Post by stcks on Jul 12, 2016 11:55:17 GMT
Medtech Venture Funding Collapses
www.seekingalpha.com/article/3987785
The medical device industry is in the grip of the worst VC funding environment for more than a decade. Just 27 financing rounds completed in the second quarter of 2016, the fewest since Q3 2003, and at $25m the average size of VC rounds in the last quarter is the largest since Q2 2000. This last fact sounds like a positive, but it is not: a handful of companies are sucking in what little money is available, and the majority of start-ups must go without.
There is no cheer for companies seeking cash on the markets, either. Just three medtech groups managed to get IPOs away so far in 2016 and none raised more than $45m. The IPO window is swinging closed.
At $670m, the total raised in Q2 2016 was the lowest quarterly total since the first three months of 2009. But, as the graph below shows, it is the number of deals that has really fallen off a cliff.
At the half-year point 2016 had seen just 83 financing rounds closed, a huge drop from the 184 deals in the first half of last year. But seven of them were worth more than $50m compared with just four a year ago; rounds are getting bigger and scarcer.
Flatiron stake
The largest VC haul so far this year belongs to IT provider Flatiron Health, which raised $175m in a series C in January. The provider of electronic health records and data analytics counts Google Ventures among its early investors, though Google did not participate in the latest round.
Instead the series C was led by Roche (OTCQX:RHHBY), as part of a non-exclusive partnership under which Roche will buy a number of Flatiron’s products and will collaborate with the NYC company on clinical trials and personalized medicine.
It has been clear for a while that the best way to hook a large VC round is to offer technology that can cut costs. Flatiron says its series C will go towards its OncologyCloud software which, among other things, helps cancer care providers maximize efficiency and identify revenue opportunities. Software is relatively cheap to develop and Flatiron’s cost-saving, revenue-boosting pitch ought to be tempting to customers; no wonder VCs bit.
Tap to see the table
Two of the companies in the top 10 have been here before. Liquid biopsy specialist Guardant Health raised $50m in a C round last year, putting it – just – in the top group of 2015, and Proteus Digital Health (Private:PRDI) came second in 2014 with a $120m series G haul. Proteus’ $50m series H round, closed this April, bucks the usual pattern of successive rounds getting larger.
Once these huge rounds would have been outliers. But smaller funding rounds are getting ever-scarcer. The reasons for this are well-rehearsed: to limit their risk VCs club together and put in a large amount of cash to get companies as close as possible to a takeout, listing or simply to get their products approved and reimbursed (Vantage point – How to fix the medtech venture crunch, February 22, 2016).
Naturally this favors later-stage groups and leaves start-ups high and dry: in a sense, funding is only available for the medtech groups that need it least.
But the situation has now reached a worrying extreme. The top 10 rounds of H1 2016 make up two thirds of the total venture cash raised this half. Since EvaluateMedTech started tracking VC funding, there has never previously been a half-year period during which the top 10 made up more than 35% of the total.
IPO no-no
And if companies cannot raise cash from VCs, it looks like they can’t get it from the markets either. Just three companies have listed on US or pan-European exchanges so far this year, and none raised more than $45m. Last year there were six medtech IPOs worth more than $100m. Those days seem to be over.
The IPO scene seems to have returned to where it was in the early months of 2013, before Foundation Medicine (NASDAQ:FMI) crowbarred the window open with its $122m float on Nasdaq, kicking off the recent surge.
As for the performance of the companies that listed in 2016, it is hard to draw any conclusions since the sample size is so small. Both Senseonics (OTCPK:SENH) and Asit Biotech listed beneath their previously announced range; the third company, Pulse Biosciences, did not state an intended per-share price before it floated on the Nasdaq.
Tap to see the table
Since then implantable continuous glucose sensor developer Senseonics has done reasonably well, seeing its shares rise 38% from its debut in March to the half-year point. There is some evidence to suggest that investors regard medtech as safer than biopharma in the current market: perhaps if a company can get an IPO away on a US exchange it can expect to survive.
But plenty of medtechs have been unable to list at all, and many must wither and die for lack of venture cash long before reaching that stage. Now is a bad time to start a medtech business.
www.seekingalpha.com/article/3987785
The medical device industry is in the grip of the worst VC funding environment for more than a decade. Just 27 financing rounds completed in the second quarter of 2016, the fewest since Q3 2003, and at $25m the average size of VC rounds in the last quarter is the largest since Q2 2000. This last fact sounds like a positive, but it is not: a handful of companies are sucking in what little money is available, and the majority of start-ups must go without.
There is no cheer for companies seeking cash on the markets, either. Just three medtech groups managed to get IPOs away so far in 2016 and none raised more than $45m. The IPO window is swinging closed.
At $670m, the total raised in Q2 2016 was the lowest quarterly total since the first three months of 2009. But, as the graph below shows, it is the number of deals that has really fallen off a cliff.
At the half-year point 2016 had seen just 83 financing rounds closed, a huge drop from the 184 deals in the first half of last year. But seven of them were worth more than $50m compared with just four a year ago; rounds are getting bigger and scarcer.
Flatiron stake
The largest VC haul so far this year belongs to IT provider Flatiron Health, which raised $175m in a series C in January. The provider of electronic health records and data analytics counts Google Ventures among its early investors, though Google did not participate in the latest round.
Instead the series C was led by Roche (OTCQX:RHHBY), as part of a non-exclusive partnership under which Roche will buy a number of Flatiron’s products and will collaborate with the NYC company on clinical trials and personalized medicine.
It has been clear for a while that the best way to hook a large VC round is to offer technology that can cut costs. Flatiron says its series C will go towards its OncologyCloud software which, among other things, helps cancer care providers maximize efficiency and identify revenue opportunities. Software is relatively cheap to develop and Flatiron’s cost-saving, revenue-boosting pitch ought to be tempting to customers; no wonder VCs bit.
Tap to see the table
Two of the companies in the top 10 have been here before. Liquid biopsy specialist Guardant Health raised $50m in a C round last year, putting it – just – in the top group of 2015, and Proteus Digital Health (Private:PRDI) came second in 2014 with a $120m series G haul. Proteus’ $50m series H round, closed this April, bucks the usual pattern of successive rounds getting larger.
Once these huge rounds would have been outliers. But smaller funding rounds are getting ever-scarcer. The reasons for this are well-rehearsed: to limit their risk VCs club together and put in a large amount of cash to get companies as close as possible to a takeout, listing or simply to get their products approved and reimbursed (Vantage point – How to fix the medtech venture crunch, February 22, 2016).
Naturally this favors later-stage groups and leaves start-ups high and dry: in a sense, funding is only available for the medtech groups that need it least.
But the situation has now reached a worrying extreme. The top 10 rounds of H1 2016 make up two thirds of the total venture cash raised this half. Since EvaluateMedTech started tracking VC funding, there has never previously been a half-year period during which the top 10 made up more than 35% of the total.
IPO no-no
And if companies cannot raise cash from VCs, it looks like they can’t get it from the markets either. Just three companies have listed on US or pan-European exchanges so far this year, and none raised more than $45m. Last year there were six medtech IPOs worth more than $100m. Those days seem to be over.
The IPO scene seems to have returned to where it was in the early months of 2013, before Foundation Medicine (NASDAQ:FMI) crowbarred the window open with its $122m float on Nasdaq, kicking off the recent surge.
As for the performance of the companies that listed in 2016, it is hard to draw any conclusions since the sample size is so small. Both Senseonics (OTCPK:SENH) and Asit Biotech listed beneath their previously announced range; the third company, Pulse Biosciences, did not state an intended per-share price before it floated on the Nasdaq.
Tap to see the table
Since then implantable continuous glucose sensor developer Senseonics has done reasonably well, seeing its shares rise 38% from its debut in March to the half-year point. There is some evidence to suggest that investors regard medtech as safer than biopharma in the current market: perhaps if a company can get an IPO away on a US exchange it can expect to survive.
But plenty of medtechs have been unable to list at all, and many must wither and die for lack of venture cash long before reaching that stage. Now is a bad time to start a medtech business.