SANTA CLARA, CA – January 4, 2018 –Healthcare venture capital fundraising set a record of $9.1 billion in 2017, increasing 26 percent over 2016, according to Silicon Valley Bank (SVB), the bank of the world’s most innovative companies and their investors. Investments into venture capital-backed biopharma, medical device and diagnostics/tools companies also are expected to break a record in 2017 when the final numbers are compiled for the year.
SVB today released its annual Trends in Healthcare Investments and Exits Report that analyzes and makes predictions about the top venture capital investing, fundraising and exit trends that are shaping the biopharma, medical device and diagnostics/tools sectors.
“This year’s report points to healthcare innovations leading to increased investments,” said Jon Norris, Managing Director of Silicon Valley Bank’s Life Science and Healthcare Practice and author of the report. “New technologies such as artificial intelligence and machine learning have led to more generalist investors entering the healthcare space. They are leveraging their tech expertise, particularly in the diagnostics/tools sector.”
Results from 2017:
Venture investment and fundraising in the healthcare sector set new records, underscoring the strength of biopharma Series A deals, new interest in medical devices and the promise of technology to advance diagnostics/tools opportunities.
- Investors making big bets on new technologies led biopharma and device Series A investments to record levels. Spikes in Q1 and Q4 biopharma Series A deals propelled the sector to another record year, posting $2.8 billion in investments.
- Biopharma saw a wave of IPOs, beating 2016’s total. IPOs had a significant upswing in pre-money valuations.
- While biopharma big exit M&A activity slowed, focus continued on early-stage companies while IPOs shifted to later-stage companies. SVB’s report defines big exit M&A as acquisitions of venture capital-backed companies with at least $75 million upfront in biopharma and $50 million upfront in device and diagnostics/tools.
- Non-invasive monitoring deals took off in medical device and traditional healthcare venture investors have returned to the sector.
- M&A activity in the device sector was steady, however, in 2018, SVB expects neuro and drug delivery technologies to drive investor interest and also become an emerging exit area.
- Diagnostics/tools companiessaw no M&A activity, though investors were drawn to the potential of next-generation sequencing (NGS) and liquid biopsy companies. The sector raised more than $2.8 billion in 2017, a record.
“On the heels of the healthy 2017 investment and fundraising environment, we anticipate M&A exits to increase in 2018 across biopharma and diagnostics and tools,” Norris said. “Specifically, we anticipate more exits in biopharma as acquiring companies continue to restock their pipelines with early-stage assets.”
SVB’s outlook and expectations for 2018:
- U.S. healthcare venture capital fundraising will decline in 2018 to $6-7 billion, as larger firms closed funds in the last year.
- Biopharma M&A will increase from 14 deals in 2017 to at least 20 deals in 2018 due to available acquirer cash and the need to replenish their pipelines.
- Medical device investments are expected to increase. M&A will be stable, buoyed by PMA/De Novo 510(k) pathway companies that have achieved healthy returns and spend less time between raising Series A and exiting.
- Diagnostics/tools investments in 2018 will dramatically decline by at least 25 percent from 2017’s record; although, the number of deals is expected to be steady. SVB expects large tech companies to continue to invest in and potentially buy companies in this sector.
The Life Science and Healthcare Practice of Silicon Valley Bank delivers specialized solutions and market expertise in the areas of biopharma, medical device, diagnostics and tools, digital health and healthcare services, with a focus on helping companies of all sizes grow.
Read the full Trends in Healthcare Investments and Exits 2018 report.
About Silicon Valley Bank
For more than 30 years, Silicon Valley Bank (SVB) has helped innovative companies and their investors move bold ideas forward, fast. SVB provides targeted financial services and expertise through its offices in innovation centers around the world. With commercial, international and private banking services, SVB helps address the unique needs of innovators. Learn more at svb.com.