Sector-Leading Companies to Dominate Healthcare Fundraising in New Year Despite Economic Uncertainties

A significant number of healthcare companies will face challenges raising capital in the coming year, leading to valuation re-sets and possibly consolidations, according to HSBC’s Venture Healthcare Report: Are we out of the woods yet? Despite venture capital available for investment, investment dollars declined 28%. For the best deals, however, capital remained plentiful with large rounds and valuation step-ups.

The report shows that 2024 will bring about further transformation in key sectors (biopharma, healthtech, medical devices and dx/tools) led by a focus on patient needs, new technologies and strong partnerships.

“In 2023, technology and business-model disruption led to an ideal environment for real innovation, and we noted that sector-leading companies had significant funding rounds, which we think will continue in 2024,” said Lead Author and Managing Director Jonathan Norris. “However, with global economic uncertainty expected to continue into 2024, companies that have not hit significant value inflection in development or revenue may have trouble raising new investor-led rounds, leading to low value M&A or private company consolidation, and some may have to shut down.”

Biopharma

The trend of large first-financing deals will continue, likely marked by the re-emergence of “hub and spoke” deals designed to control cost and generate unique M&A opportunities. However, first-financing deals are anticipated to continue trailing overall investment, as investors maintain a restrained deal pace and expand interest towards later-stage deals at reduced valuations. Metabolic and neuro are two indications poised for increased investment. We expect significant drip-feeding, consolidations, and shut-downs for companies that have exhausted insider rounds and have not been able to hit significant value inflection points. Some deals might be too early to capture investor interest, as the focus has shifted significantly to clinical data. M&A interest by big pharma and biotech will remain strong but will continue to be divided between the private market and recent IPOs from the last few years.

Healthtech

In 2024, we anticipate a smaller and more targeted pool of investors, reinforcing their commitment to high-performing growth companies and simultaneously revitalizing their early-stage pipeline through new first-financing investments. We expect the continued maturation of generative AI will spur investor interest. Additionally, we foresee increased investments in value-based care, focusing on both specialty care delivery models and provider operations companies dedicated to enhancing provider infrastructure, process and analysis, thus facilitating efficient care delivery. We predict numerous mature companies considering going public in 2024, yet well-funded ventures might choose to wait, maintaining flexibility until the healthtech IPO window reopens. As we progress into early 2024, numerous insider bridge rounds from 2023 are likely to deplete, leading to consolidation through all-equity transactions. This trend may involve larger, more mature companies acquiring smaller entities to expand their platforms and geographical footprints. ​