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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

While deal value for VC med tech investments trended upward last quarter, deal volume slumped, according to a recent PitchBook report, Aaron writes.

Why it matters: The discrepancy is a reflection that venture funding is harder to come by as VC investors prioritize higher-quality investments, according to PitchBook analyst Aaron DeGagne.

What's happening: Q3 venture capital activity in med tech totaled $3.2 billion, a 14.1% increase in deal value from the prior quarter, per the report.

Yes, but: The deal count in VC was 187, down 10.1% from Q2.

Although deal value rose for the second straight quarter, the deal count reached a new, multi-year low.

Zoom in: Top VC-led med tech deals in the quarter included Elon Musk's brain implant business Neuralink, which raised a $280 million Series D led by Peter Thiel's Founders fund

Surgical robotics company CMR Surgical raised $165 million from existing investors, while cancer diagnostic company Harbinger Health corralled new investors Pictet, Partners Investment, and Catalyst for its $140 million Series B.

Meanwhile, in the PE world, growth deal activity came out to $280 million —plummeting nearly 70% year over year.

PE deal count accumulated 37 deals, a drop off of 3.3% from the year earlier.

But, but, but: Private equity has been seemingly driving large-stage dealmaking in med tech, with Advent International and Warburg Pincus agreeing to acquire Baxter International's biopharma solutions unit for $4.25 billion in May.

In September, Carlyle was reported to be in exclusive talks for a $7 billion-plus deal to acquire Medtronic's patient monitoring and respiratory interventions businesses.

What they're saying: "Exit opportunities remain few and far between as the IPO market remains shut and potential acquirers continue to prioritize improving their own cost structures," writes DeGagne.

"Large mergers have recently fallen out of favor, and addition by subtraction remains the name of the game," he says.

What's next: DeGagne says he expects "historically low M&A activity continue into 2024," although he notes newly independent companies could start making consolidation moves.

For example, GE HealthCare, which spun out in January, reported Q3 2023 earnings that emphasized product integration opportunities for AI-powered medical imaging.

"It would be logical to expect the firm to consider acquisitions to further grow this business over the years ahead," DeGagne writes.

1 big thing: A tale of two med techs 

Illustrated collage of two hands, one showing thumbs-up, one showing thumbs-down, elements of a hundred-dollar bill and blocks of color. 

It's passed medical licensing exams. It's advanced how researchers develop new medicines and cut down on doctors' hefty paperwork. And it's nudged health care closer to a world where AI can offer diagnoses, Axios' Tina Reed writes.

Why it's the BFD: One year after OpenAI's ChatGPT exploded onto the scene, the generative AI model is already upending health care — an industry not exactly known for its speedy adoption of tech — while accelerating questions about AI's promises and limitations.

The big picture: ChatGPT and other generative AI models that quickly followed have supercharged the use of AI and algorithms across research and the delivery of care.

Among other applications, tech giants have been finding ways to use the algorithms to better target cancer. AI is also helping doctors sift through the latest research.

"All these things that are happening now [are] because the race to get to AI faster, quicker and to create the market share began with ChatGPT," said Shafiq Rab, system CIO and chief digital officer at Tufts Medicine.

"We're in the 'wow' period,"  Stanford's School of Medicine dean Lloyd Minor told Axios at a health tech event earlier this fall.

He and other experts predicted that the unprecedented hype around how AI may change health care will begin to quiet down over the next few months as the industry races to get a better handle on what the technology can and can't do.

"It's powerful. But I think you know, the hype right now is, is probably a little more than reality," Headspace CEO Russ Glass told Axios earlier this fall.

Yes, but: There's also been quite a bit of hand-wringing about AI chatbots' potential to churn out harmful misinformation, amplify bias and undermine medical education.

2. The BFD: ChatGPT's mark on medicine

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Want more health tech deals? Check out the Axios Pro Deals Tracker beta.

• PayGround, a Gilbert, Ariz.-based medical payments startup, raised $19.7m in Series A funding led by SixThirty. www.payground.com

• MiMark Diagnostics, a Barcelona-based developer of gynecological diagnostics, raised €4.22m in seed funding from the European Innovation Council Accelerator, Clave Capital, Nara Capital, Namarel Ventures, WA4STEAM, CDTI Innvierte, Inveready, and Canterbury Scientific. https://axios.link/40Xhu44

• Phare Health, a London-based hospital administration and revenue cycle management startup, raised €2.8m in pre-seed funding led by General Catalyst and joined by KHP Ventures and Bertelsmann Investments. https://axios.link/47zVQ8v

• HempStreet, a New Delhi-based developer of cannabis-based treatments for common health ailments, raised $1m in pre-Series A funding led by Waahlin Holdings. https://axios.link/46B6kTR

3. Deals o' the day

• Scott Stockberger, former CFO of Bolt, joined Cedar as CFO. https://axios.link/3sTmgmD

• Steve Lloyd, former chief product and technology officer (CPTO) at Strava, joined Sunnyside as CPTO. https://www.sunnyside.co/

• Brian Rutkowski, former chief administrative officer at Olive AI, joined AndHealth as SVP of people. https://andhealth.com/

• Stephanie Bell, former VP of commercial at Sona Dermatology, joined HealthBridge as chief commercial officer. https://healthbridge365.com/

• Maura Sullivan, former VP at Ginkgo Bioworks, joined Virta Health as general manager, public health. https://www.virtahealth.com/

• Isabel Fulcher was promoted from VP of data science to chief scientific officer at Delfina. https://www.delfina.com/

• Chris Collins, former managing director at Piper Sandler, joined Wells Fargo as managing director of health care banking. https://axios.link/3RkAx5q

• John Parker, M.D. and associate program director at OhioHealth, has joined PeriGen as chief medical officer. www.perigen.com

4. It's Personnel

📈 U.S. suicides reached a record high last year — WSJ

5. Your daily dose

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Happy Wednesday, Health Tech enthusiasts!

🧗🏽 Erin got a climbing harness as an early birthday present and gave it a try on the wall this week.

💪🏽 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece. Please ask your colleagues, friends, and family to sign up.

November 29, 2023

1 big thing: A tale of two med techs