Led by strong interest in biotechnology and medical devices, venture-capital investing in 2006 reached a five-year high of $507.4 million in the Philadelphia area and $25.5 billion nationally, an industry analysis released yesterday said.
It was the highest level of investment since 2001, the year after the tech-stock bubble burst, but fell short of the peak in 2000, when venture investors poured $2.1 billion into local companies, according to the MoneyTree Survey by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Financial. Venture investment peaked nationally at $105 billion in 2000.
"Philadelphia had a very strong year, with a focus in the later-stage and expansion-stage companies, which was consistent with the national numbers," said Steve Hamilton, head of the technology practice in PricewaterhouseCoopers' Philadelphia office.
Investments in biotechnology - the industry viewed by many as a key to the region's future economic growth - more than doubled in 2006, to $349.2 million from $126.7 million in 2005, the survey said.
Biotechnology attracted the most investments locally and was the second-strongest area for investment nationally, topped only by software.
"The size deal in biotech was a lot larger than the size deal for the other industries," said Al Piscopo, partner in PricewaterhouseCoopers venture-capital practice in Philadelphia.
The other industries attracting most of the private capital in 2006 were medical technology, telecommunications, semiconductors, media and entertainment, alternative energy, and Internet companies.
While 2006 capital investment was at a five-year high, the fourth quarter was the slowest quarter of the year, with 13 deals and $78.8 million in the Philadelphia region and 802 deals and $5.7 billion invested nationally. That was still within the range of $4.3 billion to $6.9 billion seen over the last five years nationally, the report said.
In terms of investment trends, seed and early-stage companies received more financing dollars, up 11 percent, with $5 billion going to 1,176 deals. First-time financings also reached the highest level since 2001.
Life-sciences companies dominated the Philadelphia-area list of those getting venture capital in the fourth quarter:
Morphotek Inc., Exton, raised $40 million to advance its therapeutic antibodies to treat cancer inflammation and infectious diseases. The company's lead drug is in midstage clinical trials to treat ovarian cancer in patients who have already had surgery and traditional chemotherapy.
Quinnova Pharmaceuticals Inc., Newtown, a specialty dermatology drug company, raised $13.6 million and plans to launch three products in 2007 based on its foam and pad topical-delivery technologies to treat skin conditions, including acne, dermatitis and psoriasis.
Yaupon Therapeutics Inc., Wayne, raised $4 million to continue development of potential medicines for lymphoma and neuropathic pain.
Prescient Medical Inc., Doylestown, raised $4.4 million for technologies to help diagnose and detect plaque that causes heart attacks.
New Hope-based Insider Guides Inc. and its myYearbook. com, a social-networking site, raised $4.1 million.
Nationally, the biggest venture deal of 2006 was the $209 million invested in Cilion Inc., a California operator of ethanol plants. Locally, the biggest deal was $50 million invested in Tengion Inc., of East Norriton, which is developing replacement tissues and organs, including the bladder.
"I expect 2007 to be a lot like 2006, a good year of growth, a good year of opportunity," said Terry McGuire, cofounder and managing partner of Polaris Venture Partners, of Boston, in a MoneyTree conference call.
"There's wonderful science coming out of our research institutions every day. I am very encouraged about what the next year will hold for us."