Trends in Healthcare Investments and Exits 2018mttc.org/wp-content/uploads/2018/06/SVB-Presentation-on... · 2018-06-01 · Trends in Healthcare Investments and Exits 2018 Incubators

Trends in Healthcare Investments and Exits 2018

Clark Hayes – Managing Director Life Science/Healthcare Northeast Head of Business Development

2018 Massachusetts Life Science Innovation Day

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More than

*As reported on a consolidated basis for the period end March 31, 2018(5,7) See disclosure corresponding to this number on the last page of this presentation.

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HEALTHCARE IT/ DIGITAL HEALTH

MEDICALDEVICES

BIOPHARMA &DIAGNOSTICS

HEALTHCARESERVICES

Healthcare Investments and Fundraising Set Records in 2017

2017 Key Highlights: Investments

5

• U.S. healthcare venture fundraising set a record, reaching $9.1B – a 26 percent increase over 2016 – and surpassing the 2015 record of $7.5B.

• Investments into venture-backed biopharma, medical device and diagnostics and tools (Dx/Tools) companies are also expected to break a record in 2017, increasing 31 percent over 2016 to reach $15.5B.

• Spikes in Q1 and Q4 biopharma Series A deals propelled the sector to another record year, posting $2.8B in investments.

• Biopharma investment centered on oncology and platform companies. Platform companies piqued investor interest, as their technologies showed promise for multiple exits across different indications.

• Non-invasive monitoring, especially in cardiovascular, uro/gyn and neuro, took off in medical device Series A investments.

• Neuro investment surged in 2017, with significant interest from niche investors and incubators.

• Artificial intelligence spurred tech investor interest in Dx/Tools, leading to record investment.

• Liquid biopsy investment exploded, punctuated by $1.8B in investments into Guardant Health, GRAIL and Human Longevity.


6

Healthcare Fundraising Reaches New HeightsU.S. Healthcare Venture Fundraising*, 2009 – 2017

$5.2B

$1.8B

$3.7B $3.6B$3.9B

$6.1B

$7.5B$7.2B

$9.1B

2009 2010 2011 2012 2013 2014 2015 2016 2017

*SVB estimates the dollars allocated to healthcare by all U.S. venture funds.Source: PitchBook and SVB proprietary data

Healthcare venture funding hit a new high in 2017. The increase started in 2014 when fundraising jumped 50% over the previous year. This has led to a large pool of capital available to invest in venture-backed companies.

Venture healthcare investors have recently focused on biopharma and Dx/Tools. As Dx/Tools companies integrate computational methods such as artificial intelligence, we see tech investors, many new to healthcare, starting to invest in these deals.

Over the past few years, traditional VCs scaled back medical device investments. This trend reversed in 2017.

Looking ahead, we anticipate fundraising will continue to be strong, but will decline to the $6B-7B range in 2018.

HC VC $ Fundraised($ BILLIONS)


5

13

16

17

36

9

12

16

19

38

Anti-Infective

Orphan/Rare Disease

Neuro

Platform

Oncology

2016 2017

Oncology

Platform

Neuro

Orphan/Rare

Anti-Infective

2016 2017

# of Investments 125 144

Total Series A Funding ($M) $2,334 $2,787

Corporate Investments (%) 26% 29%

7

Biopharma Series A Spikes in Q1 & Q4 Set A RecordU.S. Series A* Biopharma Investments, 2016 – 2017

A

B

C

$784M

$540M

$743M

$267M

$1,711M

Investors making big bets on new technologies led biopharma Series A activity to record levels in 2017.

[A]: Corporate investors often joined these early-stage syndicates, but they were least active in orphan/rare and neuro companies (20% and 22%).

[B] Oncology deals and dollars at least double the next closest indication.

[C]: The 2017 median deal was $9M, but Q1 and Q4 median deals had values twice that size.

*Series A investments include all U.S.-based first-round institutional or corporate venture investment, and all first-round investments equal to or greater than $2M regardless of investor. Source: PitchBook and SVB proprietary data.

2016 Median Series A Funding by Quarter ($M)

2017 Median Series A Funding by Quarter ($M)

75thQuartile

25thQuartile


$10.0M $6.3M $7.4M $7.5M

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

Q1 2016 Q2 2016 Q3 2016 Q4 2016

$18.4M

$6.0M$5.7M

$19.5M

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

Q1 2017 Q2 2017 Q3 2017 Q4 2017

8

Investors Seek Early-Stage Biopharma DealsMost Active Biopharma Investors*, 2016 – 2017

*Most Active Biopharma Investors calculated as new (first-time) investments into companies in 2016 – 2017.**AREE, Inc. Earnings Press Release 9/30/17Source: PitchBook, press releases and SVB proprietary data.

# OF DEALS

89

10111213141516171819222326

Corporate Investors


8

9

15

16

27

70

3

5

1

3

3

6

3

4

4

6

5

10

Anti-Infective

Auto-Immune

Orphan/Rare Disease

Neuro

Platform

Oncology

Early Stage Late Stage Undesignated

9

Oncology, Platform Draw New Investor ActivityMost Active Biopharma Investors* by Indication, 2016 – 2017

*Most Active Biopharma Investors by Indication defined as Top 42 venture and corporate investors calculated as new (first-time) investments into companies in 2016 – 2017. Early Stage is defined as Series A & B; Late Stage defined as Series C and later.Source: PitchBook and SVB proprietary data.

Oncology

Platform

Auto-Immune

Orphan/Rare Disease

Anti-Infective

Neuro

$3,410M

$1,421M

$664M

$734M

$541M

$649M

# DEALS | $ MILLIONS

Logos represent any $25M+ financing raised in that time period/indication.


7

5

5

6

4

1

3

7

7

11

Ophthalmology

Cardiovascular

Neuro

Orthopedic

Non-InvasiveMonitoring

2016 2017

$97M

$63M

$72M

$50M

$27M


Orthopedic

Neuro

Cardiovascular

Ophthalmology

2016 2017


Total Series A Funding ($M) $248 $342


Median Round Size ($M) $3.3 $3.9

Non-Invasive Monitoring Drives Device Series AU.S. Series A* Device Investments, 2016 – 2017

10

A

B

Cardiovascular

Uro/Gyn Neuro

Respiratory Ambulatory Metabolic Ophthalmology

Series A Investments includes all U.S. based first-round investments from institutional or corporate venture investment, and all first-round investments equal to or greater than $2M regardless of investor. Source: PitchBook and SVB proprietary data.


C

3

4

5

7

8

11

Traditional VCs Increase Device InvestmentsMost Active Device Investors*, 2016 – 2017

*Most Active Device Investors calculated as new (first-time) investments into companies in 2016 – 2017. Source: PitchBook and SVB proprietary data.

Traditional venture investor activity in device rebounded in 2017. Nine firms had at least four deals in 2016 –2017, compared to only three firms in 2015–2016. In contrast to biopharma investors’ focus on early-stage deals, device investments by corporate investors were primarily in later-stage companies.

Corporate Investors

# OF DEALS

KCK Group


Incubators and niche corporate venture arms generated significant new interest in neuro, leading to a 2017 investment surge. Non-invasive monitoring companies continue to spark investor interest at smaller deal sizes. These companies have smaller development costs and less stringent regulatory requirements. We anticipate that drug delivery investment will continue to increase, as therapeutic treatments move outside the hospital.

1

4

2

5

4

5

7

9

5

3

0

3

1

3

1

4

5

3

1

1

1

5

1

6

ENT

Drug Delivery

Metabolic

Vascular Access

Non-Invasive Monitoring

Orthopedic

Neuro

Cardiovascular

Surgical

Early Stage Late Stage Undesignated

12

Niche Investors Generate Major Interest in NeuroMost Active Device Investors by Indication*, 2016 – 2017

*Most Active Device Investors defined as Top 35 venture and corporate investors calculated as new (first-time) investments into companies in 2016 – 2017. Early Stage is defined as Series A & B; Late Stage defined as Series C and later.Source: PitchBook and SVB proprietary data.

Surgical, Neuro and Non-Invasive Monitoring Vascular Access

Trends:

$163M

$451M

$276M

$97M

$117M

$167M

$197M

$235M

$192M

Logos represent any $25M+ financing raised in that time period/subsector.


Surgical

Drug Delivery

Metabolic


ENT

Orthopedic

Cardiovascular

Vascular Access

Neuro


2016 2017


Total Series A Funding ($M) $516 $500


Median Round Size ($M) $5.3 $4.7

13

Investors Make Smaller Series A Bets in Dx/ToolsU.S Series A* Dx/Tools Investments, 2016 – 2017

9

20

26

9

24

40

Dx Analytics

Dx Test

R&D Tool

2016 2017

$529M

$347M

$140M

B

[A]: While Series A deals increased, total funding declined, indicating that investors are making smaller Dx/Tools bets.[B]: R&D Tools companies are generating major investor interest. This is likely due to a lack of regulatory and reimbursementhurdles facing other Dx/Tools subsectors.[C]: While many Series A financings are R&D Tools, the majority of >$10M deals are AI-based bets in the Dx Tests and Dx Analytics subsectors.

C

*Series A Investments includes all U.S. based first-round investments from institutional or corporate venture investment, and all first-round investments equal to or greater than $2M regardless on investor. Source: PitchBook and SVB proprietary data.

A Artificial Intelligence

SyntheticBiology

Point-of-Care Dx Tests

Traditional R&D Tools

Logos represent all >$10M Series A

financings.


s

s

3

4

5

6

9

14

Tech-Focused Investors Emerge as Dx/Tools LeadersMost Active Dx/Tools Investors*, 2016 – 2017

*Most Active Dx/Tools Investors calculated as new (first-time) investments into companies in 2016 – 2017.Source: PitchBook and SVB proprietary data.

Tech-focused investors, including AME Cloud Ventures, Data Collective and Khosla Ventures, increased their participation in Dx/Tools investments.We anticipate that tech-focused investors will continue to apply their software expertise in Dx Analytics deals that leverage AI.While tech corporate venture participation has increased, these investors focus on a small set of deals most compatible with their own technologies.

# OF DEALS

Corporate Investors


16

19

42

Dx Analytics

Dx Test

R&D Tool


15

Investors Focus on R&D Tools and Dx TestsMost Active Dx/Tools Investors* by Subsector, 2016 – 2017

*Most Active Dx/Tools Investors defined as Top 24 venture and corporate investors calculated as new (first-time) investments into companies in 2016 – 2017.Source: PitchBook and SVB proprietary data.

$981M

$2,021M

$749M

Overall, Dx/Tools fundraising increased 40%, reaching $2.8B in 2017. Investments in GRAIL and Guardant Health accounted for $1.6B, nearly 60% of the total.R&D Tools fundraising increased by 50% in 2017, led by four $25M+ financings in Series A companies.Two 1H deals accounted for the majority of Dx Tests’ 2017 investment total of $1.8B. Still, the subsector showed a median round size of $15M, higher than R&D Tools and Dx Analytics.In stark contrast to R&D Tools, active investors avoided funding Series A Dx Analytics companies. Instead, these investors focused on later-stage companies that had more clinical validation.

Logos represent any $25M+ financing raised in that time period/subsector.


s

s

Trends in Healthcare Investments and Exits 2018 16

• About Silicon Valley BankFor more than 30 years, Silicon Valley Bank 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.

This material, including without limitation to the statistical information herein, is provided for informational purposes only. The material is based in part on information from third-party sources that we believe to be reliable, but which have not been independently verified by us and for this reason we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any other transaction. ©2018 SVB Financial Group. All rights reserved. SVB, SVB FINANCIAL GROUP, SILICON VALLEY BANK, MAKE NEXT HAPPEN NOW and the chevron device are trademarks of SVB Financial Group, used under license. Silicon Valley Bank is a member of the FDIC and the Federal Reserve System. Silicon Valley Bank is the California bank subsidiary of SVB Financial Group (Nasdaq: SIVB).

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Trends in Healthcare Investments and Exits 2018mttc.org/wp-content/uploads/2018/06/SVB-Presentation-on... · 2018-06-01 · Trends in Healthcare Investments and Exits 2018 Incubators