By Bob Marshall, Chief Editor, Med Device Online
Late last year, Forbes contributor Bruce Japsen wrote about medical technology losing its share of venture investments. The share of medical technology venture deals dropped to just 4 percent of total deals in 2016, compared to the industry’s 13 percent share 25 years ago, according to a Deloitte report based on interviews and discussions with 20 medtech leaders.
Toward the end of the last century, big venture deals were happening for biotech companies like Genentech, Amgen, and Biogen. Each of these startups was able to turn its venture investments into significant returns in their IPOs during the 1980s. They were blurring the lines of science and medicine as they pioneered new treatments for diseases, and their investors were willing to take great risks to support them.
But the end of the 20th century brought us the internet bubble and its subsequent burst, which spoiled investors’ appetite for risk. This created tremendous challenges for regulated industries, which often must take significant risk to create new technologies that meet the needs of medical professionals and improve outcomes for patients.
The 2000s brought success for medical device companies — often thought to harbor less risk, due to their less arduous regulatory pathways when compared to pharmaceutical/biotech companies. St. Francis Medical Technologies, with its surgical implant for spinal stenosis, was acquired in 2006, eventually becoming part of Medtronic in 2007; Insulet went public in 2007 with its disposable insulin pump. Perhaps we will one day look at the early 21st century as the “golden age” of medical device development.
Today, selling medical devices has become more challenging, in part because of increased consolidation by healthcare providers who are under pressure to buy products that produce good outcomes. The move from fee-for-service medicine to value-based models means insurance companies won't always pay for the specific medical device a doctor may want to use; they reward performance and quality of care delivered to patients. All of us, as consumers of healthcare, should have some appreciation for those ideals.
But, what comes next? Are there segments of the medtech space still seeing significant investment? PricewaterhouseCoopers and CB Insights’ MoneyTree Report for Q1 2018 highlights the latest trends in venture capital funding globally. A review of the report for healthcare (medtech) bright spots indicated two key segments and four recent success stories.
The report shows that $5.3 billion was invested in the Healthcare sector in Q1 of 2018, including 168 deals. The dollars invested and total number of deals were second to only one other sector – the Internet. Four companies leading the way in the Healthcare sector are detailed below.
This Cambridge, MA-based company is pioneering a new class of medicines made of messenger RNA (mRNA). The potential implications of using mRNA as a drug are significant and far-reaching. It could transform not only how certain diseases are treated but also how medicines are discovered, developed and manufactured — at a breadth, scale, and speed not common in the biopharma industry.
The company announced in February that it has raised $500 million in a new funding round. Since its founding in 2010, Moderna Therapeutics has raised $2.4 billion. The company is led by CEO Stéphane Bancel, who joined Moderna in the summer of 2011, when it was a one-employee company. Bancel previously was CEO of bioMérieux.
In February, Redwood City, CA-based HeartFlow announced the closing of its Series E financing, securing $240 million. The company will use the proceeds from this financing to ramp up commercial expansion of the HeartFlow FFRct Analysis, continued technology innovation, and additional clinical studies. The HeartFlow Analysis is a non-invasive technology that creates a personalized, 3D model of the heart to help clinicians diagnose and treat patients with suspected heart disease. The financing includes investments from Wellington Management, Baillie Gifford & Company, and existing investors.
“We are incredibly pleased to have Wellington Management Company LLP and Baillie Gifford & Company as anchor investors. This financing will enable us to drive commercial success of the HeartFlow Analysis, which is poised to become the global standard of care in the diagnosis of coronary artery disease,” said John H. Stevens, M.D., president and CEO of HeartFlow. “Given our recent momentum with clinicians, the Centers for Medicare & Medicaid Services, commercial payers, and strategic collaborators, we are well-positioned for growth.”
In March, Helix — a personal genomics company that has created the first online store for DNA-powered products — announced the first close of an expected $200 million Series B financing round. The round was led by DFJ Growth, with participation from all of Helix’s founding investors, which include Illumina, Kleiner Perkins Caufield Byers, Mayo Clinic, Sutter Hill Ventures, and Warburg Pincus. Helix, headquartered in San Carlos, CA, is planning to use this financing to continue to accelerate consumer adoption of genomics via the expansion of its marketplace. The marketplace features a growing list of world-class partners, all committed to developing innovative health-focused products powered by next-generation sequencing (NGS).
Chicago-based Tempus announced in March it has raised an additional $80 million in financing. The round included existing investors, New Enterprise Associates, and Revolution Growth, along with new investors Kinship Trust Company, and funds advised by T. Rowe Price Associates, Inc. The additional funds will be used to further grow and scale the company’s clinical and molecular analytic platform. With this close, the company has raised $210 million to date.
“Tempus was born out of frustration with a health care system that too often lets powerful data and real world evidence go to waste," said Eric Lefkosky, founder and CEO at Tempus. “Given the breadth and scale of our current data set, we’re in a unique positon to help usher in an era of precision medicine to support patients battling disease.”
These four recent funding successes represent over a billion dollars of “confidence” in medtech development. But, notice the types of products garnering the attention of venture capitalists: these investors are drawn toward personalized medicine and digital health. Think about these aspects of your product when making your next pitch for investment!
I’d love to hear from you if you are seeking or have recently secured funding. Also, if you are an investor in medtech, I would appreciate your opinion on the investment landscape. What is capturing your attention these days? Let us know in the Comments section below.