Healthcare venture investment in the U.S. and Europe reached a new high in 2018, according to Silicon Valley Bank's annual analysis. Investment totals in 2018 grew more than 50 percent over 2017, with the activity due in large part to record Series A investments in U.S. biopharma companies.
U.S. healthcare venture fundraising reached $9.6 billion, marking the fourth consecutive year of robust activity. On the exits side, global biopharma IPO and mergers and acquisitions total deal value reached $49 billion, also a record.
"This big appetite for healthcare venture investments, especially among generalist and crossover investors, is the result of remarkable science and technology advancements leading to more effective treatments," said report author Jon Norris, managing director of SVB's Life Science and Healthcare Practice.
The venture investment and U.S. fundraising records have been fueled by the uptick in biopharma deals and round sizes, crossover investor appetite and successful IPOs and M&A exits across the healthcare sector.
U.S. biopharma Series A dollars increased 56 percent, led by oncology and platform companies. And with nearly twice the number of deals compared to a year earlier, top 15 crossover investors restocked biopharma IPO pipelines by funding 60 private companies.
2018 saw a record 18 $1 billion-plus venture-backed biopharma IPOs and M&A deals, and since 2015, oncology companies have generated exit returns of more than three times the capital invested.
For the first time, venture-backed device M&A total upfront payments, reaching $3.5 billion, eclipsed all other sectors. Device IPOs doubled over 2017, marking a five-year high for median IPO valuation and dollars raised.
Diagnostics/tools far exceeded 2017 activity, with 10 acquisitions and two successful IPOs in 2018.
WHAT ELSE YOU SHOULD KNOW
SVB anticipates total healthcare venture fundraising to continue at a healthy pace, reaching about $8 billion, slightly below the 2018 total. Established funds are likely to be joined by new spin-out funds anchored by established investors. Plus, tech firms may raise life science-only sister funds.
Strong biopharma IPO activity looks to continue in 2019 as crossovers replenished their private company pipeline in 2018. But market uncertainty could drag the number of IPOs down and moderately reduce pre-money valuations and dollars raised. As a result, SVB expects an increase in private biopharma M&A.
Healthcare startups received a significant infusion of cash in the first half of 2018, benefiting from $10.6 billion in investment from venture capitalists, according to data released in July.
The first and second quarters of 2018 saw similar investment activity, with about $5.3 billion being poured into the sector each quarter -- enough to push healthcare into second place among industries attracting venture capitalist investment, behind only internet companies.