Healthcare venture fundraising on track for record year

Venture fundraising in the healthcare sector is on track to set a record this year with $5 billion raised through midyear, according to a study from Silicon Valley Bank.

Meanwhile, a surge of activity late in the second quarter pushed first-half IPO activity in healthcare to 15 deals – all biopharma – setting the year on course to surpass 2016’s 28 deals, SVB found. The bank forecasts 28 to 32 deals by year’s end. In 2015, there were 42 deals.

The observations are part of a first-half 2017 study of healthcare investment trends. Overall, activity in the space set a fast pace during the period.

Included are venture investments, which continue to be strong, with pharma and biotech startups attracting $4.6 billion in capital, and devices and supplies companies roping in $2.9 billion. SVB expects full year biopharma investments to closely match last year’s $8.1 billion. Deal volume is slightly above last year’s pace so far, while dollars invested are largely on par.

In terms of fundraising, this year’s activity is being led by biopharma. By year’s end, the total could top 2015’s previous record of $7.5 billion, the bank projects. The brisk activity is being supported by traditionally tech-focused investors eager to put money to work behind the trends of artificial intelligence and machine learning.

In addition, of particular note is that companies going public this year are more mature than in the recent past. In the first six months of the year, just two of the 15 deals were early stage, compared with 40 percent of the deals over the past three years that were in pre-clinical or phase I activities, the report found.

Helping to drive this are crossover investors, who have scaled back investments in new biopharma companies and are driving existing portfolio companies to go public. Eight of the 15 IPOs had participation from top crossover firms.

On the downside, M&A activity in the biopharma sector slowed during the first half of the year. M&A in the devices space remained stable.

Action Item: To download the Silicon Valley Bank report, go to http://bit.ly/2qJjbzP

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