The medical device industry’s active M&A market and uncrowded investment space make it attractive for investors looking to get into healthcare. A recent report from Silicon Valley Bank (SVB) says that as a result, traditional venture investors are returning to devices, including diagnostics, following a few years of scaling back in this sector.
The report notes that device funding and deal levels for devices rebounded and were steady 2017. Nine firms had at least four deals in 2016–2017 compared with only three firms in 2015–2016. SVB says that while biopharm investors focus on early-stage deals, device investments by corporate investors were primarily in later-stage companies. Among the most active investors were Johnson & Johnson, Boston Scientific, and OrbiMed, a healthcare fund management firm.
According to SVB, niche investors generated major interest in neuro devices. Surgical, neuro, and non-invasive monitoring devices were trending up, while interest in devices for vascular access indications was down.
The neuro space attracted a total of $276 million in investments. According to SVB, incubators and niche corporate venture arms “generated significant new interest in neuro, leading to a 2017 surge.” The biggest gainers here — companies that raised $25 million or more — were Neuropace, whose initial device, the RNS System, was developed for the treatment of epilepsy, and G Therapeutics, whose device treats spinal cord injury.
Saluda Medical, which raised $40 million, has developed closed loop neuromodulation technology that enables the recording and measurement of electrical nerve signals travelling up and down the spine in real time on the same electrode array that is used for stimulation. Other major investments in neuro went to Monteris Medical and Endostim.
The cardiovascular sector garnered the greatest level of investment at $451 million with companies such as CVRx and Acutus Medical among those with the greatest investment. Another category that did well was the surgical devices, which garnered $163 million in investments. Companies such as MedLumics and SentreHeart each raised more than $25 million. MedLumics uses optical coherence tomography as a “virtual biopsy” method. SentreHeart’s technology is focused on remote suture delivery for immediate and complete closure of anatomic structures.
SVB says that companies making non-invasive monitoring devices continue to spark investor interest at smaller deal sizes. “These companies have smaller development costs and less-stringent regulatory requirements,” notes the report. Future investment is likely to increase in drug-delivery devices. As therapeutic treatments move outside the hospital, SVB says it anticipates investment will continue to increase. One very interesting trend is that artificial intelligence played a big role in diagnostics investment. The majority of the diagnostics deals that were greater than $10 million were AI-based products for diagnostics testing and analytics.
Editor and Director of Medical Content
To download a copy of the report, click here .