About $19.2 billion was generated by both public and private device companies in a total of 394 financings in 2017, according to data compiled by BioWorld MedTech. Public companies brought in about $12.7 billion in 144 transactions while private companies took in about $6.4 billion in 250 financing rounds in 2017.
Device firms were able to raise cash in an environment fraught with headwinds that included potential cuts to National Institutes of Health funding; a slowdown in China's economy and several natural disasters that impacted many companies manufacturing plans.
However, Larry Biegelsen, an analyst with Wells Fargo, noted that while 2017 had some difficulties, companies could have significant tailwinds that might make for an easier 2018.
"We see 2018 as another strong year for med tech as the tailwinds outweigh the headwinds," Biegelsen said. "Specifically, we see a more innovation-friendly FDA, potential tax reform and a weaker dollar all contributing to top- and bottom-line growth in 2018."
Financings for 2017 were spread across several med-tech sectors, some garnering significantly more cash than others. Companies focused on the cardiovascular market brought in about $516 million through 33 separate financing rounds.
Public and private companies that specialize in diabetes technology trailed close behind bringing in about $813 million in 10 separate transactions.
The diabetes market has been quite active this year, with Abbott Laboratories Inc. receiving FDA approval for a Freestyle Libre Flash glucose monitoring system as a replacement for blood glucose monitoring. (See BioWorld MedTech, Oct. 2, 2017.) The draw behind the Abbott Park, Ill.-based company's Freestyle Libre Flash is it eliminates the need for routine finger sticks.
Public and private orthopedics companies raised about $145 million across 13 transactions.
However, liquid biopsy was a segment in the med-tech space that enticed private investors the most, bringing in about $1.5 billion in seven different financing rounds.
One of the largest financing rounds that occurred in the liquid biopsy space came from early cancer screening startup Grail Inc. The Menlo Park, Calif.-based company took in about $1 billion in its series B round. (See BioWorld MedTech, March 2, 2017.)
Grail was spun off from San Diego-based Illumina Inc. almost two years ago. (See BioWorld MedTech, Jan. 12, 2016.) Grail raised $100 million in a series A round from the likes of Bill Gates, Bezos Expeditions and Sutter Hill Ventures.
Grail said it needs an exorbitant amount of financing for its clinical trials.
In December 2016, the company launched the Circulating Cell-free Genome Atlas (CCGA) study, which will enroll at least 7,000 cancer patients and 3,000 healthy individuals. (See BioWorld MedTech, Dec. 6, 2016.) The study will interrogate the biology of both tumor biopsy tissue samples and the circulating, tumor-derived nucleic acids in blood.
Large-scale studies like CCGA will support the development of a pan-cancer screening test for asymptomatic individuals, which could, according to Grail, make a major dent in global cancer mortality.
The company said these studies have to include samples from tens of thousands of people in order for researchers to identify the patterns required to detect many types of cancer.
Guardant Health Inc. is another liquid biopsy specialist that nabbed a massive cash infusion. In May, the company raised about $360 million in a round led by a subsidiary of Japanese investor Softbank Group. (See BioWorld MedTech, May 15, 2017.)
The sum will enable the liquid biopsy startup to progress on a number of fronts: to conduct its own effort to sequence one million cancer patients within five years, to advance its Project Lunar effort to develop both cancer recurrence monitoring as well as early screening for high-risk patients and to enhance marketing of its Guardant360, particularly via a joint venture with Softbank to expand into Asia, the Middle East and Africa.
The Redwood City, Calif.-based company, which was founded in 2013, has raised more than $500 million since its inception.
Freenome Inc. raised about $65 million in a series A round to enable it to further validate its approach in the clinic, as well as to potentially extend its work into identifying patients in a precancerous state who could benefit from early interventions such as lifestyle changes. (See BioWorld MedTech, March 6, 2017.)
The San Francisco-based company's approach is to apply machine learning technology to fragments of DNA and RNA that are in the blood after having been shed by cells in the body as they die, known as the freenome. Essentially, the company aims to monitor signals, including immune system and metabolic changes, coming from the body's reaction to the presence of cancerous cells.
Getting in on the ground floor
Venture capitalist and investors showed excitement about series A rounds in general, drumming up about $679.4 million for these early stage financings in 2017.
Karius Inc. had one of the highest series A rounds, bringing in about $50 million. (See BioWorld MedTech, Aug. 8, 2017.) Existing investors Data Collective (DCVC) and Lightspeed Venture Partners co-led the financing round, with major participation from new investors including Tencent and Khosla Ventures. Innovation Endeavors and Spectrum 28 participated as well.
The Redwood City, Calif.-based company said the financing supported ongoing and new clinical trials, the scale up of laboratory capacity and advance commercialization of the Karius test, which uses a combination of machine learning, proprietary genomics algorithms and next-generation sequencing to enable the broad and rapid detection of more than 1,250 pathogens.
Using a standard blood draw, the Karius test identifies cell-free DNA fragments left by bacteria, viruses, fungi, and other eukaryotic pathogens in a patient's bloodstream, even when living organisms are no longer detectable in the blood.
In November, Salt Lake City-based Collective Medical Inc. brought in about $47.5 million in its series A round. (See BioWorld MedTech, Nov. 15, 2017.) The investment, led by Kleiner Perkins, was used to expand and advance the company's care team collaboration network accelerating efforts to drive better patient outcomes nationwide. Bessemer Venture Partners, Maverick Ventures, Kaiser Permanente Ventures, Providence Ventures, Peterson Ventures and Epic Ventures also participated in the round.
By unifying providers and payers through real-time information alerts, patient context, and collaborative care planning, Collective Medical empowers care teams to identify patients with complex needs and help them get the care they need, when they need it, from those best positioned to deliver it.
About 14 companies in the med-tech space completed their Initial public offerings (IPO) in 2017, raising about $745 million, according to data compiled by BioWorld MedTech. In 2016, 31 companies completed IPOs in the med-tech sector according to a report from Fenwick & West LLP.
Yardley, Pa.-based Optinose Inc. raised the highest amount in its IPO, bringing in about $138 million. Optinose is a specialty pharmaceutical company focused on the development and commercialization of products for patients treated by ear, nose and throat and allergy specialists. The firm has a market capitalization of $604 million.
Optinose develops products based on its "Exhaled Delivery System" (EDS), a breath-actuated nasal spray drug delivery platform. The company has two FDA-approved products. Onzetra Xsail has been out-licensed to Avanir Pharmaceuticals Inc. while full ownership of Xhance has been retained. Xhance is an EDS-delivered fluticasone spray currently approved for nasal polyps associated with chronic rhinosinusitis (CRS).
David Steinberg, an analyst with Jefferies, noted the company will launch this product into the ENT/allergist channel and aims to add general CRS to the label in 2021, potentially increasing its addressable market threefold.
"Xhance Is a complex product protected by long-duration patents: while nine orange book-listed patents protect Xhance into 2030, it also benefits from being a drug-device combination," Steinberg said.
Quanterix Corp. brought in about $74 million for its IPO. The Lexington, Mass.-based company has developed a blood biomarker testing product, Simoa. The company said the technology is more sensitive than traditional testing, as it only requires a single target molecule to generate a signal. The firm has market capitalization of $327 million.
Another well-performing IPO came from Orthopediatrics Corp. The Warsaw, Ind.-based company provides a comprehensive product offering to the pediatric orthopedic market to improve the lives of children with orthopedic conditions.
In its first reported quarter as a public company, Orthopediatrics said it brought in about $12.4 million vs. consensus expectations of $12.1 million. The company has a market capitalization of $164 million.
"Encouragingly Orthopediatrics saw balanced growth both within Trauma & Deformity and Complex Spine as well as with the U.S./OUS mix," said Ryan Zimmerman, an analyst with BTIG. "We believe the balanced growth will be appreciated by investors over successive quarters."