MINNEAPOLIS – As the 8th edition of the IBF Med-Tech Investing Conference got under way here yesterday, the tone of the talks was generally upbeat, considering the consistently gloomy state of the economy.

The general take-away of the conference, co-presented by International Business Forum (IBF; Massapequa, New York) and LifeScience Alley (St. Louis Park, Minnesota), is that there is a glimmer of positive financial light at the end of the tunnel. That optimism was further bolstered by Federal Reserve Chairman Ben Bernanke's remarks on Tuesday that he expects the recession to end later this year.

Providing data that both affirmed and refuted some of that financial optimism as it relates to the med tech field was Ralph Weinberger, a partner in the Technology Industry Group at PriceWaterhouseCoopers (PWC; New York). He discussed the state of med tech venture capital trends and used data from PWC's MoneyTree survey of quarterly venture capital activity.

In 1Q09, the life sciences sector (biotechnology and medical devices combined) experienced a 40% decline in terms of dollars and a 31% drop in deals with $989 million going into 133 rounds. Investment in biotechnology fell 46% to $577 million in the quarter, while medical device investments fell 27% to $412 million.

Investments in life sciences companies, Weinberger noted, represented 33% of all investment dollars and 24% of all deals in the first quarter, which is in line with historical norms.

Weinberger called the drop in medical device investments a "precipitous decline," but said that despite that drop, medical devices have "come back into favor" with investors, and that about 13.7% of all venture capital investment dollars went into device deals in 1Q09.

If historical indications are indicative of future opportunity, Weinberger said that the most recent decline in medical device investment maypresage a rally for the industry in the near term as it did after the most recent downturn in the sector in 2000.

"Perhaps this speaks well of some opportunities for the sector and maybe foretells of another disproportionate run up for medical devices from here, we'll have to see," he said. That being said, Weinberger pointed out that valuations are down right now "and they're going to stay down for awhile."

While Weinberger said that the trend has been upward for the amount of money provided in med-tech funding deals, much of that money is going to existing deals and not seed and early-stage companies, the lifeblood of the industry.

Between 2003 and 2006, Weinberger said the trend had been for ever-increasing amounts of money going to those early-stage companies. That all changed in 2007 and the decline has continued into 1Q09. "This is telling us that the available dollars that these venture capital funds have, many of them have to be committed to existing deals, so for the first time in quite awhile we're seeing a decline in the percentage of deals that are being funded that are seed and start up.

Another way to look at that data is to see what funding rounds or tranches that the money is going into in the sector. In 2008, Weinberger said that more than 49% of all VC money went to deals that were in their fifth round or higher. Contrast that with 1997, a good year for IPOs in the sector, in which only 21% of the money was going to funding deals in the fifth round or later.

"It's going to be tough for awhile for the earlier stage deals to achieve venture capital funding," Weinberger said, but there is "cause for optimism" that the device industry will rebound in the not-too-distant future."