Health tech venture-backed investments continued strong in 2019, hitting a record and cementing health tech as the fastest growing healthcare sector, according to a report by Silicon Valley Bank (SVB).
The Healthcare Investments and Exits Report predicts that health tech investments in Europe and the US will continue to rise in 2020, driven by provider operations and alternative care companies.
Last year’s growth is primarily attributed to alternative care and provider operations, each of which has received more than $2 billion in investments. This was largely driven by London-based Babylon Health, which raised a $550 million round and Chicago-based VillageMD, which raised $175 million.
“We expect that 2019’s successful public offerings will pave the way for more health tech IPOs, specifically in the alternative care space,” the report’s authors wrote.
European investment in every healthcare sector showed a significant 50% uptick year over year in 2019 and has increased each of the last three years.
WHY IT MATTERS
"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 report author Jon Norris, managing director of SVB's life science and healthcare practice.
SVB anticipates total healthcare venture fundraising to slow but remain healthy, reaching about $9 billion compared to $10.7 billion in 2019. Biopharma investments are expected to decrease by 10-15% as large private crossover-lead deals decline.
Dx/Tools mergers and acquisitions (M&A) could include Dx test and Dx analytics companies by tech acquirers and some biopharma acquisition of artificial intelligence (AI)/machine learning-focused research and development (R&D) tools companies, according to the report.
THE LARGER CONTEXT
SVB’s annual Healthcare Investments and Exits Report analyses and predicts trends for venture capital investing, fundraising and exits that shape the biopharma, medical device, diagnostics/tools and health tech sectors in the USA and Europe.
Meanwhile, Rock Health's recently published annual funding report revealed that the average size of digital health deals decreased in 2019, as did the total funding for the year.
ON THE RECORD
Norris said: "In 2019, public markets created significant mark-ups with up-round IPOs and positive post-IPO performance for biopharma, dx/tools, device and health tech companies. Strong M&A and IPO performance also led to greater returns for limited partners, further driving fundraising and investment."
Noomn Haque, head of life sciences and healthcare at SVB UK, said: “The data show a continued upsurge of interest in life sciences and a healthy exit environment, helping to recycle further funds into the sector.”