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HEARINGS

Medical device sector received large portion of 2010 health-care investments

February 02, 2010

A poor global economy and uncertainty about the U.S. health-care industry put the brakes on investment in health-care start-ups in Ohio, according to a new report.

Investments in Ohio dropped from $189.1 million in 2008 to $105 million last year, according to the BioEnterprise Midwest Health Care Venture Investment Report.

In the Columbus region, however, 13 companies received $12.4 million in venture investments compared to $6.4 million in 10 companies in 2008.

Despite that increase, the Columbus area ranked 13th out of 14 regions in the report for amount of investments. Only Louisville had less money invested in its health-care start-ups.

Minneapolis again had the most in the Midwest with 23 companies there receiving $199 million, though that's down from $318.9 million a year earlier.

The Cincinnati area had the second-highest amount of investments with $121.2 million going to eight companies.

Columbus had similar amounts of investments last year to earlier years. Area companies received $14.2 million in 2007 and $12.4 million in 2006.

The majority of the investments in Columbus companies was in the medical device sector, said Baiju Shah, president and chief executive officer of BioEnterprise, a Cleveland-based biomedical venture developer that compiled the report.

"There is a lot of interest in starting business, seed-stage deals," he said. "The good news for Ohio is there is still an incredibly high level of activity, higher than other Midwestern states."

Optivair, a Columbus company that makes an aerosol-based drug delivery system, received the largest infusion of money with a $5 million investment from Battelle.

Click4Care, a Powell-based company that makes medical management software, received $2 million in investments from Psilos Group Managers, and Minimally Invasive Devices, a Columbus firm that develops disposable instruments for minimally invasive surgery, received $1.7 million from the Ohio Tech Angel Fund.

"In Ohio I'd say about two-thirds of capital in the state is in (medical) devices," said Shah.

Ohio had the second-most amount of investments in the Midwest with 40 companies statewide receiving $105.4 million, trailing only Minnesota, which had $199 million. Michigan was third with $102.2 million.

He said that a separate national report that was released last week shows Ohio ranked 10th in the nation for venture deals activity.

Uncertainty in the nation's health-care and energy sectors, meanwhile, could lead to another sluggish year in investment, Shah said.

"With health-care, a lot of that still is to be determined ... and investors will wait and see," he said.

Congress has been proposing health-care reform that would change the nation's health-care system, though there is much uncertainty how or if that would occur.

Overall, Midwest health-care startups attracted $780 million in new investments across 156 companies in 2009.

While the total number of investments is comparable to 2008, the funding level represents a 26 percent drop from 2008, reflecting a similar drop nationally in health-care venture investing.

"This was a difficult year for emerging health-care ventures in the Midwest and nationally," said Shah. "The global recession combined with the industry uncertainties related to U.S. health care reform dampened investment."


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Copyright 2010 The Daily Reporter


Jim Arnold & Associates, LPA


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