2020 brought a huge boom in healthcare investment. How big? SVB analysts have the record-breaking answer
As the past year developed, it became clearer that 2020 was proving to be massive for the biopharma industry. But just how big did the sector boom?
The financial gurus over at Silicon Valley Bank attempted to answer that question Thursday, as their top healthcare advisors released their 2020 Annual Report. All in all, SVB has the total amount raised pegged at a staggering $16.8 billion, far eclipsing the fundraising record set in 2019 and marking the biggest year-over-year growth in almost a decade.
It’s also the fourth straight record year in healthcare VC fundraising, SVB managing director Jonathan Norris wrote in the report.
So what caused the boom? There were multiple factors that contributed, but it wasn’t that wells of cash suddenly sprung up everywhere. In fact, the number of funds dedicated solely to life sciences remained exactly the same last year as it did in 2019.
Rather, the median deal size in 2020 — $415 million — was nearly double that of the median $217 million a year earlier. Add to that a bustling IPO market, with 2020’s record class of 84 exits ending up about twice as valuable as 2019’s, as well as strong M&A action and the industry had itself quite the lucrative year.
Though Norris did not include SPACs in his fundraising figures, he noted that there was a large upswing in such mergers, with VCs and hedge funds putting together about $2 billion in deals.
The biggest growth occurred during the third quarter of 2020, with a whopping 482 deals taking place across all healthcare sectors. That’s the most deals by far in any quarter in the last three years, with only 2020’s fourth quarter clocking in above 400 deals during that timespan.
There were also significant increases not just in Series A rounds, but follow-on rounds as well by companies likely to file for an IPO. Oncology led the way in both areas: the field pulled in $1.3 billion in Series A funding, up from $959 million in 2019, and $7.6 billion in later rounds and healthcare deals, up from $6 billion the prior year.
Norris additionally discussed SVB’s global healthcare index to track the performance of post-IPO companies compared to the broader marketplace. Created in 2018, the index recorded an overall growth of 71% among these companies, vastly outperforming the Nasdaq healthcare index (+31%) and S&P 500 (+15%).
These now-public companies also outperformed the big tech quintet of Facebook, Apple, Microsoft, Google and Amazon, which combined for about 51% growth last year. Among the biggest winners this year were, unsurprisingly, firms working on Covid-19 vaccines: Moderna, CanSino and BioNTech saw a collective 508% increase.
Looking ahead to 2021, the folks at SVB don’t think the industry can quite keep up with the record-breaking pace from 2020. But they still project a solid year likely to be in line with 2019’s $10.7 billion fundraising total, with strong investment projected to continue both in Series A and succeeding rounds as well as a potential 50 to 60 IPOs.