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Healthcare startup investments strong in Minnesota, Ohio

Brandon Glenn

Minnesota topped all other Midwestern states in attracting investment to healthcare startups during the first half of 2011.

Overall, investment in Midwestern healthcare startups was down 24 percent to $315 million, compared with the first half of last year, according to a report from Cleveland-based BioEnterprise, a nonprofit that helps biomedical companies with business development.

BioEnterprise president Baiju Shah attributed the declining investment dollars to an upsurge in mergers and acquisitions activity, meaning that more startups are being purchased by strategic acquirers rather than seeking investment financing.

Compared to the pre-recession days of 2007, the decline was even more stark: a drop of 58 percent from $742 million.

One bright spot for Midwestern healthcare startups, however, was an upswing in the number of deals — albeit obviously smaller deals. The 86 deals in the first half of this year represented a 15 percent increase from last year, as well as a 34 percent rise from 2007.

Broken down by state, Minnesota attracted the most dollars with $88 million, followed by Ohio ($80 million) and Wisconsin ($49 million). In terms of number of deals, Ohio was first with 25, followed by Minnesota (13) and Pennsylvania (12).

The biggest Minnesota healthcare (pdf) deals in the first half of the year were health IT firm Ability Network ($20 million), managed-care provider SeeChange Health ($20 million) and the mysterious Rotation Medical ($10 million).

Top Ohio deals included a private placement to stem cell developer Athersys ($13 million), anti-anemia drug developer Akebia Therapeutics ($14 million), health IT company Explorys ($11.5 million) and genetic test maker AssureRx ($11 million).

Broken down by sector, Midwestern biopharmaceutical companies raised the most cash ($153 million), followed by medical device firms ($85 million) and health IT and services companies ($70 million).

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