Michael Esquivel

Subscribe to Michael Esquivel

The annual gathering of life sciences executives and investors in San Francisco that many now call “JPM Week” recently concluded, marking the J.P. Morgan Healthcare Conference’s 38th year.

The Big Story of 2019 & 2020 Outlook: M&A

The one-week confab centered on the Westin St. Francis Hotel in Union Square is thought to set the stage for life sciences investing for the coming 12 months. Last year, that certainly proved to be the case when Bristol-Myers Squibb’s acquisition of Celgene—announced at the beginning of the J.P. Morgan Healthcare Conference—set the stage for a surge of M&A activity that exceeded $340 billion in value by the end of 2019.

It was the biggest year for M&A since analysts at Dealogic began tracking deals in 1995, and prompted biotech journalists to refer to 2019 as the year of the “mega-merger.”

While no transactions reaching the size of the $74 billion Celgene deal were unveiled during this year’s conference, Barron’s reported that some significant deals have been announced including Dermira’s $1.1 billion acquisition by Lilly.

EY expects M&A activity to maintain record, or near record levels in 2020 based on data from their Global Capital Confidence Barometer. They report that 52 percent of life sciences executives said their company plans to actively pursue M&A activity in the coming 12 months, and that 68 percent are expecting the M&A market to be even more lively in 2020.

…
Continue Reading Biotech & Life Sciences Trends to Consider Following JPM 2020: M&A, Venture Capital and More

At Fenwick’s recent Digital Health Investor Summit, Bill Evans—CEO and managing director of Rock Health—noted to attendees that private investment in digital health showed signs of leveling off in the third quarter of 2019. As of November 8, 2019, the year-to-date total through the third quarter is $5.5 billion, putting the sector on track to raise $7.3 billion this year, slightly below 2018’s high watermark of $8.3 billion. He also noted that megadeals, those valued at $100 million or more, continue to drive the topline and are clustered in the later stage.

Half of the 10 largest deals in the third quarter were valued at $100 million or more. The quarter’s largest deal clocked in at an impressive $550 million, and all but two of the deals were classified as late stage, according to our analysis of PitchBook data.

The largest deals also reflect the key digital health trends that Evans outlined at the summit, including the growth of behavioral health, women’s health and direct-to-consumer prescription services.

…
Continue Reading Megadeals Continue to Dominate as Digital Health Investment Levels Off

Fenwick’s eighth annual Digital Health Investor Summit took place against the backdrop of strong and increasingly diverse investment markets, a focus on clinical validation of digital health tools, and a healthcare system that is shifting to prioritize wellness and disease prevention rather than treating diseases only after they have developed.

Speakers included Rock Health’s Bill Evans and Goldman Sachs’s Peter van der Goes, who shared the digital health investment outlook for 2020, and Rock Health’s Megan Zweig, who discussed developments in digital health therapeutics with Antoun Nabhan of Pear Therapeutics and Jenna Carl of Big Health. My colleague Dawn Belt moderated a panel on wellness and remote patient monitoring with TRIPP’s Nanea Reeves and Forward’s Adrian Aoun. To finish the day, Fenwick’s Ian Goldstein chatted with Bill Taranto about startup enterprise partnerships in the digital health space.

…
Continue Reading Key Takeaways from Fenwick’s 2019 Digital Health Investor Summit

Industry leaders anticipate that the use of artificial intelligence in medical imaging will have a substantial clinical impact, ushering in an opportunity to significantly improve decision support in medical image interpretation. In this post, we cover a variety of promising medical imaging applications for AI and machine learning—including diagnosing cancer and brain aneurysms—as well as recent regulatory developments.

Metrics Climb

CB Insights reports that healthcare-related AI investment totaled $1.44 billion in the first half of 2019, putting investment in the space on track to surpass the prior year, in which investment reached $2.5 billion. Much of the attention to date has surrounded applications in medical imaging or radiology.

VC-backed deals and financing to healthcare AI startups, Q1'18 - Q2'19 ($M)

The National Center for Biologic Information (NCBI) reports that publications covering AI in radiology have steeply increased in recent years. Between 2016 and 2017, the number of articles published on the topic ranged from 700 to 800. That’s compared to 100 to 150 articles published between 2007 and 2008. In addition, more than half of recent articles focused on applications related to magnetic resonance imaging (MRI) or computed tomography (CT). And January saw the launch of a peer-reviewed journal devoted to AI in medical imaging: Radiology: Artificial Intelligence. …
Continue Reading AI in Medical Imaging: Exploring the Frontier of Healthcare Applications

Double-Helix-Blue-FB-1

Rock Health reported that $4.2 billion was invested in digital health companies during the first half of 2019. This places the sector on pace to exceed 2018’s record total annual investment of $8.2 billion.

Strong and Steady with No Signs of Froth

This steady growth should put to rest, at least for the time being, concerns that emerged at the end of last year about a digital health investment bubble. Rock Health provides a detailed “bubble analysis” in its midyear report, but in short the venture fund concludes that the space is not experiencing a bubble thanks to sound business fundamentals, a strong base of repeat investors and the lack of fraud or misuse of funds.

Rock Health also notes that the $4.2 billion in investment was spread over 180 deals. About a third of the money invested went toward megadeals—deals of $100 million or more.

…
Continue Reading Q2 2019: Big Deals in China, Drones and the Return of the Digital Health IPO

Insights from Mary Meeker’s 2019 Internet Trends Report

In the latest edition of the Internet Trends report, Mary Meeker highlights the growing digitization of the healthcare sector, framing that growth squarely in the context of a U.S. healthcare system that—in some cases—has room for further innovation to better meet consumers’ demands or expectations.

Meeker, founder of Bond Capital (and former Kleiner Perkins Caufield & Byers general partner), launches the report’s healthcare section with an overview of a system that has the highest expenditures on healthcare as a percentage of GDP among other nations in the Organisation for Economic Co-operation and Development. Adding in the high number of uninsured individuals, high administrative costs and outcomes that are worse than other developed countries, Meeker makes the case that the digitization of U.S. healthcare is driven by consumer demand for better alternatives.

LSLI Photo 1

…
Continue Reading US Health Consumers Demand More: Can Tech Save Us?

IPO-Survey-Blue-Graph-FB

In our 2018 year-end review of life sciences and tech IPOs (co-authored by my colleagues James Evans and Rob Freedman), we noted that life sciences offerings totaled 67 raising an average of $133 million while there were 45 technology deals raising an average of more than $380 million, not including Spotify, whose unique direct listing process did not raise capital. We were curious to see if those trends would continue in 2019, so we took a look at the numbers year to date.

2019 Deal Size

Through the end of May 2019, there were 27 life sciences offerings that raised $2.3 billion. On average, life sciences IPOs grossed $86 million. The largest deal so far was Gossamer Bio’s initial public offering that garnered $276 million. The smallest offering was $5 million raised by Guardion Health Services.

On the technology side, there have been 11 IPOs through May raising an impressive $14 billion. However, that total includes the outsized offerings from Uber and Lyft which took in $8.1 billion and $2.34 billion respectively, lifting the average offering to $1.3 billion. Omitting the two rideshare companies, the value of the average tech offering drops to $416.7 million. After Uber and Lyft, the next largest tech offering was Pinterest at $1.4 billion.

…
Continue Reading Life Sciences IPOs Haven’t Slowed in 2019

Life-Sciences-Green-Sea-Shell-FB-1

The business of animal health has traditionally been dominated by the animal health divisions of big pharma companies. But with Pfizer’s 2013 spin-off of its animal health business, now known as Zoetis, the sector has been undergoing fundamental changes that create new opportunities for investors and innovators.

The success of the Zoetis $2.2 billion IPO, at the time the largest since Facebook, helped inspire the spin-off of Eli Lilly’s animal health business, Elanco, last September, which surged 41 percent on its debut. And, late last year, Bayer announced its intention to leave the animal health business.

In addition to the spin-offs, or in part because of them, there has been substantial consolidation in the animal health space. In 2014, the company that became Elanco acquired Novartis Animal Health. Two years ago, Boehringer Ingelheim acquired Merial, Sanofi’s animal health business, making it, at the time, the second-largest animal health company in the world.

…
Continue Reading Divestitures and Consolidation in Animal Health Market Present Opportunities to Investors, Innovators

Life-Sciences-Digital-Health-Graphic-Doctors-Patients-FB-1

In its Q1 2019 digital health funding report Rock Health noted that investment in digital health companies leveled off in the first quarter after a record-setting 2018. At $986 million, investment in the first three months of the year was down 21 percent from the fourth quarter of 2018, when it hit $1.2 billion

But the leveling off in funding is more likely linked to an overall decrease in venture investment than to any weakness in the fundamentals of the digital health sector.

The PwC/CB Insights MoneyTree Report Q1 2019 states that global venture funding dropped 22 percent in the first quarter over the last quarter of 2018—from $67 billion in Q4 to $52.2 billion in Q1. U.S. venture investment overall dropped even more in Q1, from $38.7 billion to $24.6, or 36 percent. As a result, digital health venture investment is either even with or outperforming the market as a whole.

…
Continue Reading Digital Health Investment Levels Off and Unicorns Emerge

Life-Sciences-Blue-Molecular-Structure-FB-1

With 58 U.S. biopharma IPOs in 2018, the biotech industry entered the new year with confidence. By all appearances, the longest and largest biotech IPO window in history was not going to close anytime soon. But it was biotech dealmaking that took center stage at the annual J.P. Morgan Healthcare Conference at the beginning of 2019.

On the opening day of the annual confab in San Francisco, Bristol-Myers Squibb and Eli Lilly and Company both announced blockbuster deals — strengthening the case that M&A would likely be the exit of choice. Many IPO candidates may be reluctant to pursue a public offering, given lingering political and market uncertainty in the first part of the year.

After announcing Lilly’s deal to acquire Loxo Oncology, David Ricks, the company’s chairman and CEO, assured analysts that he expects there will be an increase in M&A activity in the year to come. Lilly’s CFO and SVP Joshua Smiley, added that the company could continue doing deals throughout the year. (Fenwick represented Loxo Oncology in the $8 billion deal)

…
Continue Reading Which Way to the Exits for Biotech?