Venture Capital Activity and Performance in Healthcare and Medical Innovation

Pythagoras Petratos
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Pythagoras Petratos: The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise

No 76, Studies in Applied Economics from The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise

Abstract: The U.S. is a global leader in life sciences and there is wide acceptance that venture capital currently constitutes the cornerstone of its innovation commercialization leadership. Healthcare is the second most important sector for Venture Capital (VC) investment and accounts for a large proportion of innovation, employment and welfare creation in the U.S. economy. This paper describes the innovation activity and performance of venture capital in healthcare. Using Thomson One’s Private Equity module database for the period 1990-2014, we find that the performance of investment funds expressed by Return On Investment (ROI) measured by Internal Rate of Return, IRR) averages approximately 17%. Industry categories in life sciences present different behavior among them regarding returns, activity and exits. The benefits of venture capital and innovation in healthcare are attenuated by numerous barriers. We propose policy recommendations that could remove these hurdles in order to enhance venture capital activity and promote healthcare and medical innovation. These would mainly include tax reforms as well as financial regulations

Pages: 25 pages
Date: 2017-03
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jhisae:0076

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