From pioneering human genome engineering to humanized antibodies for cancer immunotherapy, to wearable devices for continuous blood glucose monitoring, life sciences have exploded in the past two decades. Venture capital investors have poured at least $20 billion into life sciences companies annually since 2018 alone, according to a new report from PitchBook Data. According to the report, this number increased to $ 44 billion in 2021. Risk investment support companies and startups, rather than large multinational companies, leading most of innovation.
Several developments have boosted the field. On the one hand, Congress passed the 21st Century Cure Act at the end of 2016, authorizing US$6.3 billion to accelerate the development of medical products. More generally, both the field’s understanding of the mechanisms underlying disease and advances in digital technologies have expanded opportunities for new drugs and devices to treat disease.
With this boom, there has been a remarkable shift in recent years between two industries in the life sciences: biotechnology and medical technology. The latter includes companies that make medical devices for disease treatment, such as neuro-cochlear implants or artificial cervical discs. The former introduces biological drugs, such as gene therapy and antibody therapy to treat diseases. In the past few years, biotechnology is particularly booming, and medical technology is pushed to a few in the industry. Of the 4,448 venture-backed life sciences companies in the U.S., only 1,785 are medtechs and 2,303 are biotechs, according to the PitchBook Data report. Only 360 degree bridges are connected in two groups, and the double markers are two.
In 2021, 232 companies received seed rounds, 517 received early-stage VC financing, and 620 received late-stage VC financing, the report said.
In contrast, in the same year, 310 Biotechnology Co., Ltd. got a seed round financing, 919 early VC financing, 617 were obtained later VC financing.
According to the PitchBook Data report, these biotechnology companies received USD 35.8 billion of the total USD 44.4 billion in life science venture capital, accounting for 80.7%. In fact, 2021 is the largest percentage to date for this sub-sector. For example, 2020 biopharmaceutical revenue is $ 26.7 billion, setting a record at the time. By contrast, medtech companies raised $7.9 billion in 2020, their all-time high. From 2020 to 2021, funding in this area is booming in both sub-sectors.
Compared with medical devices, biotech companies have a higher rate of capital consumption, which is mainly due to the process of drug discovery and development, which has contributed to this shift to a certain extent. Deal sizes in each sub-sector reflect this, with biotech typically seeing twice the size of deals as medtech. In the long run, the median deal value for biotech in 2021 will be $10 million, with an average deal value of $36.9 million, according to the PitchBook Data report. By contrast, the median lock in medtech was $3.9 million and the average was $12.6 million.
The valuation of these private support for the valuation proves challenging because they usually have not yet generated. Despite this, from the perspective of history, the valuation of biotechnology startups is higher than its medical technology. According to the report, in 2021, the average valuation of biotechnology reached 145.3 million U.S. dollars, of which the pre-investment valuation of VC was 49.8 million U.S. dollars. MedTech’s median and average estimates are $ 88.7 million and $ 22.5 million, respectively.
To determine value creation, investors utilize: Velocity of Value Creation (VVC), which is determined by the dollar increase in valuation between rounds; and Relative Velocity of Value Creation (RVVC), which is the percentage increase in valuation per round. These show the growth rate of startup valuations. For more than 10 years, biotechnology has always dominated medical technology on both indicators. In 2021, VVC is valued at $24.1 million in biotech, RVVC is valued at 49.3%, while medtech financing is only at $5.7 million and 25.9%.
Between 2010 and 2015, investors invested equally in biotech and medtech. In 2016, however, they pivoted to primarily funding biotech companies, a shift driven by increased demand for therapeutics and the need for additional investors to band together to meet the increased capital investment needs of biotech companies.
However, medical technology is superior to biotechnology when it comes to patents. For example, in 2020, medical technology companies received 3,490 patents, and biotech companies received 2,742 patents. It is worth noting that these numbers create a new high in the two sub-industries.
It is worth noting that valuations and funds are not the only means of innovation. When the field of medical technology is considered as a whole, they continue to bring value to public health by tackling dreaded diseases ranging from cancer to sepsis. Therefore, medical technology continues to provide valuable contributions, although it accounts for only a small part of the field. However, despite the fact that medical technology companies make products that affect health outcomes, companies in this sub-sector are pushing to bring their products, such as the Apple Watch, to the market rather than as medical devices to avoid the resulting FDA regulations. These regulations may change in the near future.
Finally, biotechnology and medical technology provide favorable map of investment options, but there is a risk. Investors will have to decide which ones are worth it.
Photo: Garroenkov, Gati Picture Social; and PitchBook Data
