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Total takings from October's venture financing deals may not have been the highest, but the $295m raised by the 20-plus transactions last month is enough for 2017 to trump 2016 in total deal value – with more room to widen the gap.

 

 

VCDealsAnalysis

 

The venture financing climate in 2017 has proven to be more favorable than in 2016, after October's total takings of $295.1m pushed the year's total deal value to date to $5.28bn, surpassing 2016's $5.14bn and even the $5.23bn recorded in 2015. And with two more months to go before the year is out, the gap will be widening even more, although by how much remains to be seen.

 

October saw 29 deals that raised $1m and over, as recorded by Medtech Insight's VC financing deal tracker. This is veering more towards the higher end of deal volume seen across the different months this year so far, which had July recording a whopping 35 deals and June 33. Nonetheless, October's deal volume beat September's 25 transactions and was twice as many as the paltry 14 recorded in October last year.

 

Of the 29 deals, 26 disclosed financial details and more than two-thirds of this group were small investments of $10m or under. (See Figure 1).

 

 

Figure 1

No. of deals by amount raised, Oct 2017 vs Sept 2017 vs Oct 2016

Source: Medtech Insight VC deal tracker

 

This explains some of the disparity between the large deal volume and relatively modest deal value for October. Looking across the last five years, however, it seems that the deal value falls not too far from the levels seen in October last year ($240m) and in October 2013 ($296m). (See Figure 2). The Octobers in 2014 and 2015 had each benefitted from one exceptionally large round, which skewed the total deal value. In 2015, there was a $115m round from consumer-focused genetic testing company 23andMe while 2014 saw a huge $542m round from MagicLeap, the visual display technology specialist started up by the co-founder of Mako Surgical Rony Abovitz.

 

 

Figure 2

5-Year Trend: Monthly VC deal value, Jan-Oct 2013-2017

 

Source: Medtech Insight VC deal tracker

 

Closed-Loop Neuromodulation Seals Biggest Deal

 

 

The paucity of big-buck deals is evident in the month's list of top five fundraisings. (See Table 1). While there was one deal in October that raised over $50m, NeuroPace's $74m Series F, the second largest fundraising was only half that amount, $35m from Shockwave Medical. Thereafter, the top fundraisings were just in the mid-teens range.

 

Table 1: Top 5 VC Fundraisings, October 2017

Source: Medtech Insight VC deal tracker

Ranking

Company

Based in

Product/ Therapy sector

Amount raised

Financing round

Total investment

1

NeuroPace

CA, US

Neuromodulation

$74m

Series F

$294m

2

Shockwave Medical

CA, US

Vascular

$35m

Part of a larger Series C

$136.5m

3

Azura Ophthalmics

Tel Aviv, Israel

Ophthalmology

$16m

Series B

Undisclosed

4

CathWorks

Kfar Saba, Israel

Cardiology/Imaging

$15.8m

Series B

Undisclosed

5

TELA Bio

PA, US

Surgery

$15m

Undisclosed

Undisclosed

 

 

NeuroPace Inc. 's $74m round brought in new investors KCK Group, a family investment fund, and Orbimed, a well-known name in the health care investment community. The Silicon Valley company said it will use the funds to accelerate commercialization of its RNS system, a closed loop, cortical stimulation system approved by the US FDA to treat patients with refractory epilepsy. Unlike LivaNova PLC 's VNS system, another established neuromodulation product in the epilepsy market, NeuroPace's RNS system senses abnormal brain activity and then delivers electric shocks to a target point in the brain cortex before the epileptic seizure occurs. The VNS system, on the other hand, stimulates the vagus nerve system and is programmed to deliver neurostimulation at regular intervals.

 

 

NeuroPace got the FDA premarket approval in November 2013 and has been building a body of evidence to back the technology before ramping up commercialization. To date, around 1,300 patients in the US has received the system and results from multiple controlled, prospective studies have shown that 72% median seizure reduction patients experienced seven years after initiating the therapy, including 30% of patients who experienced seizure reductions of 90% or greater.

 

Heart And Eyes

In terms of product/therapy sectors that grabbed investors' attention in October, IVD again fell from its usual top position, giving way to cardiology/vascular, which took seven deals, and ophthalmology, with four deals. (See Figure 3).

 

 

Figure 3

No. of deals by product/therapy sector, October 2017

 

Source: Medtech Insight VC deal tracker

 

Indeed, looking at across the different product sectors that have successfully completed financing rounds this year so far, cardiology/vascular has just pipped IVD to the post with 45 deals (versus 44 for IVD). Ophthalmology, a market with a significant growth opportunity primarily driven by the ageing population, will likely be in the top five. But, as with the total deal value, there are still two more months to go before the end of the year and whether IVD keeps its long-held leading position as most popular investment space or whether there might be new sectors in the top spots remain to be seen.

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