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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

THL is bullish on biopharma investing, betting that a surge of new drug approvals will offset the biotech funding slowdown of last year, per a recent report from the firm.

Why it matters: The biopharma sector is primed for an active year and an area that is becoming increasingly attractive for sponsors — which wasn't always the case, Aaron writes.

The big picture: Loss of exclusivity on blockbuster drugs will impact pharma revenue significantly, with sales expected to dip by 46% for some of the largest industry players over the next decade.

Yes, but: The industry has seen a recent spike in the development and approval of new drugs, particularly complex therapeutics.

In 2022, the U.S. FDA approved 37 new drugs — the lowest number of approvals in five years.

As of Dec. 20, 2023, the FDA had approved 546 new molecular entities and new therapeutic biological products as well as 207 vaccines, allergenic products, and cell and gene therapies, per the report.

The cell and gene therapy market is projected to grow at a 60% CAGR through 2026, says THL head of health care Josh Nelson.

What they're saying: THL has spent years developing relationships in biopharma, Nelson tells Aaron.

"Providing the infrastructure to support the full lifecycle — from discovery to trial to delivery — will be critical," he says.

Drug discovery and development requires tools and technology to optimize resources and navigate the regulatory and commercial landscape, he says.

"That's where a sophisticated investor can add real value," Nelson adds.

He notes that the sector's increasing maturity has created an attractive ecosystem of growth companies with large addressable markets and durable business models that serve the biopharma market.

Plus: "The rising popularity of new classes of biologics like weight loss drugs in the GLP-1 class and the expansion of indications for drugs like Keytruda show that there is still tremendous opportunity in the pharmaceuticals and biologics sector," writes THL managing director Megan Preiner.

"The complexity across the value chain creates huge opportunities for investment," she writes.

The bottom line: The rapidly shifting health care landscape has had a profound impact on the private equity deal environment.

1 big thing: THL is bullish on biopharma

Illustration of the Wall Street bull wearing a stethoscope. 

Sano Genetics, a software platform to facilitate precision medicine-powered clinical trials, raised $11.4 million in funding, CEO Patrick Short tells Aaron exclusively.

Why it's the BFD: AI can make traditional clinical trials — which are very expensive and take years to complete — more efficient and effective.

Details: The round was led by Plural with participation from existing investors including MMC Ventures, Episode 1 and Seedcamp.

This most recent round of funding brings the total raised by the company to $22 million.

How it works: The Cambridge, England-based company is an end-to-end precision medicine-based clinical trial software platform.

Sano connects patients in the United Kingdom, U.S., Australia and Canada with pharmaceutical companies and biotech companies conducting clinical trials, making it easier for patients to access precision medical treatment.

Once patients are recruited, customers use Sano's platform to manage aspects of the trial including participant communication, facilitating genetic and other biomarker testing, returning results, and supporting patients with genetic counseling.

The big picture: Clinical trials that use genetic data have a 26% success rate compared to 10% for standard clinical trials.

What's next: Fresh funds will be used to meet the growing demand for its products, leverage AI further, and expand its reach to more countries.

"We will probably raise again by the end of this year or early next year if we continue to grow at this pace," Short says.

While the company is focused on genetics, it will eventually branch out into other areas such as metabolomics and proteomics using data to prevent, treat and diagnose diseases.

Of note: While there is no label on this round, Short confirmed the fresh funding was an up-round for the company.

"We are profitable on a unit basis and we could be profitable overall if we allocated money differently, but we will be in growth mode for a long time," he says.

What they're saying: "Five years ago less than 5% of the market" comprised precision medicine, says Carina Namih, partner at Plural.

Carina believes that by the end of the decade, more than 80% of trials will use genetic testing or other biomarkers.

"Sano is the only end-to-end software platform that enables pharmaceuticals to run this trial with a precision element," she says.

1 fun thing: The word Sano in Latin means healthy.

2. The BFD: Sano Genetics scores $11.4M round

Illustration of an AI brain surrounded by shapes, health crosses, and money elements. 

Even AI optimists don't envision the tech fundamentally remaking the U.S. health care system soon, but it could vastly improve the quality of care and trim costly waste, Axios' Caitlin Owens writes.

Why it matters: The scale of AI's potential change impacts patients and health care employees who may ultimately shape how widely it's adopted.

The big picture: Recent AI breakthroughs battle a $4 trillion system that's resistant to change, which will temper its adoption.

Yes, but: On the other hand, AI uses that increase productivity or improve workers' quality of life are more likely to be integrated into the system.

For example, there's a lot of talk about improving diagnostics, reducing providers' paperwork hassle and streamlining billing processes.

There's also talk of AI's potential within biotech to discover more drugs, speed up the development process and better match drugs to patients.

What they're saying: Nothing is drastically changing soon. 

"I don't have any hopes that within the next 3-5 years that these technologies are going to be transformative in terms of patient interaction with the clinician," says Morgan Health CEO Dan Mendelson.

Much of the transformation will come by helping companies be more efficient, Mendelson adds.

"AI is going to do what computers do really well, and it's going to allow humans to do what humans do really well," says Genialis CEO Rafael Rosengarten.

"There's an opportunity to dramatically improve the way we deliver health care either by augmenting or automating in some way," says Bayesian Health CEO Suchi Saria.

3. How AI will and won't change care

Illustration of a Swiss Army knife in the shape of a red cross with a metal one and zero

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

• Midi Health, a Menlo Park, Calif.-based virtual menopause care provider, is reportedly raising $60m in Series B funds, per Business Insider.

• Onera Health, a Netherlands and SF-based sleep diagnostic and monitoring startup, raised $32m in Series C funding co-led by EQT Life Sciences and Gimv with participation from Innovation Industries, Invest-NL, Imec.xpand, BOM and 15th Rock. https://www.onerahealth.com/

• You Are Accountable, a NYC-based substance use disorder treatment company, raised $2m in unlabeled funding from GEHA Ventures. https://www.youareaccountable.com/

•  Martis Capital and Din Ventures invested in Archway Dental Partners, a Danbury, Conn.-based dental support organization. https://archway.dental/

• BrightSpring Health Services and CG Oncology each are expected to price U.S. IPOs this week, with plans to raise more than $1b in aggregate. https://axios.link/3HukR9U

• Sandoz of Switzerland agreed to pay $170m for Cimerli, a drug focused on vision loss and impairment, from California's Coherus BioSciences (Nasdaq: CHRS). https://axios.link/3U89njM

4. Deals o' the day

• Amanda Weaver, former VP of growth at Daybreak Health, joined Better Life Partners as SVP of clinical operations. https://betterlifepartners.com/

•  Mark Laperouse has joined Varsity Healthcare Partners-backed Ventra Health as a strategic adviser. https://ventrahealth.com/

• Katie Reed, former CEO of Balanced, joined SCAN Health as senior director of member retention. https://www.thescangroup.org/

• Ravi Bala, former VP of digital, U.S. business at MetLife, joined Family First as chief product and technology officer. https://www.family-first.com/

5. It's Personnel

🐂 🐻 State of the IPO Market: Bull and bear perspectives — Axios

🤝 MA 2024 enrollment winners and losers — Modern Healthcare

💰 Intermountain physician group to close if no buyer found — Fierce Healthcare

6. Your daily dose

illustration og a person holding an x-ray that reads "daily dose" up to a light

Situational awareness: Today, on what would have been the 51st anniversary of Roe v. Wade, the White House said it would convene the fourth meeting of the Task Force on Reproductive Healthcare Access.

🐔 Aaron made chicken adobo and is looking forward to the engagement party this weekend in New Jersey!

☑️ 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.

January 22, 2024

1 big thing: THL is bullish on biopharma