The landscape of the Midwest is rapidly changing. While much of the region's established industry has migrated overseas for much stronger tax shelters and havens, its healthcare assets — active but mostly on the Midwest's periphery — is quickly being pulled to the forefront by increased investor confidence.

According to a report just released by BioEnterprise (Cleveland), start-up companies in the healthcare industry in the Midwest drew in roughly $726 million in the first half of 2007, threatening to blow past the $792 million in investments made during the entire calendar year of 2006. Analysts are speculating the investments could reach the $1 billion mark by this year's end making 2007 another record year.

"The Midwest has always been home to a myriad of healthcare industries," Baiju Shah, president of BioEnterprise told Medical Device Daily. "What had been missing was the venture activity. What has happened [now] is that states have made concerted efforts in the last five years to build new venture pipelines."

The report shows biopharmaceuticals making up 62%, or $447 million of total investments. Medical device investments were at $148 million, or 20%, with healthcare software and service companies pulled only slightly further back with $132 million, or 18%.

Leading the pack in healthcare venture capital attraction investments is Ohio, which had ventures attracting $244.3 million compared to last year's $113.9 million.

The report shows those deals include large financings such as Atherys (Cleveland) at $65 million, Franklin & Seidelmann (Beachwood, Ohio) at $25 million and numerous others.

According to the report, Minnesota ($126 million) and Indiana ($117.8) are second and third after Ohio. Two startups in those states received particularly significant investments — CVRX (Maple Grove, Minnesota) at $65 million and Targanta Therapeutics (Indianapolis) at $70 million.

Michigan ($63.4 million), Illinois ($42.5 million), Missouri ($25.6 million), Wisconsin ($16.11 million), and Kentucky ($5 million) follow the top three states. In addition, Western Pennsylvania companies attracted $85.4 million in financing, according to the report.

Iowa, Kansas and West Virginia did not report financings.

Various Midwestern cities were reported to have garnered significant funding: Indianapolis ($102 million), West Lafayette ($15 million), Louisville ($5 million), Detroit-Ann Arbor ($63.4 million), Minneapolis-St. Paul ($126 million), St. Louis ($25 million), Cincinnati ($33 million), Cleveland ($199.1 million), Columbus ($11.5 million),

Leading coastal venture capital firms, such as Burrill & Company, MPM, New Enterprise Associates, Oak Investments, Orbimed, Polaris Ventures, Psilos Group and Radius Ventures, are making Midwest investments," Shah said. "Midwest deals have gained notice because of successful Midwest industry exits — IPOs and acquisitions, and the significant amount of public funds spent in developing rich pipelines by Midwestern states."

"What also happened in the Midwest was the formation of MidAmerica Investors Network ," Shah said. "They formed in about 2003 or so, and there are [about] 70 members."

The group meets on a quarterly basis, providing insight and acting as a "Chamber of Commerce" of sorts for the healthcare industry.

While the area has garnered significant attention due to the investing group, the Midwest still has significant hurdles to climb before becoming the top region for healthcare investment, Shah acknowledged. He said he didn't have solid numbers for the other regions but offered up a guess in terms of rankings.

"The Bay area is still the leader for investments, along with the Northeast — but I'd almost confidently say [the Midwest] is ahead of the South East," Shah said.

Arguably, the Midwest could be seen as a barometer for investment strength throughout the country, particularly in the medical device segment, according to a report from Dow Jones News Service.

That report states that venture capitalists pumped a record $1 billion into U.S. medical device companies in the first quarter of 2007, a 58% increase over the investment in the second quarter of 2006. In the medical device realm investor confidence is especially strong – thus challenging drug therapies. About 75 device makers raised capital last quarter, the most on record, according to the report.

Cases such as the Polaris Venture Partners-backed deal that had Boston Scientific (Natick, Massachusetts) purchasing Remon Medical Technologies (Caesarea, Israel) support this investor confidence.

"Success breeds an appetite for more," said Polaris Managing Partner Terry McGuire in the article.

BioEnterprise is a business formation and acceleration effort designed to support the growth of bioscience companies, providing consulting and support services to healthcare companies. Its partners are Case Western Reserve University , The Cleveland Clinic Foundation , University Hospitals Health System , and Summa Health System . Additional technology partners include the NASA Glenn Research Center , Cleveland State University , NorTech , and Omeris .

BioEnterprise says that with these partnerships it has created, recruited and accelerated more than 50 companies in four years.