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VC Investment In Medical Software, Information Services Soars

Investment in healthcare outpaced IT venture capital investment in the second quarter, increasing 91% from a year ago to $157 million.

New figures from Dow Jones VentureSource show that venture capital investors poured $157 million into U.S. based medical software and information services companies in the second quarter of 2010 compared with $82 million during the same quarter of last year -- a 91 percent increase.

As the country's healthcare information infrastructure continues to modernize, the breakdown of investments in the medical software and information service sector for the second quarter showed that clinical decision support raised the most investments at $77 million. Second was the health administration software segment, which garnered $37 million. The drug discovery and bioinformatics software segment and the medical software and information services tied for third spot with $15 million. Medical imaging software was last with $13 million worth of investments.

"In medical software and information services the important part is that venture investors are really focusing on conveying more information about health care to patients and within the hospital organization itself," said Jessica Canning, global research director for Dow Jones VentureSource.

Canning also observed that while the number of deals in the medical software and information services sector fell from 21 deals in 2009 to 11 in 2010, there was significantly more money per deal and an overall uptick in investments in the sector.

"In health information as a whole you are seeing a lot more interest. We've spoken to several clients looking to find new companies to invest in," Canning said.

Canning also noted that the figures show momentum for the software and information services segment, which has so far posted $202 million for the year, as opposed to this time last year when the sector attracted $151 million.

In the medical devices and equipment sector, there was also a drop in the number of deals from 80 in 2009 to 78 deals in 2010, but the value of those deals increase from $825 million in 2009 to $919 million in 2010.

Overall, Healthcare companies raised $2.7 billion for 201 deals, a 13% increase in capital raised from the $2.4 billion put into 189 deals during the second quarter of 2009. Within Healthcare, the Biopharmaceuticals sector continued to see the highest level of activity. Ninety-five Biopharmaceuticals deals raised $1.2 billion, a 30% increase in deals but a slight drop in capital raised from the same period last year.

Behind healthcare the IT sector garnered the second highest investment with 231 deals that raised $1.9 billion, up from the second quarter of 2009, which saw 208 deals raise $1.6 billion. Software garnered the largest slice of capital as 156 deals raised $908 million, up from the 132 deals that raised $761 million in the second quarter of last year.

Dow Jones VentureSource, which released the numbers over the weekend, noted that for the entire second quarter of this year, venture capital investments totaled $7.7 billion to fund 744 deals. That is the highest quarterly total for capital invested since $8.4 billion was put into 699 deals during the third quarter of 2008.

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