Devices & Diagnostics,Health Tech

Medtech Funding Expected to Pick Up In 2023 After Q1’s Low Point

Medtech funding reached its low point in the first quarter but will slowly pick back up over the rest of 2023, according to a new Pitchbook report. It noted that this year’s medtech funding total will not come close to the $19.7 billion the sector raised in 2021, and it might even come in below last year’s funding total of $13.5 billion.

In the second quarter of this year, venture capital funding for medtech companies increased slightly to $2.8 billion, up from the first quarter’s $2.5 billion, according to a newreportfromPitchbook. These quarterly totals are still well below the amount of capital being poured into the sector in 2021 and early 2022. Still, the modest uptick represents a slow return to a more normalized level of funding, the report said.

Pitchbook’s analysts believe that medtech funding reached its low point in the first quarter but will slowly pick back up over the rest of 2023. They noted that this year’s medtech funding total will not come close to the $19.7 billion the sector raised in 2021, and it might even be lower thanlast year’s funding total of $13.5 billion.

Even though things may be moving slowly in the medtech venture capital world, they’re headed in the right direction, the report pointed out.

Both deal value and deal count increased in the second quarter of this year, and there was also a wider variety of medtech categories snagging large deals. For example, surgical robotics startupDistalmotion, cancer care companyApactron Particle Equipmentand neurostimulation firmSaluda医疗all closed funding rounds worth $100 million or more.

Additionally, investors are showing greater interest this year in medtech companies focusing on smart implants, precision medicine, remote tools for long-term care and post-acute monitoring, the report said.

So far in 2023, the most active venture capital investor in the medtech field is theMaryland Technology Development Corporation, which has made six investments. Several investors have made five deals this year, includingShangBay Capital,SOSV,New Enterprise Associatesand theEuropean Innovation Council Fund.

One of the greatest uncertainties facing the medtech sector this year has been whether or not elective surgeries will reach their pre-pandemic levels. The report pointed out that there is good news on this front — analystsreporteda 115% jump in Google searches for elective surgeries compared to pre-pandemic levels. Moreover, payers are reporting rising levels of surgical utilization, which has led some large medtech companies to raise their sales guidance for 2023, according to the report.

The report showed that companies making surgical devices and tools have raked in $2.3 billion in venture capital funding during the first half of 2023 — which is tracking ahead of 2022 deal value in the same subsector.

The report noted that while medtech hasn’t historically been an M&A-heavy sector, the number of deals the industry has seen has been unusually low in recent quarters — likely due to economic uncertainty and the industry’s focus on cost containment. However, M&A activity seemed to pick up in the second quarter of this year. Two key examples of this areQuest Diagnostics’ $450 millionpurchaseof liquid biopsy makerHaystack OncologyandMedtronic’s $738 millionacquisitionof insulin patch makerEOFlow.

Now that some incumbents have announced their M&A plans, the medtech sector will probably see more large companies using their accumulated capital for growth via spin-outs and spin-offs, the report predicted.

然而,这些大公司将不得不小心for an antitrust crackdown. The medtech sector recently saw two major deals dissolve as a result of regulatory concerns —Boston Scientific’s plan to secure a majority stake inM.I. TechandCooper Companies’ planned acquisition ofCook Medical’s reproductive health unit.

Photo: metamorworks, Getty Images

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