Provider operations and alternative care companies are predicted to drive health tech investments
According to a report by Silicon Valley Bank (SVB), health tech investments continued to be strong in 2019 which will continue to rise in 2020, strengthening its position as the fastest growing healthcare sector.
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.
Alternative care and provider operations received more than $2 billion each in investments.
London-based Babylon Health and Chicago-based VillageMD led the investments as Babylon Health raised a $550 million round, while $175 million were raised by VillageMD.
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.
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.
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 annual funding report revealed that the average size of digital health deals and the total funding for the year decreased in 2019.
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.