Strategic Trends in Private Equity and Venture Capital Funding for Healthcare

Publisher Name :
Date: 01-Nov-2016
No. of pages: 78

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 66.2 Billion. This plummeted by 81% to USD 12.6 Billion in 2008. In 2010, the market showed signs of recovery when deal values reached an aggregate of USD 33.9 Billion, 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 53.6 Billion and USD 66.2 Billion 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.

Strategic Trends in Private Equity and Venture Capital Funding for Healthcare

Table of Contents

1 Table of Contents 3
1.1 List of Tables 5
1.2 List of Figures 6

2 Introduction 7
2.1 Overview of Private Equity and Venture Capital 7
2.1.1 Private Equity and Venture Capital: Similarities and Differences 7
2.1.2 The Importance of Adequate Fundraising for PE and VC firms 8
2.2 The Significance of Private Equity and Venture Capital in the Healthcare Industry 8
2.2.1 The Venture-Backed Healthcare Innovation Model 9
2.2.2 Critical Factors to Consider when Selecting a Venture Capital Firm 11
2.2.3 What Are the Types of Private Equity Firms Operating in the Healthcare Industry? 12

3 Global Trends in Private Equity and Venture Capital Investments in the Healthcare Industry 13
3.1 Is R&D Productivity in Healthcare Still Declining? 13
3.2 What is Causing the Increase in the Cost of Bringing Medical Interventions to Market? 13
3.3 Global Healthcare Private Equity Deal Trends: Volume and Value, 2006-2015 14
3.4 Regional Healthcare Private Equity Deal Trends: Volume and Value, 2006-2015 15
3.5 Which Therapy Areas Are Receiving Noteworthy Private Equity Investment? 17
3.6 Top 10 Healthcare Private Equity Deals, 2015 17
3.7 Top 10 Healthcare Venture Capital Deals, 2015 19
3.8 Are New Companies in the Healthcare Industry Living in a Post-VC Era? 20
3.9 What are the Risks if Investments in the Healthcare Industry Decrease Significantly? 20
3.10 New Funding and Investment Models Emerging in the Healthcare Industry 21
3.10.1 The Role of Crowdfunding in Early-Stage Healthcare in the Post-VC Era 21

4 US Private Equity and Venture Capital Industry Dynamics 23
4.1 Immediate Aftermath of the 2008 Global Financial Crisis on the Value of Capital Commitments to Private Funds in the US 23
4.2 Venture Capital Fundraising Trends in the US: Volume and Value of Funds, 2006-2015 23
4.3 US Venture Capital Investment Trends 24
4.4 Is Biotechnology Still Playing Second Fiddle to the Software Sector? 25
4.5 Trends in Seed Stage VC Financing in the US by Volume and Value, 2015 27
4.6 US Venture-Backed Exits, Volume and Value, 2006-2015 28
4.7 US Venture-Backed Healthcare Acquisitions 2006-2015 30

5 Equity Offerings in the Healthcare Sector, Value and Volume, 2006-2015 31
5.1 US Venture-Backed Initial Public Offerings in Healthcare, 2006-2015 31
5.2 Company Profiles and Initial Public Offer Details 33
5.2.1 Axovant Sciences (Stock Symbol: AXON) 33
5.2.2 NantKwest (Stock Symbol: NK) 33
5.2.3 Adaptimmune Therapeutics (Stock Symbol: ADAP) 34
5.2.4 Spark Therapeutics (Stock Symbol: ONCE) 36
5.2.5 Aimmune Therapeutics (Stock Symbol: AIMT) 37
5.2.6 Blueprint Medicines (Stock Symbol: BPMC) 37
5.2.7 RegenxBio (Stock Symbol: RGNX) 38
5.2.8 ProNAi Therapeutics (Stock Symbol: DNAI) 39
5.2.9 Seres Therapeutics (Stock Symbol: MCRB) 40
5.2.10 Global Blood Therapeutics (Stock Symbol: GBT) 41

6 Private Equity Firms, Company Drill-Downs 43
6.1 TPG Capital 43
6.1.1 Overview and Portfolio Management 43
6.1.2 TPG Capital, Historical Healthcare Deal Trends 45
6.2 The Carlyle Group 45
6.2.1 Overview and Portfolio Management 45
6.2.2 The Carlyle Group, Historical Healthcare Deal Trends 47
6.3 Apax Partners 47
6.3.1 Overview and Portfolio Management 47
6.3.2 Apax Partners, Historical Healthcare Deal Trends 48
6.4 KKR & Co 48
6.4.1 Overview and Portfolio Management 48
6.4.2 KKR & Co, Historical Healthcare Deal Trends 49
6.5 Warburg Pincus 49
6.5.1 Overview and Portfolio Management 49
6.5.2 Warburg Pincus, Historical Healthcare Deal Trends 50
6.6 Bain Capital Private Equity 51
6.6.1 Overview and Portfolio Management 51
6.6.2 Bain Private, Historical Healthcare Deal Trends 51

7 Venture Capital Firms, Company Drill-Downs 52
7.1 New Enterprise Associates 52
7.1.1 Overview and Portfolio Management 52
7.1.2 New Enterprise Associates, Historical Healthcare Deal Trends 55
7.2 OrbiMed Advisors 55
7.2.1 Overview and Portfolio Management 55
7.2.2 OrbiMed Advisors, Historical Healthcare Investment Trends 57
7.3 Kleiner Perkins Caufield & Byers 57
7.3.1 Overview and Portfolio Management 57
7.3.2 Kleiner Perkins Caufield & Byers, Historical Healthcare Investment Trends 59
7.4 Flagship Ventures 59
7.4.1 Overview and Portfolio Management 59
7.4.2 Flagship Ventures, Historical Healthcare Investment Trends 61
7.5 Third Rock Ventures 61
7.5.1 Overview and Portfolio Management 61
7.5.2 Third Rock Ventures, Historical Healthcare Investment Trends 63
7.6 Versant Ventures 63
7.6.1 Overview and Portfolio Management 63
7.6.2 Versant Ventures, Historical Healthcare Investment Trends 65

8 Future Outlook 66
8.1 What Factors will Drive Investment in Healthcare Industry in Coming Years? 66
8.2 Will New Financing Models Provide Sustainable Growth for Early-Stage Healthcare Companies? 66
8.3 Which Geographical Markets will Drive Investment in Healthcare in Foreseeable Future? 66
8.4 How will Venture Capital Firms React to Increasing Competition in Healthcare Sector? 66

9 Conclusions 68

10 Bibliography 69

11 Appendix 71
11.1 Global Healthcare Private Equity Deal Trend (Volume and Value), 2006-2015 71
11.2 Global Healthcare Private Equity Trends by Region, Volume, 2006-2015 71
11.3 Global Healthcare Private Equity Trends by Region, Value ($bn), 2006-2015 72
11.4 Global Healthcare Private Equity Deal Value by Therapy Area ($m), 2014 and 2015 72
11.5 US Capital Commitments to Private Equity Firms ($bn), 2006-2015 73
11.6 US Venture Capital Fundraising, Volume and Value, 2006-2015 73
11.7 US Venture Capital Investment Trends, Volume and Value, 2006-2015 74
11.8 Composition of Venture Capital Investments in the US by Sector, 2015 74
11.9 Value of Venture Capital Investment in the US by Company Stage of Development, 2015 75
11.10 Volume of Venture Capital Investment in the US by Company Stage of Development, 2015 75
11.11 Venture-Backed Initial Public Offerings and Merger and Acquisition Exits, Volume, 2006-2015 76
11.12 Venture-Backed Initial Public Offerings and Merger and Acquisition Exits, Value ($bn), 2006-2015 76
11.13 US Venture-Backed Acquisitions, Total Transaction Value ($bn), 2006-2015 77
11.14 Equity Offerings in the Healthcare Sector, Value and Volume, 2006-2015 77
11.15 US Venture-Backed IPOs, Healthcare and Total, 2006-2015 78
11.16 Contact Us 78
11.17 Disclaimer 78

List of Tables

Table 1: Main Differences and Similarities between Private Equity and Venture Capital Companies 8
Table 2: Types of Private Equity Firms Typically Operating in the Healthcare Industry 12
Table 3: Top 10 Healthcare Private Equity Deals in 2015 18
Table 4: Top 10 Healthcare Venture Capital Deals in 2015 19
Table 5: Emerging Sources of Funding for Early-Stage Healthcare Companies 21
Table 6: Venture Capital Investment in the US Life Sciences Industry, 2006-2015 ($m) 27
Table 7: Top 10 Healthcare IPOs in 2015 32
Table 8: Axovant Product Pipeline 33
Table 9: NantKwest Product Pipeline 34
Table 10: Adaptimmune Therapeutics Product Pipeline 35
Table 11: Spark Therapeutics Product Pipeline 36
Table 12: Aimmune Therapeutics Product Pipeline 37
Table 13: Blueprint Medicines Product Pipeline 38
Table 14: RegenxBio Product Pipeline 39
Table 15: ProNAi Product Pipeline 40
Table 16: Seres Therapeutics Product Pipeline 41
Table 17: Global Blood Therapeutics Product Pipeline 42
Table 18: TPG Capital, Healthcare Investment Portfolio, 2016 44
Table 19: The Carlyle Group, Healthcare Investment Portfolio, 2016 46
Table 20: Apax Partners, Healthcare Investment Portfolio, 2016 47
Table 21: KKR & Co, Healthcare Investment Portfolio, 2016 49
Table 22: Warburg Pincus, Healthcare Investment Portfolio, 2016 50
Table 23: Bain Capital Private Equity, Healthcare Investment Portfolio, 2016 51
Table 24: New Enterprise Associates, Healthcare Investment Portfolio, 2016 52
Table 25: OrbiMed Advisors, Selected Healthcare Investments 55
Table 26: Kleiner Perkins Caufield & Byers, Selected Healthcare Investments 58
Table 27: Flagship Ventures, Selected Healthcare Investments 60
Table 28: Third Rock Investments, Selected Healthcare Investments 62
Table 29: Versant Ventures, Selected Healthcare Investments 64

List of Figures

Figure 1: Venture-Backed Healthcare Innovation Model 10
Figure 2: Global Healthcare Private Equity Deal Trend (Volume and Value), 2006-2015 14
Figure 3: Global Healthcare Private Equity Trends by Region, Volume, 2006-2015 15
Figure 4: Global Healthcare Private Equity Trends by Region, Value ($bn), 2006-2015 16
Figure 5: Global Healthcare Private Equity Deal Value by Therapy Area ($m), 2014 and 2015 17
Figure 6: US Capital Commitments to Private Equity Firms ($bn), 2006-2015 23
Figure 7: US Venture Capital Fundraising, Volume and Value, 2006-2015 24
Figure 8: US Venture Capital Investment Trends, Volume and Value, 2006-2015 25
Figure 9: Composition of Venture Capital Investments in the US by Sector, 2015 26
Figure 10: Value of Venture Capital Investment in the US by Company Stage of Development, 2015 27
Figure 11: Volume of Venture Capital Investment in the US by Company Stage of Development, 2015 28
Figure 12: Venture-Backed Initial Public Offerings and Merger and Acquisition Exits, Volume, 2006-2015 29
Figure 13: Venture-Backed Initial Public Offerings and Merger and Acquisition Exits, Value ($bn), 2006-2015 29
Figure 14: US Venture-Backed Healthcare Acquisitions, Total Transaction Value ($bn), 2006-2015 30
Figure 15: Equity Offerings in the Healthcare Sector, Value and Volume, 2006-2015 31
Figure 16: US Venture-Backed IPOs, Healthcare and Total, 2006-2015 32
Figure 17: Global Healthcare Private Equity Deal Trend (Volume and Value), 2006-2015 71
Figure 18: Global Healthcare Private Equity Trends by Region, Volume, 2006-2015 71
Figure 19: Global Healthcare Private Equity Trends by Region, Value ($bn), 2006-2015 72
Figure 20: Global Healthcare Private Equity Deal Value by Therapy Area ($m), 2014 and 2015 72
Figure 21: US Capital Commitments to Private Equity Firms ($bn), 2006-2015 73
Figure 22: US Venture Capital Fundraising, Volume and Value, 2006-2015 73
Figure 23: US Venture Capital Investment Trends, Volume and Value, 2006-2015 74
Figure 24: Composition of Venture Capital Investments in the US by Sector, 2015 74
Figure 25: Value of Venture Capital Investment in the US by Company Stage of Development, 2015 75
Figure 26: Volume of Venture Capital Investment in the US by Company Stage of Development, 2015 75
Figure 27: Venture-Backed Initial Public Offerings and Merger and Acquisition Exits, Volume, 2006-2015 76
Figure 28: Venture-Backed Initial Public Offerings and Merger and Acquisition Exits, Value ($bn), 2006-2015 76
Figure 29: US Venture-Backed Acquisitions, Total Transaction Value ($bn), 2006-2015 77
Figure 30: Equity Offerings in the Healthcare Sector, Value and Volume, 2006-2015 77
Figure 31: US Venture-Backed IPOs, Healthcare and Total, 2006-2015 78"

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