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PublishedAugust6,2024

HEALTHCAREINVESTMENTSANDEXITS|MID-YEARREPORT2024

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RisingTideLiftingsomeBoats

If2023wastheyearofventuremarketshockandvolatility,2024maybetheyearofadjustmentandcautiousoptimism.Despiteahigher-for-longerinterestrate

environment,challengingpublicmarketsandsubsequentdroughtof

distributionstopaid-incapital(DPI),wesawslowbutsteadyincreasesinhealthcareventurecapital(VC)investment,impressiveVCfundraisingandimprovedinitialpublicoffering(IPO)activityinbiotech.

Investmentseemsbifurcatedintothe“haves”vs.the“havenots,”withVCs

increasinglyfocusedonqualityoverquantity.Formanydeals,investorscanbidetheirtimetoensureasolidsyndicateformsbeforemakingamove.In

biopharma,VCscontinuetofocusonadvancedclinicalassetsandwell-

characterizedmodalitieswhileeschewingearly-stageplatforms.Inhealthtech,heightenedexpectationsarerootedinstronguniteconomicsandhealthy

marginsinsteadoftop-linerevenueandprojectedgrowthrates.

Acrossallsectors,valuationsareunderunprecedentedscrutiny.Atleast28%of

reporteddealsaredownorflatrounds1,markingthehighestlevelinrecenthistory.What’smore,only14of29unicornsformedin2020and2021havecomebacktomarkettoraiseanotherround,meaningthe“markdown

hammer”hasyettofullydrop.

Astheventuremarketcorrectedin2022and2023,investorsallocated

resourcestosupporttheirmostpromisingcompanies.Thisstrategyextended

into2024astheexitmarketremainedhistoricallychallenging,resultinginmoreinsiderandbridgerounds.Afteryearsofpainandpressure,wemaybeturningacorner.With2023’sshocktotheventuremarket,investorsquicklyturnedtheirattentiontosupportingtheirmostpromisingcompanies.Thisstrategycontinuedthisyearastheexitmarketremaininghistoricallychallenging,resultinginmoreinsiderandbridgerounds.Promisingly,we’veheardthatsomeinvestorsare

spendinglesstimeonportfoliomanagementrationalizationin2024.

Eachsectorhasitsownstorytotellthisyear.Inbiopharma,theIPOwindow

finallyopenedwiderwith13IPOssofarandsixina15-dayspan.However,

publicdebutsslowedinQ2andremainchallengingforpre-clinicalandearly-

stagecompanies.Historicactivityinthepublicbiotechmarkets(including

record-highpublicM&A,follow-onandprivateinvestmentinpublicequity(PIPE)activity)catalyzedinvestorreturnsandreinvigoratedtheprivatemarkets.

Healthtechinvestmentoverthelastfouryearshasbeentumultuous.The

pandemicusheredinamassivewaveofinvestmentasalleyesturnedtodigitalhealthcare.Consequently,investmenthithigherhighs—anddroppedtolowerlows.However,thesectorisshowingsignsofrecovery,albeitslowly.Quarterlyinvestmentoverthelastthreequartersconsistentlyhoveredaround$3.2B—

markedlyhigherthanaveragequarterlyinvestmentin2019($2.5B).

HealthcareVCfundraisingremainedstrongdespitethehighestfederalfunds

rateindecades.InH12024,$9Bclosed(comparedto$7BinH22023),and89%

offundshittheirfundtargets.Manyfundraisesfollowedsuccessfulexits,

pointingtocontinuedconfidenceinthesector.Andyet,thesuccesswasn’tdistributedequally.Emergingmanagersstruggledtoclosefunds,andtime

betweenfundraiseshitarecordhighatamedianthreeyearsbetweenfunds.

Buildingon20yearsofresearchanddataanalysisofhealthcareVC,this

14theditionofHealthcareInvestmentsandExitsleveragesourproprietarydataandstrongVCnetworktodeliverunmatchedindustryintelligence.

Fromourresearch,it’sevidentthat2024activityshowsthathealthcare

investmentisfindingapathforwarddespiteexperiencingstrongheadwinds.Inthemarket,wearenowseeinghealthyandsustainableinvestmentrevitalize

optimismforasolid,albeitbumpy,secondhalfoftheyear.

JackieSpencer

HeadofRelationshipManagementforLifeScience&HealthcareBanking

jspencer@

svb》SBiaiinckonvaley

ADivisionofFirstcitizensBank

Notes:1)Themethodologyforthisanalysishaschangedfrompriorreports.Downroundsaredefinedasdealswherethepre-moneyvaluationislowerthanthepriordeal’spost-moneyvaluation.Onlydealswithareporteddealsizeareconsideredforthisanalysis.

2

Source:PitchBookData,Inc.andSVBproprietarydata.

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Trending

MacroOutlook

“TheFederalReservewantstoseeaconsistenttrendineconomicdata,namelyinflation

headingtowardits2.0%targetbeforejustifyingacutinthefedfundsrate.Employmenthasweakenedrecentlybutremainssolid,andcoreinflationcontinuedtomovetowardthe

Fed’s2%long-termtarget.TheFedwilllikelycutratesinSeptemberandborrowingcostsareexpectedtodecline.BroadmarketsanticipatetheFedwillreduceinterestratesfour

timesduringthisyear.AtSAM(SVBAssetManagement),ourforecastsuggeststheFedwilllowerratestwicein2024,andwethinkthereareincreasedoddsthattheycutratesbyasmuchas50basispoints(bps)attheirSeptembermeeting.”

TravisDugan,CFA

ManagingDirector

PortfolioManagement

tdugan@

InvestorSentiment

Asurgeinactivityputs2024onpaceto

eclipse2021innumberofdeals,thoughinvestmentdollarsaretrackingwellshortofpandemic-eralevels(62%of2021

investmentlevels1).Downandflatroundscontinuetoclimbasinvestorsrebalanceequitywhilemanagingtheneedforlargerreservesofdrypowdertosupporttheir

winners.

1.Mega-Deals

71mega-deals2closedinH12024,a50%increaseyearoveryear.

2.AdministrativeAISolutions3

$1.5BinvestedinH12024,growingmorethan3xyearoveryear.

s

Healthtech

Privateinvestmentdollarsweredownslightlyinthefirsthalfof2024($7.8B)comparedtothesecondhalfof2023($8.1B).Despitemanycompaniesstillmanagingtheburdenofoutsized

valuations,AIisabrightspot.Since2019,thenumberofhealthtechAIdealshas

increasedover4x,outpacingallother

sectors.Inthepublicmarkets,healthtechisstillsearchingforthefirstIPO.

ADivisionofFirstcitizensBank

Biopharma

2024startedasaverysolidyearfor

biopharmawithall-time-highpublic

financingactivity,aflurryofmega-deals,andabriefsprintforIPOs(sixin15days).Althoughsuccesseshavebeen

concentratedamongthestrongestfew,thebiopharmamarketisshakingofftherust

andbuildingmomentum.

Dx/Tools

Despitebeingtheonlysectorbesides

biopharmatohaveIPOs(twoinQ22024),Dx/ToolsissufferingfromhistoricallylowM&Aactivity-onpaceforthelowest

numberofprivateDx/ToolsM&Asince

2013.Ontheprivateinvestmentside,

valuationsaretakingahit.SeriesAmedianvaluationsareattheirlowestpoint($20M)since2019andare38%offthehighsetin2022.

Notes:1)USandEuropeandealsthatincludeaninstitutionalventureinvestor,corporateventureinvestor,orisequaltoorgreaterthan$2M,regardlessofinvestor.2)Deals$100Mandaboveareconsideredmega-deals.3)Non-exhaustiveexamplesofadministrativeartificialintelligence(AI)solutions

includevirtualassistant,notetaking/EHRdocumentationandrevenuecycleoperationssolutionsleveragingAI.

Source:PitchBookData,Inc.andSVBproprietarydata.

Device

Likediagnostics,thedevicemarketis

experiencinganexitsdrought.DeviceM&Aistrackingtothelowestlevelsince2008.DespitenoIPOstodatein2024,thereis

positivityintheprivatemarket.Median

SeriesAvaluationsareatanall-timehigh($24M),up20%fromthepreviouspeakin2022.

3

HEALTHCAREINVESTMENTS&EXITS|MID-YEARREPORT2024

HealthcareInvestmentsandExits

Mid-year2024report

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LeadAuthors

JackieSpencer

HeadofRelationship

ManagementforLifeScience&HealthcareBanking

jspencer@

JackieSpencerleadstheUSRelationshipManagementteamforLifeScienceandHealthcareAcceleratorand

Growth.Jackieandherteamarefocusedonproviding

bankingandfinancingsolutionstoinnovativecompaniesinthesector.SincejoiningSVBin2007,Jackiehas

workedacrossboththetechnologyandhealthcare

practicesfromemergingmarkettolate-stagecorporatefinance.

JackiegraduatedfromSt.Mary’sCollegeofCaliforniawithhonors,receivingabachelor’sinfinance.

RaysaBousleiman

VicePresident

HealthcareVentureCapitalRelationshipManagement

rbousleiman@

RaysaBousleimanmanagesrelationshipswith

traditionalVCfirmsfocusedonhealthcareandlifescienceinvestments.Sheisalsoresponsiblefor

conductingdata-drivenanalysesontheglobal

healthcareinnovationeconomythatSVBserves.PriortoSVB,Raysaworkedasahealthcareconsultant

focusingonhealthsystemsrevenuecyclemanagementandoperations.

RaysagraduatedfromtheUniversityofSouthern

Californiawithhonors,receivingabachelor’sinhumanbiology.

KaleFrank

ManagingDirector

Biopharma,Dx/Tools

kfrank@

KaleFrankleadstheBiopharmaandDx/ToolspracticefortheBayAreaandPacificNorthwest.Heandthelife

scienceteamprovideinsights,advice,venture

financingandbankingsolutionstohelpcompaniesscalefromSeriesAandbeyond.

KalehasbeenatSVBfornineyearsandhasworkedinbankingfor13.

HegraduatedfromtheUniversityofNotreDamewithhonors.

contributors

MiloBissin

MarketManagerLifeSciences

mbissin@

JulieEbert

ManagingDirectorLifeSciences

jebert@

DennisHe

ManagingDirectorLifeSciences

dhe@

BenJohnson

ReportAcknowledgements

Thankyoutothefollowingforlendingtheirsubject-matterexpertisetothisreport:

MarketInsightsTeamAuthors

HeadofEarlyStage

LifeScienceandHealthcare

bjohnson@

AlexanderLennox-Miller

SeniorResearcherMarketInsights

alennoxmille@

TimotLamarre

Researcher

MarketInsights

tlamarre@

PeterSletteland

ManagingDirectorCreditSolutions

psletteland@

svb》SBiaiinckonvaley

5

ADivisionofFirstcitizensBankAllnon-SVBnamedcompaniesareindependentthirdpartiesandarenotaffiliatedwithSiliconValleyBank,adivisionofFirst-CitizensBank&TrustCompany.HEALTHCAREINVESTMENTS&EXITS|MID-YEARREPORT2024

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