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TrendsinHealthcareInvestmentsandExits2018InnovationWaveDrivesRobustActivityMID-YEARREPORT2018Follow@SVB_FinancialEngage#SVBHealthcareTableofContentsTrendsinHealthcareInvestmentsandExitsMid-Year20182Mid-Year2018KeyHighlights3HealthcareInvestmentsandFundraising5SVBDeepDive:ToolsDrivingSyntheticBiologyinLifeScience18HealthcareExitsandIPOs20BiopharmaUnicorns:2013–201821SecondHalfof2018Outlook29Glossary30AbouttheAuthors31Mid-Year2018Highlights:InvestmentsPioneeringInnovations,DrugDevelopmentCreateInvestorExcitementTrendsinHealthcareInvestmentsandExitsMid-Year20183•Atmid-year,U.S.healthcareventurefundraisingreached$4.5billion,andisonpacetocloselymatchthe2017recordof$9.1billion.•InvestmentsinVC-backedbiopharmacontinuedtosurge,whiledeviceremainedstable.Dx/Toolsinvestingdecreased.Full-year2018investmentinventurelifesciencecompanieslikelywillreachanewhigh,surpassingtherecord$17.3billioninvestedin2017.•BiopharmaSeriesAinvestmentsareexploding,andbymid-yearreached$2.6billion–comparedtothefull-yeartotalof$2.3billionin2017.•Byindication,investorinterestisdrivingbiopharmaplatformcompaniestolevelssimilartooncology,andorphan/raredealsaremakingacomeback.•Underscoringrobustpre-IPObiopharmavaluations,step-upsfromSeriesAtoBhaveseen2xto3xincreasesinthepast18months.•Non-invasivemonitoringandimagingcompaniesaredrivinginvestmentsinSeriesAdevicecompanies.•Whiledevicepre-moneyvaluationsalsohaveseenlargestep-upsfromSeriesAtoB,SeriesDvaluationsareflatordownrounds.•InvestmentinDx/Toolsoverallislaggingin2018,draggeddownbyalargedropinDxTestsdeals.•Onthebrightside,R&DToolssaw20dealsfromthemostactiveinvestorsbymid-year,representing60%ofalldollarsinvestedinDx/Toolsin1H2018.•Investmentsinsyntheticbiologybuildingblocks,includingcomputationaldesign,CRISPRediting,DNA/RNAsynthesisandorganismengineeringtools,haveclimbedin2017and2018.•ThesecompaniesarerevolutionizingthefieldofsyntheticbiologywithhardwareandbiochemicaladvancesinDNA/RNAsynthesis.Mid-Year2018Highlights:ExitsBiopharmaIPOsArePoisedtoBlowPast2017NumbersTrendsinHealthcareInvestmentsandExitsMid-Year20184•75VC-backedbiopharmaunicornshavereachedvaluationsof$1billionorhighersince2013–eitherthroughacquisitionorinthepublicmarkets.Thisyearisshapinguptobeanotherstrongyear.Thesebiopharmaexitsarecreatingthemomentumforstrongfundraisingandinvestment.•In1H2018,30biopharmacompanieswentpublic–comparedto31IPOsforallof2017.•BiopharmaM&Aisslowing,aslargerroundsandhighervaluationsmakeearly-stageM&Alessappealing.•Instead,companieslookingtogopublicarereplenishingthebiopharmaIPOqueue.Thisisfueledbylargepre-moneyIPOvaluationsdrivenbycontinuedtopcrossoverinvestoractivity.•DeviceM&Aisstable,buttheIPOmarketisfavoringneuro-focusedcompanies,withthreeIPOsin1H2018.•PMA/DeNovopathwaycompaniescontinuetoachievebetterM&Avalues,highermultiplesandfastertimestoexitthan510(k)companies.•However,overthelasttwoyears,510(k)devicevaluesandmultipleshaveincreased.•Dx/ToolsM&Aactivityisincreasing,butthesedealshavelowerupfrontvaluesandlongertimestoexit.•Therearemanylater-stageDx/Toolscompaniesthatareshapingupasacquisitioncandidates,with25still-privatecompaniesvaluedat$150millionorhigher.5HealthcareInvestmentsandFundraising:BiopharmaAdvancementsDriveInvestorActivityTrendsinHealthcareInvestmentsandExitsMid-Year2018TrendsinHealthcareInvestmentsandExitsMid-Year20186U.S.HCVentureFundraisingStaysonTorridPaceU.S.HealthcareVentureFundraising*,2009–2018$5.2$1.8$3.7$3.6$3.9$6.1$7.5$7.2$9.1$4.52009201020112012201320142015201620171H2018Fundraisingisonpacetomatchthe2017totalof$9.1B–countertoourearly2018predictionthattheannualtotalwoulddecline.Aconfluenceofeventsisdrivinginvestmentandfundraisingtonewlevels.Rapidtechnologicaladvances,leadingtoclinicalbreakthroughs,arebenefitingpatientsandinvestorsalike.Inthisenvironment,quickexitsareunderpinninganexplosionofactivity,particularlyinbiopharma,attractingnewpoolsofcapitalandgiantinvestmentsbytraditionalandnon-traditionalinvestors,includingtechinvestors.Withtheentryofartificialintelligence(AI)andmachinelearning(ML),thesetechinvestorsseehugeopportunitiesindrugdevelopmentandthetoolsrequiredtohelpidentifycuresforarangeofdiseases.ThebiopharmaIPOwindowisrewardinginvestorswithquickvaluationstep-ups(manycompanieshadIPOswithintwotothreeyearsofSeriesA).Thispathtoliquidityistranslatingintorenewedexcitementbylimitedpartnerswhoareeagertokeeptheinvestmentcyclegoingbysupportinglargerventurefundraisesatafasterpace.*SVBcalculatesonlythedollarsallocatedtohealthcarebyU.S.venturefundsorfundsinvestingprimarilyintheU.S.Source:PitchBookandSVBproprietarydata.HCVC$Fundraised($BILLIONS)36181416532191212919171163OncologyPlatformOrphan/RareDiseaseNeuroAnti-Infective201620171H20182016*2017*1H2018#ofInvestments12212877TotalSeriesAFunding($M)$2,299$2,259$2,632CorporateInvestments(%)26%31%16%TrendsinHealthcareInvestmentsandExitsMid-Year20187BiopharmaSeriesADealsSetBlazingPaceU.S.SeriesABiopharmaInvestments,2016–1H2018$1,395M$987M$650M$281M$2,362M*2016&2017numbersamendedbasedonPitchBookfinancingupdates.Financingdatathrough6/15/18.Source: