Strategic Trends in Private Equity and Venture Capital Funding for Healthcare

  • ID: 3980841
  • Report
  • Region: Global
  • 78 Pages
  • CBR Pharma Insights
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Healthcare Companies Must Embrace New Funding Sources As Venture Investment Continues to Decline

FEATURED COMPANIES

  • Adaptimmune Therapeutics
  • Axovant Sciences
  • Global Blood Therapeutics
  • New Enterprise Associates
  • RegenxBio
  • The Carlyle Group
  • MORE

Private Equity is a term used to refer to money invested in private companies, and those companies become private through investment. However, in the financial industry the term is used to refer to firms that buy companies through leveraged buyouts (LBO) – the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition (Agres, 2005).

More specifically, Private Equity companies take existing companies with existing products and existing cash flows, and restructure them in order to enhance the financial performance. Success for PE investors lies in generating higher returns by pursuing opportunities with target companies that have significant growth potential, by adding value to the company while it is owned, and by executing a successful exit strategy.

PE and VC funds have been important participants in a wide range of industries for many decades. This is particularly true in the healthcare industry and, although to a much lesser extent than previously, they remain one of the few sources of funding for start-up companies, which can that often bring disruptive and life-saving medical interventions and technologies to the marketplace (NVCA, 2016a).

In 2007, the total value of completed global healthcare Private Equity deals was USD 66.2Billion. This plummeted by 81% to USD 12.6Billion in 2008. In 2010, the market showed signs of recovery when deal values reached an aggregate of USD 33.9Billion, an increase of 170.3% from 2008. However, recent years have witnessed a steady decline, with 2015 and 2014 being the exception. Deal values exhibited a negative compound annual growth rate (CAGR) of 11.8% from 2010 to 2015, with 2015 recording a total of USD 18.1Billion. Despite the recent uptick, 2015 values were nowhere near pre-crash levels. For example, PE deal values recorded totals of USD 53.6Billion and USD 66.2Billion in 2006 and 2007, respectively.

In terms of deal volume, North America and Europe continue to be the main focus for Private Equity investments in healthcare. The North American region has witnessed a decline in deal activity in recent years, however. From 2010 to 2015, the deal activity in the region exhibited a negative CAGR of 4.1%.

The report “Strategic Trends in Private Equity and Venture Capital Funding for Healthcare” provides a comprehensive analysis on emerging investment trends within the healthcare industry. Private equity (PE) and venture capital (VC) funds have been important participants in a wide range of industries for many decades – particularly the healthcare industry.

In depth, it provides the following:

  • Provides in-depth qualitative and quantitative analyses of global and regional trends that have shaped the current healthcare PE and VC landscape, particularly from 2006 to 2015.
  • Analyses of key investment indicators in the US, including levels of fundraising activities by PE and VC companies, VC investments by industry sector, and VC-backed exits and venture financing trends – particularly for early-stage healthcare companies.
  • Identifies the top private equity and venture capital deals in 2015 and concludes with a discussion of new funding and investment models emerging in the healthcare industry.
  • Includes forecasts for the outlook for PE and VC firms investing in the healthcare sector. VC investment in early-stage healthcare companies continues to decline, and has almost completely disappeared in certain countries.

Companies mentioned in this report: Axovant Sciences, NantKwest, Adaptimmune Therapeutics, Spark Therapeutics, Aimmune Therapeutics, Blueprint Medicines, RegenxBio, ProNAi Therapeutics, Seres Therapeutics, Global Blood Therapeutics.

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FEATURED COMPANIES

  • Adaptimmune Therapeutics
  • Axovant Sciences
  • Global Blood Therapeutics
  • New Enterprise Associates
  • RegenxBio
  • The Carlyle Group
  • MORE

1 Table of Contents
1.1 List of Tables
1.2 List of Figures

2 Introduction
2.1 Overview of Private Equity and Venture Capital
2.1.1 Private Equity and Venture Capital: Similarities and Differences
2.1.2 The Importance of Adequate Fundraising for PE and VC firms
2.2 The Significance of Private Equity and Venture Capital in the Healthcare Industry
2.2.1 The Venture-Backed Healthcare Innovation Model
2.2.2 Critical Factors to Consider when Selecting a Venture Capital Firm
2.2.3 What Are the Types of Private Equity Firms Operating in the Healthcare Industry?

3 Global Trends in Private Equity and Venture Capital Investments in the Healthcare Industry
3.1 Is R&D Productivity in Healthcare Still Declining?
3.2 What is Causing the Increase in the Cost of Bringing Medical Interventions to Market?
3.3 Global Healthcare Private Equity Deal Trends: Volume and Value, 2006-2015
3.4 Regional Healthcare Private Equity Deal Trends: Volume and Value, 2006-2015
3.5 Which Therapy Areas Are Receiving Noteworthy Private Equity Investment?
3.6 Top 10 Healthcare Private Equity Deals, 2015
3.7 Top 10 Healthcare Venture Capital Deals, 2015
3.8 Are New Companies in the Healthcare Industry Living in a Post-VC Era?
3.9 What are the Risks if Investments in the Healthcare Industry Decrease Significantly?
3.10 New Funding and Investment Models Emerging in the Healthcare Industry
3.10.1 The Role of Crowdfunding in Early-Stage Healthcare in the Post-VC Era

4 US Private Equity and Venture Capital Industry Dynamics
4.1 Immediate Aftermath of the 2008 Global Financial Crisis on the Value of Capital Commitments to Private Funds in the US
4.2 Venture Capital Fundraising Trends in the US: Volume and Value of Funds, 2006-2015
4.3 US Venture Capital Investment Trends
4.4 Is Biotechnology Still Playing Second Fiddle to the Software Sector?
4.5 Trends in Seed Stage VC Financing in the US by Volume and Value, 2015
4.6 US Venture-Backed Exits, Volume and Value, 2006-2015
4.7 US Venture-Backed Healthcare Acquisitions 2006-2015

5 Equity Offerings in the Healthcare Sector, Value and Volume, 2006-2015
5.1 US Venture-Backed Initial Public Offerings in Healthcare, 2006-2015
5.2 Company Profiles and Initial Public Offer Details
5.2.1 Axovant Sciences (Stock Symbol: AXON)
5.2.2 NantKwest (Stock Symbol: NK)
5.2.3 Adaptimmune Therapeutics (Stock Symbol: ADAP)
5.2.4 Spark Therapeutics (Stock Symbol: ONCE)
5.2.5 Aimmune Therapeutics (Stock Symbol: AIMT)
5.2.6 Blueprint Medicines (Stock Symbol: BPMC)
5.2.7 RegenxBio (Stock Symbol: RGNX)
5.2.8 ProNAi Therapeutics (Stock Symbol: DNAI)
5.2.9 Seres Therapeutics (Stock Symbol: MCRB)
5.2.10 Global Blood Therapeutics (Stock Symbol: GBT)

6 Private Equity Firms, Company Drill-Downs
6.1 TPG Capital
6.1.1 Overview and Portfolio Management
6.1.2 TPG Capital, Historical Healthcare Deal Trends
6.2 The Carlyle Group
6.2.1 Overview and Portfolio Management
6.2.2 The Carlyle Group, Historical Healthcare Deal Trends
6.3 Apax Partners
6.3.1 Overview and Portfolio Management
6.3.2 Apax Partners, Historical Healthcare Deal Trends
6.4 KKR & Co
6.4.1 Overview and Portfolio Management
6.4.2 KKR & Co, Historical Healthcare Deal Trends
6.5 Warburg Pincus
6.5.1 Overview and Portfolio Management
6.5.2 Warburg Pincus, Historical Healthcare Deal Trends
6.6 Bain Capital Private Equity
6.6.1 Overview and Portfolio Management
6.6.2 Bain Private, Historical Healthcare Deal Trends

7 Venture Capital Firms, Company Drill-Downs
7.1 New Enterprise Associates
7.1.1 Overview and Portfolio Management
7.1.2 New Enterprise Associates, Historical Healthcare Deal Trends
7.2 OrbiMed Advisors
7.2.1 Overview and Portfolio Management
7.2.2 OrbiMed Advisors, Historical Healthcare Investment Trends
7.3 Kleiner Perkins Caufield & Byers
7.3.1 Overview and Portfolio Management
7.3.2 Kleiner Perkins Caufield & Byers, Historical Healthcare Investment Trends
7.4 Flagship Ventures
7.4.1 Overview and Portfolio Management
7.4.2 Flagship Ventures, Historical Healthcare Investment Trends
7.5 Third Rock Ventures
7.5.1 Overview and Portfolio Management
7.5.2 Third Rock Ventures, Historical Healthcare Investment Trends
7.6 Versant Ventures
7.6.1 Overview and Portfolio Management
7.6.2 Versant Ventures, Historical Healthcare Investment Trends

8 Future Outlook
8.1 What Factors will Drive Investment in Healthcare Industry in Coming Years?
8.2 Will New Financing Models Provide Sustainable Growth for Early-Stage Healthcare Companies?
8.3 Which Geographical Markets will Drive Investment in Healthcare in Foreseeable Future?
8.4 How will Venture Capital Firms React to Increasing Competition in Healthcare Sector?

9 Conclusions

10 Bibliography

11 Appendix
11.1 Global Healthcare Private Equity Deal Trend (Volume and Value), 2006-2015
11.2 Global Healthcare Private Equity Trends by Region, Volume, 2006-2015
11.3 Global Healthcare Private Equity Trends by Region, Value ($bn), 2006-2015
11.4 Global Healthcare Private Equity Deal Value by Therapy Area ($m), 2014 and 2015
11.5 US Capital Commitments to Private Equity Firms ($bn), 2006-2015
11.6 US Venture Capital Fundraising, Volume and Value, 2006-2015
11.7 US Venture Capital Investment Trends, Volume and Value, 2006-2015
11.8 Composition of Venture Capital Investments in the US by Sector, 2015
11.9 Value of Venture Capital Investment in the US by Company Stage of Development, 2015
11.10 Volume of Venture Capital Investment in the US by Company Stage of Development, 2015
11.11 Venture-Backed Initial Public Offerings and Merger and Acquisition Exits, Volume, 2006-2015
11.12 Venture-Backed Initial Public Offerings and Merger and Acquisition Exits, Value ($bn), 2006-2015
11.13 US Venture-Backed Acquisitions, Total Transaction Value ($bn), 2006-2015
11.14 Equity Offerings in the Healthcare Sector, Value and Volume, 2006-2015
11.15 US Venture-Backed IPOs, Healthcare and Total, 2006-2015
11.16 Contact Us
11.17 Disclaimer

List of Tables
Table 1: Main Differences and Similarities between Private Equity and Venture Capital Companies
Table 2: Types of Private Equity Firms Typically Operating in the Healthcare Industry
Table 3: Top 10 Healthcare Private Equity Deals in 2015
Table 4: Top 10 Healthcare Venture Capital Deals in 2015
Table 5: Emerging Sources of Funding for Early-Stage Healthcare Companies
Table 6: Venture Capital Investment in the US Life Sciences Industry, 2006-2015 ($m)
Table 7: Top 10 Healthcare IPOs in 2015
Table 8: Axovant Product Pipeline
Table 9: NantKwest Product Pipeline
Table 10: Adaptimmune Therapeutics Product Pipeline
Table 11: Spark Therapeutics Product Pipeline
Table 12: Aimmune Therapeutics Product Pipeline
Table 13: Blueprint Medicines Product Pipeline
Table 14: RegenxBio Product Pipeline
Table 15: ProNAi Product Pipeline
Table 16: Seres Therapeutics Product Pipeline
Table 17: Global Blood Therapeutics Product Pipeline
Table 18: TPG Capital, Healthcare Investment Portfolio, 2016
Table 19: The Carlyle Group, Healthcare Investment Portfolio, 2016
Table 20: Apax Partners, Healthcare Investment Portfolio, 2016
Table 21: KKR & Co, Healthcare Investment Portfolio, 2016
Table 22: Warburg Pincus, Healthcare Investment Portfolio, 2016
Table 23: Bain Capital Private Equity, Healthcare Investment Portfolio, 2016
Table 24: New Enterprise Associates, Healthcare Investment Portfolio, 2016
Table 25: OrbiMed Advisors, Selected Healthcare Investments
Table 26: Kleiner Perkins Caufield & Byers, Selected Healthcare Investments
Table 27: Flagship Ventures, Selected Healthcare Investments
Table 28: Third Rock Investments, Selected Healthcare Investments
Table 29: Versant Ventures, Selected Healthcare Investments

List of Figures
Figure 1: Venture-Backed Healthcare Innovation Model
Figure 2: Global Healthcare Private Equity Deal Trend (Volume and Value), 2006-2015
Figure 3: Global Healthcare Private Equity Trends by Region, Volume, 2006-2015
Figure 4: Global Healthcare Private Equity Trends by Region, Value ($bn), 2006-2015
Figure 5: Global Healthcare Private Equity Deal Value by Therapy Area ($m), 2014 and 2015
Figure 6: US Capital Commitments to Private Equity Firms ($bn), 2006-2015
Figure 7: US Venture Capital Fundraising, Volume and Value, 2006-2015
Figure 8: US Venture Capital Investment Trends, Volume and Value, 2006-2015
Figure 9: Composition of Venture Capital Investments in the US by Sector, 2015
Figure 10: Value of Venture Capital Investment in the US by Company Stage of Development, 2015
Figure 11: Volume of Venture Capital Investment in the US by Company Stage of Development, 2015
Figure 12: Venture-Backed Initial Public Offerings and Merger and Acquisition Exits, Volume, 2006-2015
Figure 13: Venture-Backed Initial Public Offerings and Merger and Acquisition Exits, Value ($bn), 2006-2015
Figure 14: US Venture-Backed Healthcare Acquisitions, Total Transaction Value ($bn), 2006-2015
Figure 15: Equity Offerings in the Healthcare Sector, Value and Volume, 2006-2015
Figure 16: US Venture-Backed IPOs, Healthcare and Total, 2006-2015
Figure 17: Global Healthcare Private Equity Deal Trend (Volume and Value), 2006-2015
Figure 18: Global Healthcare Private Equity Trends by Region, Volume, 2006-2015
Figure 19: Global Healthcare Private Equity Trends by Region, Value ($bn), 2006-2015
Figure 20: Global Healthcare Private Equity Deal Value by Therapy Area ($m), 2014 and 2015
Figure 21: US Capital Commitments to Private Equity Firms ($bn), 2006-2015
Figure 22: US Venture Capital Fundraising, Volume and Value, 2006-2015
Figure 23: US Venture Capital Investment Trends, Volume and Value, 2006-2015
Figure 24: Composition of Venture Capital Investments in the US by Sector, 2015
Figure 25: Value of Venture Capital Investment in the US by Company Stage of Development, 2015
Figure 26: Volume of Venture Capital Investment in the US by Company Stage of Development, 2015
Figure 27: Venture-Backed Initial Public Offerings and Merger and Acquisition Exits, Volume, 2006-2015
Figure 28: Venture-Backed Initial Public Offerings and Merger and Acquisition Exits, Value ($bn), 2006-2015
Figure 29: US Venture-Backed Acquisitions, Total Transaction Value ($bn), 2006-2015
Figure 30: Equity Offerings in the Healthcare Sector, Value and Volume, 2006-2015
Figure 31: US Venture-Backed IPOs, Healthcare and Total, 2006-2015

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FEATURED COMPANIES

  • Adaptimmune Therapeutics
  • Axovant Sciences
  • Global Blood Therapeutics
  • New Enterprise Associates
  • RegenxBio
  • The Carlyle Group
  • MORE

Although the life sciences industry remains an attractive investment area, the healthcare sector has seen a decline in venture investments, particularly for early-stage investments, as pricing pressures, stringent regulations, rising development costs, reimbursement issues, and declining R&D productivity have proved significant barriers.

According to our latest report, completed global healthcare private equity deal values exhibited a negative compound annual growth rate (CAGR) of 11.8% from 2010 to 2015, with 2010 recording a total of $33.9 billion, falling to $18.1 billion by 2015. The continued decline in R&D productivity is one of the most important challenges the healthcare industry is facing at a global level. Blockbuster therapies, for example, have become increasingly rare, and many drugs continue to face reimbursement challenges in key markets, resulting in declining revenues for companies.

One of our analysts explains: “The accumulating evidence of the decline in R&D productivity adds to the uncertainty associated with innovation in the healthcare industry, which in turn reduces the attractiveness of the field for investment.

“Despite this, a recent surge in the approval of innovative drugs, coupled with reports of companies having been more successful in the final stages of clinical testing, seems to point towards a brighter future in this regard. Indeed, the number of new molecular entities launched globally in 2014 reached a 17-year high of 46.”

If investments from private equity and venture capital (VC) firms in the healthcare industry continue to decrease significantly, it could have serious and wide-ranging consequences not just in the healthcare sector, but in wider economies. Fewer treatment options, a sharp decline in innovation, and significant financial constraints for companies in the sector could result in job losses, important projects being abandoned, and company relocations or complete shutdowns.

Our analyst continues: “Despite the precarious investment situation, many start-up healthcare companies, particularly those in the biotechnology segment, are turning to different sources of capital and funding. Many companies are obtaining funding from angel investors, which are typically individual high-net-worth investors that provide financing through loans or equity investments.

“Biotech start-ups - particularly those outside of the US - have had to embrace a variety of creative alternative funding sources, and move away from business models that require substantial investment. New companies often adopt a combination of funding sources such as angel investors, grants, and non-VC institutional investors.”

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  • Adaptimmune Therapeutics
  • Aimmune Therapeutics
  • Apax Partners
  • Axovant Sciences
  • Bain Capital Private Equity
  • Blueprint Medicines
  • Flagship Ventures
  • Global Blood Therapeutics
  • KKR & Co
  • Kleiner Perkins Caufield & Byers
  • NantKwest
  • New Enterprise Associates
  • OrbiMed Advisors
  • ProNAi Therapeutics
  • RegenxBio
  • Seres Therapeutics
  • Spark Therapeutics
  • TPG Capital
  • The Carlyle Group
  • Third Rock Ventures
  • Versant Ventures
  • Warburg Pincus
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