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Pharmaceutical fundings dropped by $129 million, from $696 million in Q2 08 to $567 million in Q3 08.

Corporate investors continued to remain active in the sector. Johnson & Johnson participated with Domain Associates in their $9 million series A investment in Neuron Systems. Genzyme Ventures invested in the $20 million fourth round for KaloBios Pharmaceuticals.

Neuron Systems is developing pharmaceutical treatments for retinal diseases. KaloBios Pharmaceuticals is a vertically integrated therapeutic antibody company that is developing a pipeline of therapeutics.

APT Pharmaceuticals received $32 million in its series B financing round. APT is developing treatments for asthma, chronic obstructive pulmonary disease (COPD), rhinitis and rhinovirus. It plans to use the funding proceeds to proceed to Phase III trials for its post-lung transplant cyclosporine treatment. Three Arch Partners led a large venture capital funding syndicate.

Medical Devices

Venture capital funding for medical device companies resumed its growth, with 87 companies receiving $1.03 billion during the quarter, a 7% dollar volume increase.

There were a significant number of late-round fundings (Series E), which included the following companies:

Xoft $25 Million
CVRx $84 Million
SpectraGenics $30 Million
Aethon $14 Million
Alveolus $3 Million

CVRx raised $84 million in order to complete pivotal trials for its hypertension treatment. New Enterprise Associates led the funding round.

SpectraGenics landed $30 million to market its laser-based technologies for the temporary removal of hair and for acne treatment. The company has raised over $45 million in the past three years.

Spineology secured $7.5 million for continued development and commercialization of its OptiMesh implantable spinal device that helps correct spinal defects. The advantage of the system is that it can be inserted in a minimally invasive or even percutaneous procedure, thus minimizing surgical complications.

Table 1

Venture Funding Activity – 3rd Quarter 2008

Industry Total
% Change
Vs. Prior
Number of
% Change
vs. Prior
Biotechnology $554 Million - 8 % 62 - 3 %
Pharmaceuticals $567 Million - 19 % 47 - 10 %
Medical Devices $1.03 Billion + 7 % 87 - 5 %
Total $2.15 Billion - 5 % 196 - 6 %

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