There are certainly all these elements to Preventice’s acquisition by Boston Scientific for up to $1.025bn. But the conditions for these deals are set by the animal spirits in the wider public markets.
And here the music is certainly playing as Silicon Valley Bank notes in annual healthcare report (chart below).
The boom in diagnostics (dx/tools as a subsector) was set by last year’s flotation of digital disease management company Livongo in an $355m initial public offering. The following year saw telehealth group Teladoc acquire Livongo for $18.5bn.
And behind both Preventice and Livongo was US-listed drugs group Merck’s corporate venturing unit, Global Health Innovation (GHI).
William Taranto, head of Merck GHI, noted by email: “This is our second unicorn for GHI in the last 18 months (Livongo and Preventice). We were majority owner of Preventice.”
Jon Otterstatter, co-founder and CEO of Preventice Technologies, and Taranto in a session moderated by Heidi Mason of Bell Mason Group spoke at length at the GCV Symposium a few years ago. Mason when asked by email remembered it well. “I recall being on your London Symposium stage with Bill and Jon some years ago, talking about strategic vision and gainful implementation before [the] ‘CVC ecosystem investor model’ was common wisdom.
“Bill and Jon discussing how their strategic innovation partnership was forged with vision of new digital health market [and] new sector…and even then, they were anticipating this type of M&A or IPO as a future rung in their strategic platform ‘ascension’ story.”
Merck operates a $500m GHI Fund and added a $700m private equity fund to be able to buy-and-build and take larger stakes across the ecosystem. For his GCV Powerlist 2016 award, Taranto said: “We are focused on using our growth equity firm to create ecosystems around oncology and infectious disease.
“We are very proud to have acquired and merged Preventice Solutions and eCardio, then bringing in Boston Scientific as our partner.”
After a merger with eCardio and a spin-out after acquisition, Joe Volpe, general manager of Merck’s $700m fund and a GCV Rising Star 2016, said the Preventice asset deal paid Merck back more than 80% of what was invested and left it still owning about 48% of the asset with significant value. This was increased to majority control in last year’s $137m round, while Boston Scientific owned about 22% stake in Preventice pre-takeover.
As SVB notes in its annual healthcare report: “Historically, we have seen few, if any, large private dx/tools acquisitions….
“However, in 2020, we saw three multi-billion dollar private M&A (ArcherDX [bought for $1.4bn by Invitae], Grail [acquired by Illumina for $8bn] and Thrive Earlier Detection taken over by Exact Sciences for $2.2bn]), two of which were pre-commercial….
“All three deals exited in less than five years from the close of their series A….
“We anticipate [this year] an even split between $1bn-plus IPOs and M&A, as big-deal IPO/M&A optionality has arrived in the sector.”
Just in the past week has been a further 11 venture-backed healthcare companies filing details on their IPOs and another four trade sales, with the majority backed by corporate venturers.
The stem cell therapy developer Sana Bio filed to go public to raise $150m seven months after closing $700m in funding from investors including Alphabet unit GV.
WuXi AppTec and New World Development-backed Adagene plans a $125m IPO.
Cambrian Biopharma is the largest investor in cancer immunotherapy developer Sensei Biotherapeutics, which has filed to raise up to $100m.
The immunotherapy developer Immunocore plans to go public in the US with $100m IPO.
PureTech Health, Johnson & Johnson and Novartis are in line for exits after the cancer drug developer Vor Biopharma filed for its initial public offering.
Lilly Asia Ventures is the largest shareholder of liver disease therapy developer Terns, which has filed for $100m IPO.
UnitedHealth Group and Merck are both in line for exits as Decipher Biosciences files for a $100m initial public offering.
Amgen and Pfizer-backed oncology therapy developer NexImmune has filed to raise up to $86.3m in an IPO on the Nasdaq Global Market.
Novo and Pfizer are among the investors set to exit the cancer therapy developer Bolt Biotherapeutics, which has set a $100m target for its initial public offering.
Non corporate-backed Lucira Health and Landos Biopharma also announced pricing of their IPOs.
On trade sales, Biohaven has purchased the 58% stake cancer immunotherapy developer Kleo Pharmaceuticals it did not already own, while Haemonetics acquired Cardiva Medical in a deal worth up to $510m, Thermo Fisher Scientific bought Mesa Biotech for $550m and Philips acquired Capsule Technologies for $635m.
With the rapid flow of capital back to investors at a faster pace, the appetite for more dealmaking is increasing.
SVB noted healthcare company investment surged more than 50% last year from 2019 to set a new high at $52bn so GCV is delighted to announce Taranto and Rob Coppedge, head of Echo Health Ventures (EHV), will co-chair the new Global Health Council being formed next month. You can catch up with Merck and EHV at our GCV Digital Forum this week, which includes an invite-only healthcare roundtable and public discussion moderated by Neil Foster at Brown Rudnick and including Hitachi’s US chairman.
