There has been much recent hand-wringing about the lack of availability of funding for medtech startup, but analysts at PricewaterhouseCoopers see it a little differently.
Total deal volume and deal value for the pharmaceuticals and lifesciences sector were down overall year-over-year, but medical device funding was one of the few areas of improvement, driven partly by some mega-deals during the 3rd quarter, according to a PwC’s quarterly report.
"Deal activity in the medical device sector was a bright spot within the industry, with deal volume more than doubling relative to the second quarter of 2013 and value increasing several-fold relative to the second quarter of 2013 and the third quarter of 2012," according to the report. "These results are in part due to the completion of the acquisitions of Gambro AB by Baxter for $4 billion and Bausch & Lomb by Valeant for $8.7 billion, inclusive of debt assumed, and other cash adjustments."
Excluding the mega-deals, medtech deal value still jumped 110% year-over-year, the analysts added.
It’s a refreshing bit of optimism amid the storm-cloud surrounding medtech funding availability lately. Annual VC dollars have been less and less available year after year, and the latest projections put 2013’s total value at about $2.1 billion, down some 40% since 2007.
That means medtech startups are searching for unorthodox ways to fill their coffers, including by asking family members and local celebrities to kick in some cash, according to a Wall Street Journal report.
The dearth of funding has sent medtech startups in search of buyers earlier and earlier in their growth, and some of the industry’s biggest players are happy to comply. Boston Scientific (NYSE:BSX) corporate business development vice president Charlie Attlan said that the company is forming relationships with ever-younger companies.
The market is definitely tough, PwC analysts ceded, but opportunities remain.
"While the fundamentals for M&A activity remain strong in the pharmaceutical and life sciences (PLS) industry, the deal market may continue to face challenges due to the scarcity of assets available for sale and heightened focus from buyers seeking to increase the likelihood of deal success," according to the PwC reports. "While these factors are driving valuations and deal timelines, several large transactions announced in the third quarter indicate buyers remain active in the market and are seeking opportunities for growth through acquisition."