Venture Healthcare Market Entering Important Phase as Companies Must Secure New Financing or Face Tough Consequences
HSBC’s Venture Healthcare Report: Shake It Off? explores whether companies can, in the words of
- 2023 was a year of triage as venture healthcare companies closed insider rounds and focused on existing portfolios, leading to a slower investment pace
- The first half of 2024 did have green shoots with increased investment across every sector, with more new investor-led financings, many at up-rounds
- Companies on dwindling on insider-round cash will need to find new lead investors or consider consolidation and/or shutdown
“Some companies continue to raise large rounds even in the down market, but the key question in 2024 is whether the prevalent insider rounds from 2022 and 2023 will provide enough runway for companies to reach a value-creation event that justifies new investment,” said Lead Author and Managing Director
Biopharma
Helped by opportunistic IPOs and a strong private M&A market, biopharma was the bright spot for investment dollars in 1H 2024. Investment doubled 2023 first-financing investment pace and was up 35% overall. Digging deeper, while dollars are up, the number of deals in first-financing actually declined, meaning fewer deals got more money. Many of these deals were venture spin-outs or led by management teams just off successful exits. Overall, there were 51 $100M+ biopharma financings in 1H 2024, with thirty adding a new crossover investor to their syndicate.
Healthtech
In 2023, Healthtech investments significantly declined. The trend reversed in 1H 2024, with deal activity rising each quarter. The high volume of insider bridges and round extensions decreased as investors completed their triage and started to rebuild their portfolio by funding new deals. Although investments took longer to finalize, Healthtech experienced a surge in earlier-stage deals, where valuation overhang is less problematic. For later-stage financing, the growth at all costs approach of previous years has evolved. Companies that secured new investors in 1H 2024 were largely ones that demonstrated additional growth potential, adopted capital-efficient models, and significantly reduced burn.
Medical Devices
Med device continued its stable pace of investment, however, there was a surge in first-financing deals and dollars in 2Q 2024, led by strong venture capital syndicates and corporate support. We also noted more PMA focused early-stage investment, especially in neurology. Pivotal trial funding and commercialization for 510(k) cleared products continued to find a combination of VC, growth, crossovers and corporates. Med device had the most down-rounds in 2023, especially in Series B and later rounds, but in 1H 2024 median step-ups for later-stage deals remained above 1x while median pre-money valuations increased across the board. Stable investment, plus good M&A in 2023, positioned med device for strong M&A in 2024, but so far private M&A has fallen flat, with just two notable private M&A deals.
DX/Tools
Dx/tools first-financing investment continued its 2H 2023 slide in 1H 2024, down significantly from the previous three years. Investors felt the pressure of a closed IPO market and the fear of finding a series B investor that can bridge to the growth round. However, companies that got to initial commercialization have found that growth investors have come back, participating in six of the highest valued financings in 1H 2024. Valuations for early stage have remained strong, however companies with heady valuations from 2020-2021 are finding flat or down rounds. Private M&A continues to falter. So far in 2024, we have noted just two private M&A deals over
The HSBC Venture Healthcare Report was written and produced by HSBC Innovation Banking’s Life Science and Healthcare Team, which serves the innovation economy by providing products and solutions to early and growth-stage companies.
“The first half of 2024 provided real glimmers of hope with increased investment across every sector and numerous investor-led financings,” said
HSBC Innovation Banking in the
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