brakes have been applied to corporate purchases that are not strategically imperative. And if you look at the monthly numbers, there is a marked deceleration throughout the third quarter with a 2012 high of 44 transactions in July, followed by a decline to 31 transactions in August, to an annual low of 21 deals in September. On the positive side, the transactions are largely of high quality with more than half of the deals bringing in 4x or more for investors. But we must see both quality and quantity if we are to characterize the acquisitions market as healthy.

Once the elections are behind us, there is a confluence of forces that needs to come together to get us back on track. Effective government, stable markets, economic recovery both here and abroad all must be present to turn things around. Until then, we should expect a less than stellar exit market in the coming quarter.

Last week, the President's Council on Advisors on Science and Technology (PCAST) released its "Report to the President on Propelling Innovation in Drug Discovery, Development, and Evaluation" this week. NVCA Board Member and MedIC Chairman Jonathan Leff of Warburg Pincus, participated in the release of the report.

The report acknowledges the U.S. leadership and tremendous progress in biomedical research and discovery of breakthrough treatments for patients but also recognizes that the current system has not kept pace with the explosion in scientific knowledge.

The report concludes that the biopharma ecosystem is under stress primarily due to the cost, time and risk of drug development which have reached unsustainable levels. The report reinforces the importance of many of the steps we have been advocating throughout the FDA reform debate, and also calls for a national innovation strategy and the creation of a public-private "Partnership to Accelerate Therapeutics," involving all key stakeholders. NVCA/MedIC believes that the development of a national innovation strategy and this type of partnership could help provide the comprehensive framework needed to tackle the critical issues facing the future of the biomedical enterprise.

PCAST is an advisory group of the nation's leading scientists and engineers, appointed by the President to augment the science and technology advice available to him from inside the White House and from cabinet departments and other Federal agencies. PCAST is consulted about and often makes policy recommendations concerning the full range of issues where understandings from the domains of sciences, technology, and innovation bear potentially on the policy choices before the President. Therefore, since PCAST is appointed by the President, we are hopeful that if the President is re-elected to a second term, the issue of biomedical innovation will become a national priority in the second term.

The NVCA has long measured job creation generated by venture-backed companies.  Established in 2001, and updated every two years, our Venture Impact report by IHS Global Insight examines the economic contribution of U.S. companies that were originally founded, financed and nurtured with venture capital.  Our alumni list is long and broad, comprising Fortune 500 companies such as Apple, Starbucks, Intel, Cisco, Genentech and FedEx.  Understandably, the collective jobs number accounted for by these organizations is impressive – more than 12 million in 2010, accounting for 11 percent of private U.S. employment.  But what did these companies’ numbers look like “before they were stars?”  And what does the job creation pipeline resemble today?

This summer the NVCA began to explore those questions.  And the logical place to start was with our member firms, asking them to provide us with the number of jobs in their current portfolio of companies.  We didn’t want to measure alumni – Venture Impact already does this quite well.  We wanted to understand – and share regularly – how our venture firms are contributing to the job creation process on a standalone basis.

Our initial list of firms and job numbers can be found here at the NVCA Jobs Count page. The number of jobs varies by firm – with larger firms and later stage investors intuitively having more jobs due to the maturity and breadth of their portfolios.  Yet, we can not discount the smaller firms and seed stage investors.  Although they may have fewer jobs in their portfolios today, these firms and their companies remain vitally important to our ecosystem, as it has been proven that 92 percent of job growth occurs after an IPO.  And we can’t forget that every single one of our alumni companies began with just a handful of employees.

With just about 10 percent of our membership now listed on the Jobs Count board, we are looking forward to adding additional firms through the Fall as well as updating those who are now listed.  We encourage you to visit often and look out for the Jobs Count badge on our member sites.  And if you want to work for one of these amazing startup companies, be sure to visit StartUpHire.com and apply to one of the thousands of open positions today!