With larger funding rounds has come a slight change in the profile of health investors.
As part of our Q3 Venture Pulse Report, developed in partnership with CB Insights, we highlighted a number of trends related to venture capital activity worldwide. One key trend was the growing interest in healthcare by VC investors. In fact, a number of mega-rounds globally meant Q3 was an active one. But with larger funding rounds has come a slight change in the profile of health investors. During Q3, corporate venturing arms of large pharma companies and large funds were particularly active in later, pre-IPO rounds.
Many forces are driving increased interest in late-stage investing, but in Q3 the biggest story was disruption in the fight against cancer; Immunocore ($320m US) and Stemcentrx ($250m US) closed two of the biggest rounds seen in the biotech world to date. Both companies are pre-revenue, awaiting regulatory approval for their cancer-fighting drugs and face significant hurdles before launching a product into the clinic. Crucially though, they offer a different approach to treating cancer than previously seen in the lab, something investors have clearly been convinced by.
Aside from these two examples, there is an underlying trend towards investment in disruptive technology that improves efficiency – whether in health systems, the delivery of treatment or in the process of developing drugs. Zocdoc ($130m US) and Oxford Nanopor ($109m US) are two good examples of this from Q3. Zocdoc is focused on providing a more efficient, internet-based scheduling solution for doctors, while Oxford Nanopore offers technology which speeds up academic and industrial research needed for developing drugs and diagnosing diseases. Investment in both of these companies illustrates that premium investors are willing to pay for innovative health technologies with a proven track record.
Outside the US and Europe, Asia is also seeing interest in healthcare by VC investors. In China, GuaHao – a technology company providing online medical services – achieved unicorn status (i.e. a valuation of over $1 billion) in Q3. In China and other Asian nations, there are a number of companies working to breakdown healthcare barriers and to build healthcare models that have greater reach into rural communities, including diagnostics, radiography, interpretation and models for medical devices.
In many countries around the world, aging populations will also continue to drive public healthcare demand up – forcing countries to look for efficiencies and alternative methods of care in order to manage their healthcare costs. As investors become more comfortable with the value offered by digital health companies, we expect to see an increase in deals in this space.
While healthcare interest is rising, there are challenges in the healthcare investment landscape. The breadth and variety of sub-sectors makes it difficult for investors to be true domain experts in every area of healthcare. To compound this, consumer technology is playing an increasing role in healthcare – for example, through wearables and activity tracking. This requires patience and often collaboration with experts in other sectors – such as consumer technology and data analytics. But for investors who have such patience, the healthcare sector could offer some excellent opportunities in the future.
If you would like more information on healthcare and other key trends from our Q3-2015 report, visit our Venture Pulse Report website.
Subscribe to KPMG’s Venture Pulse Newsletter
If you would like receive a newsletter when a new selection of blogs, or the latest Venture Pulse report has been released, please reply to email@example.com.
As the lead for Healthcare and Life Sciences at KPMG in the UK High Growth Technology Group, Mr. Martin works with high potential technology businesses in this space in the UK. This includes supporting university spin-outs, public and private organisations and businesses who are expanding globally either from or to the UK. Brendan is also a member of the KPMG Healthcare Centre of Excellence, where he is a founding member of a global network which supports healthcare and life science startups and venture-backed companies.
© 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.