While 2008 probably won't be a record-breaking year for med-tech investments in the Midwest like 2007 was, the year probably will finish with more than $800 million raised for start-up companies, according to the Midwest Health Care Venture Investment Report, published by BioEnterprise (Cleveland).

Last year investments for start-ups in the region stretched slightly past the $1 billion mark, a significant increase over previous years, said representatives of BioEnterprise. By mid-year in 2007, those investments were at $742.1 million compared to this year's midpoint amount of $442.6 million.

BioEnterprise President/CEO Baiju Shah said he doesn't see a decrease in the number of investments so much as he sees a decrease in the amount of money investors are putting into those investments. He also said he didn't see the nation's battered economy as playing a significant role.

"We're definitely seeing business as usual," Shah told Medical Device Daily on Tuesday. "Healthcare is as close to a recession-proof sector as it can get. Demand hasn't gone down. I think [the] significant difference between this year and last year is that in 2007 we saw a number of later-stage financings. We saw a lot of companies pull in $30 million or $40 million deals. Last year the deals were larger. That's what drove 2007 numbers up. We are still on an upward trend."

By the mid-year point in 2006, a little more than $286 million was raised – which Shah pointed out was further proof of the Midwest sector being on an upward trend.

"Minnesota and Ohio are your perennial leaders for investments," he said. Minnesota came in at $106.4 million and Ohio raised $84 million.

"What's new is that Michigan has come in at third place for investments, taking in $73.5 million," Shah said.

Shah credits Michigan's 21st Century Jobs Fund awards initiative as major force behind the boosting of the state's investment. The 21st Century Jobs Fund awards are designed to commercialize technologies in the state, with applicants competing for up to $30 million to grow businesses in the areas of alternative energy, life sciences, advanced manufacturing, and homeland security and defense.

In May the state reported the 2nd round of an initiative with a pot of $2 billion (Medical Device Daily, May 2, 2008).

"Few states have really stepped up," Shah said. "It's interesting to see that have made real investments and those investments pay off."

Shah mentioned that two states that stepped up to the plate are Pennsylvania and Ohio, which were listed as 1 and 4, respectively, on the strength of their biotechnology investments, in the 2008 Business Facilities Rankings Report.

"Looking at Pennsylvania and Ohio, these states both made commitments to investing in their med-tech companies and the results are striking. These are two states that weren't known for biotech before. But both started making significant investments back in 2001 and 2002 and this is the result."

He added that medical devices are also seeing a strong infusion of investment dollars.

According to the report, devices are seeing investments of $197 million and biopharmaceuticals are seeing investments of $169 million. Healthcare software and services companies came in at $74 million.

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

"Investors have recognized that devices can generate more attractive investment returns, with less development risks than biopharma products," Shah said of the shift. "It was always known that devices had less developmental risks, but coupled with attractive investment returns – well, that's a new spin that's driving medical devices into the forefront."

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.