Investments into biotechnology and healthcare technology companies drove private equity and venture capital funding in healthcare past the $60 billion mark in the first three quarters of 2020, according to a new report.
Healthcare companies raised a collective $22.44 billion across 732 private equity and venture capital deals in 2020's most recent quarter, representing the third-highest funding total and highest deal total in a single quarter since 2016, according to the report from S&P Global Market Intelligence, indicating "strong investor interest in the industry amid the uncertain COVID-19 situation."
Third-quarter investment into healthcare companies was up 17.36% year-over-year from $19.12 billion raised during the same period last year, according to S&P Global Market Intelligence's data. The data includes mergers and acquisitions deals where a buyer was a private equity firm, venture capital firm or hedge fund manager.
Taken as a whole, investors in the first three quarters of 2020 have poured $60.72 billion into healthcare companies.
Healthcare so far this year represents the third-highest industry in terms of attracting investment, following information technology ($97.5 billion) and industrials ($65.05 billion).
Biotechnology ranks as the subsector leading healthcare investment so far in 2020, accounting for $20.19 billion in funding raised in 577 deals—just about one-third of total funding raised across healthcare companies to date this year. Biotechnology was followed by healthcare technology ($12.51 billion) and pharmaceuticals ($7.43 billion).
It's likely investment in biotechnology, healthcare technology and healthcare more broadly will continue to remain high in the fourth quarter, according to a KPMG Private Enterprise report cited by S&P Global Market Intelligence, as the COVID-19 pandemic continues to encourage investors to focus on shifting communication to digital technologies and COVID-19 distribution.
That said, 2020's fourth quarter will likely experience a quarter-over-quarter decline in investments into healthcare companies, according to a report published last month by CB Insights, a firm that analyzes data on venture capital and private startups. The firm projects healthcare will hit $19.6 billion in funding for the fourth quarter, which would be up 24.7% year-over-year but down 12.4% quarter-over-quarter.
In the third quarter, funding for healthcare startups focused on artificial intelligence, medical devices, drug research and development technology, and telehealth reached record highs, according to a separate CB Insights report. Funding for drug R&D startups in particular shot up to nearly $1.5 billion amid COVID-19, up 56.8% year-over-year.
Marissa Schlueter, healthcare senior intelligence analyst at CB Insights, said that despite projections that healthcare funding may decline quarter-over-quarter, it's still a massive year for healthcare investment overall. Telehealth, which reached a record $2.8 billion in funding in the third quarter, will likely continue capturing attention from investors, if patients continue using it.
That's in part due to ongoing development of tools that support remote and virtual care, as well as an expanding view of what telehealth encompasses—including not just video platforms but also connected medical devices, continuous remote patient monitoring and digital chronic care management.
In healthcare, "even with a drop from 3Q to 4Q, the full year 2020 is still going to be significantly higher than 2019," Schlueter said. "Early signs suggest that the fourth quarter is still going to be pretty strong."
