Medical devices and diagnostics has often been regarded as the underloved part of the healthcare venture market compared with biotech and pharma, with relatively few deals and limited exit options.
This has changed. Last year’s near-doubling in corporate venturing deal values to more than $5bn has continued this year. Most recently, this week Germany-based Smart4Diagnostics
(S4DX) raised €5m ($6m) in its series A round, including local medical technology manufacturer Sarstedt and the EIC Fund, established in 2020 by the European Commission for direct equity investment in breakthrough technologies.
The startup has developed the “digital human blood sample fingerprint”, a data-picture of all quality aspects for human blood samples from collection to arrival in the lab.
As Hans Maria Heyn, CEO and co-founder of S4DX, said: “As many as three in four medical decisions are based on diagnostic results – often blood samples. Currently, this process is being managed manually which can lead to errors and can cause many issues including slow diagnosis, repeated tests on the patient, and wasted resources.”
The covid-19 disease has focused more attention on diagnosis and whether treatment can be done remotely from hospitals. But the take-off in attention to medical devices and dianostics started beforehand with the flotation then purchase of Merck-backed Livongo, a digital diabetes management platform, which had its initial public offering in 2019 and was acquired by Teladoc for $18.5bn last year.
Livongo had been incubated by venture capital firm 7wireVentures, which has just closed its second venture fund at $150m with limited partners including health plans Florida Blue and Cigna, hospitals and health systems Atlantic Health, Wellforce, Rush University Medical Center, Memorial Hermann Health System and Spectrum Health and large employers Boeing, according to Fierce Biotech.
Similarly, E-merge Capital Partners is raising its debut fund focused on early-stage medical device companies and technologies coming out the Evolve MedTech Venture Studio.
The fund, led by managing partners Brad Klos and John Xitco, is focused primarily on class II medical devices in cardiovascular and orthopedics.
Others are also trying to use strategic ties to add value. Private equity firm Revival Healthcare Capital has closed its second fund at $500m. Revival said it would invest where a corporate strategic partner will have a structural option or right to acquire the company in the future.
Rick Anderson, chairman and managing director at Revival, said: “Consolidation has made it increasingly difficult for medtech leaders to move the needle on growth.
Lauren Forshey, Revival president and another MD, added: “By removing the guess work and gamesmanship that often defines the relationship and instead aligning goals at the outset, target companies benefit from increased focus, speed, and capital efficiency in driving towards milestones they know they will get rewarded for.”
And the goal remains to gain scale. Venture-backed digital health company Ro has agreed to acquire Modern Fertility, a US-based provider of at-home fertility tests for women, for a reported at least $225m according to Fierce Biotech.
Ro started out four years ago selling erectile dysfunction medication and hair loss supplements to men but after raising $876m has been acquiring other startups, including workpath to move into the home-based healthcare market.
The next Global Healthcare Council quarterly report published next month will cover the transformation of hospitals with remote care and dianostics – insights and feedback welcome to jmawson@mawsonia.com.
