Review of Capital Movements in the Healthcare Industry
The path ahead is always tortuous and full of ups and downs, filled with unknowns and uncertainties. To better cope with future risks and challenges, at the beginning of the new year, at this new starting point, let us pause together to review the healthcare industry in 2022, and better explore the context of development and direction forward by understanding the ever-changing capital dynamics.
Part 1
Summary of Investment and Financing in the Primary Market of Healthcare
Before 2021, the global investment and financing activity in the healthcare sector maintained a rapid growth trend. Especially under the impact of the COVID-19 pandemic in recent years, the healthcare industry has become a hot spot for global competition. The level of investment and financing activity reached a peak in 2021, with the global financing scale reaching $83.55 billion that year.
With the capital market becoming more rational and influenced by external economic environment factors, the pace of investment and financing growth in healthcare companies has slowed down. Compared to previous years, investors showed a more cautious attitude in 2022. According to data compiled by CB Insights, there were a total of 3,200 financing events globally in 2022, with a total financing amount of $52.94 billion. Compared with 2021, there were a year-on-year decrease of 16.3% in the number of financings and 36.6% in the scale of financing.
*Only investment and financing events before IPOs are counted.
Data source: CB insights database, Frost & Sullivan analysis
2021 was a year of active capital in the healthcare sector in China, with unprecedented investment and financing enthusiasm. In 2021, a total of 1,357 financing events occurred nationwide, with a disclosed total amount reaching $20.06 billion. In 2022, 1,218 financing events took place domestically, with a disclosed total amount of about $9.31 billion. Representative lead investors included well-known institutions such as Sequoia Capital, Hillhouse Capital, Qiming Venture Capital, and Junlian Capital. Compared to the prosperous scene of 2021, the number of financing events in 2022 decreased by 10.2% year-on-year, and the overall amount of financing saw a significant correction, reaching 53.4%.
*Only investment and financing events before IPOs are counted.
Data source: CB insights database, Frost & Sullivan analysis
In 2022, from the perspective of investment rounds, capital showed a more cautious attitude towards validating the value of late-stage pre-IPO projects. Capital is focusing more on early investments. In the healthcare sector, 62% of transactions were concentrated in early rounds such as Series A and before Series A. At the same time, investment and financing events are dominated by Series A rounds, accounting for nearly 40% of total financing volume. Capital is still full of confidence and anticipation for enterprises with innovative technologies.
*Only investment and financing events before IPOs are counted.
Source: Public information, Frost & Sullivan analysis
Over the past year, there have also been significant deals globally. High-quality leading companies in various sectors have still been able to stand out in a challenging market environment and win the favor of investors. Among them, there have been several financing events on a massive scale, which serve as industry barometers worthy of attention.
01 Altos Labs Raises $3 Billion
In January 2022, according to Altos Labs, it completed a financing of $3 billion, which was the largest financing amount for the whole year of 2022.
Altos Labs was established in the United States in 2022 as a biotechnology company. Altos Labs boasts a strong scientific research and development team, with several Nobel laureates having joined. The company is dedicated to developing longevity therapies that can prevent or reverse the process of human aging. It mainly develops cell therapies based on induced pluripotent stem cells to create new medical methods and open up new prospects for future medicine.
02 Verily Completes $1 Billion Financing
In September 2022, Verily, a life sciences and health management company, completed a $1 billion financing led by Alphabet. This round of funding will be used to expand Verily's precision health management business, including medical data platforms, research and care, and related infrastructure technologies. It will also be used for strategic partnerships, global business development, and potential acquisitions.
Google Life Sciences was renamed Verily in 2015 and became an independent subsidiary. Verily is committed to providing customers with more precise health management services. Currently, Verily's business mainly includes building its own healthcare product and service platforms, investing in startups such as those dealing with tumors and cancer, and cross-company collaboration projects in the field of chronic diseases.
Novotech Health Completes $760 Million Financing
In January 2022, Novotech Health, a contract research organization (CRO) platform specializing in biotechnology, announced the completion of a total financing of $760 million, including $255 million in private equity financing and $505 million in refinancing. The funds raised after this round will mainly be used to support mergers and acquisitions and technology empowerment. The company's valuation is now $3 billion after this round of financing.
Novotech Health is a CRO company headquartered in Singapore, formed by the merger of Novotech and PPC Johnson & Johnson Group. It provides clinical trial services from Phase I to Phase IV for clients in multiple regions of Asia-Pacific.
04 Resilience closes $625 million Series D
In June 2022, National Resilience, Inc., a biomanufacturing company focused on innovative drug technology, announced the completion of a $625 million Series D financing. The funds raised will be used to continue investing in building infrastructure networks, through strategic partnerships, acquisitions, organic growth, and international expansion, as well as developing innovative biomanufacturing technologies to ensure the ability to manufacture current and future drugs quickly, safely, and on a large scale.
Resilience was established in 2020 and is headquartered in San Diego, California. The company focuses on five treatment modalities, including biologics, vaccines, nucleic acids, cell therapy, and gene therapy, dedicated to broadening access to complex drugs.
05 Ultima Genomics Raises $600 Million in Series A
In May 2022, Ultima Genomics completed a $600 million Series A financing round. Investors in this round include General Atlantic, Andreessen Horowitz, Founders Fund, and D1 Capital, among others, to be used for exploring genomic-driven research and ushering in a new era of healthcare.
Ultima Genomics was established in 2016 and is headquartered in New Orleans, California. The company focuses on developing new sequencing architectures aimed at surpassing traditional methods, including completely different flow cytometry engineering, sequencing chemistry, and machine learning approaches, to enable earlier disease diagnosis.
Part 2
Summary of Secondary Market Investment and Financing in the Healthcare Field
In 2022, seven medical device companies and six innovative pharmaceutical companies were listed on the Hong Kong stock market, while 16 and 13 medical device and innovative pharmaceutical companies were listed on the A-share market respectively.
In recent years, among the listed companies in the A-share and Hong Kong stock markets, it has been observed that medical device companies are gradually catching up with and surpassing innovative pharmaceutical companies in terms of number. This trend may be due to the longer R&D cycle of domestic innovative drugs. In terms of R&D investment and success probability, innovative medical devices are more flexible and orderly, allowing them to adjust their R&D content according to clinical needs, resulting in a shorter R&D cycle and faster progress.
The surge in the number of medical devices listed has also benefited from the clear planning of the Shanghai Science and Technology Innovation Board in mid-last year for the listing review rules for innovative medical devices. It is foreseeable that in the future, the number of medical device companies listed is expected to further exceed that of innovative drugs.
Data source: Wind, Frost & Sullivan analysis
Currently, Biotech companies in our country are focusing on a limited number of product targets, leading to serious homogenization of innovative drugs. The ability to layout commercial channels and related policies such as medical insurance significantly affect the sales after drugs are launched on the market. In the past year, various factors have driven the secondary capital market in the healthcare industry back to rationality. From the end of 2022 to the beginning of 2023, the secondary market began to gradually recover. As market tensions eased, the valuations of some companies tended towards a reasonable level, and under rationality, more high-quality companies will come into public view.
* Retrieval date: December 31, 2021, to January 20, 2023
Data source: Wind, Frost & Sullivan analysis
Compared to the bustling scene in 2021, IPO projects in 2022 have seen a certain degree of pullback in terms of project financing amount and number. The number of Hong Kong stock market IPOs and the raised funds both declined significantly year-on-year. The number has been reduced by one-third, while the scale of raised funds is one-tenth of last year's level. Meanwhile, the performance of the A-share market has been relatively more stable. In 2022, there were 53 IPOs in the A-share sector, showing a slight downward trend compared to 2021, with a decline of 13.1%. The raised funds amounted to 78.39 billion RMB, which is about 12.3% less than last year's scale.
*Industry categories include pharmaceuticals, biotechnology and life sciences, as well as healthcare equipment and services; the amount raised is calculated based on the net proceeds.
Data source: Wind, Frost & Sullivan analysis
With the shift in market logic, all participants are actively adjusting their expectations and response strategies.regulatory authorityFor the increasingly stringent corporate review, high-quality enterprises are identified from multiple dimensions such as market measurement logic, product technical highlights, company R&D steps, and commercialization layout;investment institutionPay attention to the enterprise's intrinsic value, future growth potential, and cash flow returns;enterpriseIn addition to achieving technological innovation and clinical value for products, it is necessary to plan the commercialization path as early as possible to generate revenue and profits, thereby demonstrating market value and bringing investment returns.
As a service provider in the industry, Frost & Sullivan also observes and follows the changes in the sector, aiming to provide more information and value. It helps enterprises identify suitable tracks for themselves, showcase unique and differentiated positioning, and find points to promote their own value. If we return to the concept of 'value', the industry as a whole can enter a virtuous development trajectory, accumulating potential for the next industry boom cycle.
Project experience
Frost & Sullivan's healthcare practice in China has extensive corporate clients and has built a vast client network over the past 20 years, accumulating a wealth of project experience in various healthcare sub-sectors. Project types include knowledge center projects (in-depth content, promotional activities), Pre-IPO projects (DCF valuation, business plan services), IPO listing projects (industry advisory, clinical audit, fundraising writing), market research, market capitalization management, and strategic consulting. The firm also collaborates with well-known domestic and international information platforms and investment and financing institutions to provide one-stop solutions for specialized sub-sectors such as pharmaceuticals and medical devices, attracting widespread attention from investors.
Data source: Analysis by Frost & Sullivan
