Healthcare deals in Q4 expected to fall from record-setting Q3, market research firm predicts

Healthcare deals in Q4 expected to fall from record-setting Q3, market research firm predicts

Dive Brief:

The number and size of global healthcare deals is expected to decline in the fourth quarter from a record- setting third, given the current pace of deals, according to a new report from CB Insights.
The market research firm estimates there will be almost 1,270 global healthcare deals in the fourth quarter amounting to about $19.6 billion in funding. That’s compared to 1,575 deals in the third quarter, amounting to a whopping $22.3 billion in funding.
The drop carries over into the digital health sector too, an area that’s seen historic investor interest in 2020 amid the coronavirus pandemic — activity that came to a head in the third quarter. CB Insights expects total digital health deals of 372 and funding of $5.5 billion in the fourth quarter, down from 505 and $8.4 billion respectively in the third.

Dive Insight:
Investors have funneled money into the healthcare sector this year, especially to health tech companies looking to digitalize the industry as the coronavirus pandemic pushes patients to look for care in the home. However, the new report from market intelligence firm CB Insights suggests that funding is likely to slow as 2020, a year of historic volatility, draws to a close.
As of Nov. 17 — about halfway through the fourth quarter — there have been 661 deals making up $10.2 billion in funding in the period. That’s significantly behind the pace of the second and third quarters this year.
Early stage deal activity, which includes convertible note, angel, seed and Series A rounds, is also expected to drop off, similarly to the third quarter, which saw late-stage deals continue to make up a larger deal share than in previous periods. Early stage deals made up 46% of total equity deals in the first half of the fourth quarter, compared to 51% in the third quarter.
As of Nov. 17, the fourth quarter has seen 30 healthcare megarounds of $100 million or more. That’s compared to another third quarter record of 48. Most of these massive deals are in the U.S. and China, with 16 and 11 respectively so far in the quarter.
The three biggest deals in the U.S. include a $250 million private equity investment in Pharmapacks, an e-commerce firm focused on health; a $235 million private equity investment in Caris Life Sciences, which focuses on precision medicine; and a $200 million private equity investment in Ambrx, a clinical-stage biopharmaceutical company.
In another notable deal, mobile app-based telemedicine startup 98point6 netted $118 million in a Series E funding round mid-October.
Digital health, and telehealth especially, have seen acute interest from Wall Street during COVID-19, as virtual care utilization skyrocketed. A number of health tech companies, capitalizing on the attention, have gone public this year, including telehealth players Amwell, SOC Telemed and Hims & Hers, along with tech-driven primary care companies One Medical and Oak Street Health.

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