Friday Five: The medtech week in review (8 January 2021)

VC deal-making soared in 2020; Hinge Health, Color ensure another stellar venture investment year; our M&A forecasts for 2021; acquisition trail already busy with Hologic, Stryker et al; Sparrow flies through FDA hoop.

 

2020 venture investing hit record levels

Venture investing activity in 2020 was off to a running start by raising around $1.3 billion in January but it ended the year even stronger with December’s tally being nearly three times as much, at $3.3 billion. So in spite of the pandemic’s deleterious grip of the macroeconomy, this did not stop venture capitalists and strategic investors from betting big bucks on innovative medical devices and, in particular, digital health companies:

The total amount of venture dollars raised in 2020 exceeded $15 billion, based on the 470-plus financing rounds FirstWord MedTech recorded. Details of how this compares against 2019’s performance plus more information on December’s blockbuster VC deal flow, see Spotlight On: 2020’s VC deal flow

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Color, Hinge show 2021 the money

Just a week into 2021 and the venture investment landscape already looks to be shaping up strong, with two nine-figure rounds coming from the digital health space. Hinge Health raised $300 million in series D financing, propelling its valuation to $3 billion. The company offers virtual physical therapy programmes to manage back and joint pain; investors were obviously impressed by the firm’s growth last year, when it saw its “customer base tripled, revenue quadrupled, and customer retention held at 100%.” Color entered the unicorn club when its $167 million series D round gave it a valuation of $1.5 billion. The firm provides the IT infrastructure and software to enable large populations - be they schools, governments, companies or even cities - to receive essential healthcare services directly where they live or work. These include testing and telehealth services for preventive health and infectious disease management.

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Hologic’s double-whammy heads early M&A flurry

On the side of the investment spectrum, the M&A trail is also looking busy, with women’s health specialist Hologic announcing two acquisitions - breast biopsy tools specialist Somatex and breast and metastatic cancers test provider BioTheranostics - in as many days, and orthopaedics player Stryker bolting on smart joint implant maker OrthoSensor to its surgical offering. This week also saw two deals in the billion-dollar range announced and, unsurprisingly, they came from the digital health realm. Health services company Optum is acquiring Change Healthcare’s expertise in bioinformatics and data analytics for around $8 billion, while Centene will be gaining Magellan Health’s behavioural health platform, among the other digital health services it offers, for a purchase consideration of over $2 billion. The smaller players are also consolidating, with one-time retina implant rivals, Pixium Vision and Second Sight, deciding to bring together their respective expertise in artificial vision technologies in a newly merged transatlantic entity [for more details, see Wider View: Pixium merger gives second life to Second Sight].

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What’s in the crystal ball for M&A?

While M&A activity in 2020 was slightly more subdued than the previous year, especially among the top medtech players, FirstWord MedTech predicted - and quite rightly, as evidenced by the busy first week - that things will pick up once as traditional device companies search for more tuck-in deals. We also forecast more consolidation within the digital health space; not just deals like the $18.5 billion Teladoc-Livongo merger in acute and chronic care, but also activity from SMEs looking to build critical mass. To find out what other things we see in our crystal ball for the year ahead, see Spotlight On: Five forecasts for digital health M&A in 2021.

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Spark’s Sparrow flies through FDA hoop

Spark Biomedical has got the thumbs up from the FDA to commercialise its Sparrow system, a noninvasive neurostimulation device for treating opioid withdrawal. The opioid crisis may have had less media attention since COVID-19 arrived but it continues to be a significant public health problem and, according to the American Medical Association, even worsened because of the mental health issues arising from the pandemic. Spark’s Sparrow is a drug-free, needle-free device, worn in the ear all day and it uses transcutaneous auricular neurostimulation (tAN) to treat opioid withdrawal symptoms. It is indicated for use in combination with standard symptomatic medications and other therapies for opioid withdrawal symptoms under clinical supervision. Spark also has in development a version of Sparrow, called the Roo system, that is designed to treat opioid withdrawal symptoms in infants who acquired the addiction through their mothers while in the womb. 

 

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