Silicon Valley Bank's Healthcare Report Signals Investor Optimism for Fundraising and IPO Market in 2020

US venture fundraising in healthcare set yet another record in 2019, with a 10% increase over 2018's record

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Jan 09, 2020, 09:00 ET

SANTA CLARA, Calif., Jan. 9, 2020 /PRNewswire/ -- US healthcare venture fundraising reached $10.7B in 2019, setting a record for the third consecutive year, according to Silicon Valley Bank (SVB) (NASDAQ: SIVB), the bank of the world's most innovative companies and their investors. Investment into venture-backed biopharma, medical device and diagnostics and tools (Dx/Tools) and healthtech reached $32B in 2019, only slightly down from 2018.

"In 2019, public markets created significant mark-ups with up-round IPOs and positive post-IPO performance for biopharma, dx/tools, device and healthtech companies," said report author Jon Norris, Managing Director of SVB's Life Science and Healthcare Practice. "Strong M&A and IPO performance also led to greater returns for limited partners, further driving fundraising and investment."

SVB's annual Healthcare Investments and Exits Report analyzes and predicts trends for venture capital investing, fundraising and exits that shape the biopharma, medical device, diagnostics/tools and healthtech sectors in the US and Europe.

Notable Results of 2019:

Biopharma investments dipped slightly in 2019. However, Series A investments dropped by 31% as VCs slowed their investment pace and shifted their focus to existing portfolio companies.
Robust mezzanine valuations and positive IPO step-ups encouraged biopharma companies to raise capital and go public, resulting in the sector's third best IPO output ever, at 50 IPOs in 2019. Twenty of these companies had $1B+ valuations at year-end.
Series A medical device deal activity set a record in 2019, increasing to 105 financings. Increases in imaging, orthopedic and surgical deals led the uptick in investment activity. The value of device exits reached a new high, driven by private M&A, IPO values and public market performance.
The record value in Dx/Tools exits was largely driven by IPOs in the sector, with R&D tools companies comprising six of nine IPOs and two IPOs valued at more than $2B.
Investments into healthtech substantially increased during the past three years, making it the fastest-growing healthcare sector. Healthtech IPOs emerged from a two-year drought, with four of the eight IPOs ending the year at $1B+ valuations.

SVB's Outlook for 2020:

"We can expect to see companies build on the momentum of 2019's IPO surge in the first half of 2020, but US fundraising will likely slow in the second half of the year," said Norris.

SVB anticipates total healthcare venture fundraising to slow but remain healthy, reaching about $9B compared to $10.7B in 2019.
Biopharma investments are expected to decrease by 10-15% as large private crossover-lead deals decline.
Dx/Tools M&A could include Dx test and Dx analytics companies by tech acquirers and some biopharma acquisition of AI/ML-focused R&D tools companies.
Healthtech investments should continue to climb in 2020, led by investments in provider operations and alternative care companies.

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 Healthcare Investments and Exits report here: svb.com/healthcare-investments-and-exits

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