Fueled at least in part by exceptionally strong IPO and M&A markets, hedge funds, venture capitalists, private equity firms and corporate investors are committing more time and money into privately held medical devices companies, according to a new “Healthcare Investments and Exits” report issued by Silicon Valley Bank.
The report examining the first half of 2021 outlines deals and dollars committed to all sectors within healthcare — while also tracking exiting opportunities for investors. An examination of the medical device portion of the report reveals many promising trends.
First, capital commitments are up. Looking at dollars raised, U.S. and European medical device startups raised $4.6 billion in the first half of this year, putting 2021 on pace to eclipse totals dollars raised in 2020 ($5.2 billion raised) and 2019 ($4.8 billion raised.) It’s worth noting that European startups accounted for 34% of the dollars raised by medical device companies, up from 11% in 2020 and 22% in 2019.
Second, the rise in investments is equally robust – 247 medical device companies in the U.S. and Europe raised rounds in the first half of 2021, putting it on track to smash past tallies in 2020 (300 deals), 2019 (277 deals) and 2018 (263 deals).
What’s driving the increases? In dollars, the report points to “large, later-stage financings.” In the first half of 2021, seven companies raised more than $100 million while 14 companies closed on financings landing somewhere between $50 million and $99 million.
Notable financings include:
• Surgical robot companies CMR Surgical ($600 million and Caresyntax ($100 million).
• Imaging companies also drew huge dollars – EDDA Technology ($245 million) and eCential ($122 million).
• Neurology companies Ablative Solutions, Ceribell, and NeurosMedical drew $40 million-plus rounds from private equity firms, hedge funds and others.
Good news can be found in the early stage as well, according to the report.
Looking at the number of deals, 77 U.S. and European medical device companies raised first rounds (Series A) in 2021, nearly matching the total year tallies in 2020. (83 deals), 2019 (88 deals) and 2018 (86 deals.)
A look at dollars tells a slightly different story. In the first half of 2021, investors committed $516 million to Series A deals in the U.S. and Europe. This still compares favorably to past years, but the difference between the 2021 dollar total and other years isn’t as pronounced: Series A investors committed $668 million to medical device companies in all of 2020; $732 million in all of 2019 and $913 million in all of 2018.
There’s hope in raising second rounds as well. “We also noted new VC leads on many Series B deals, which has historically been a difficult place to find new investors in device,” the report stated.
Solid exit signs
Silicon Valley Bank reports that medical device acquisitions were strong in the first half, with 14 acquisitions generating $4.6 billion for investors. This already tops the $3.6 billion generated in all of 2020 and puts the year on track to match the $9.2 billion paid out by acquirers in 2019 through 17 deals.
After sitting on the sidelines for more than a year, Boston Scientific returned to the market with the acquisition of Farapulse . But Silicon Valley Bank took note of many small- and mid-cap companies assuming the role of acquirer, including NuVasive, SeaSpine, Axonics, Hillrom, and Haemonetics.
IPOs were equally promising. Nine medical device companies went public in the first six months of this year versus 11 companies going public last year. Eight companies held IPOs in 2019.
While the number of IPOs is promising, the more encouraging sign is the post-IPO performance of medical device companies. According to SVB, medical device companies that have gone public over the past three years have outperformed all other healthcare sectors, including pharma and digital health.
Halfway through 2021, medical device companies that went public in 2018 averaged a 233% increase in value. Companies going public in 2019 rose 296% in value, and 2020 companies shot up 174% in value, according to the report.
The report is authored by Managing Director Jonathan Norris and Senior Associate Raysa Bousleiman. Beatriz Atsavapranee, a consultant, also contributed.
To dive deeper into the report, download it here.