Healthcare

The healthcare industry includes both hands-on businesses such as hospitals and pharmacies, and R&D facilities such as pharmaceutical R&D and biomedical. [1] Internet based medical enterprises that provide internet diagnosis and treatment, as well as medical information technology and the digital medical field are included. Especially the problem of demographic change has gained attention during pandemic in China and is of great interest in the VC field. In the first quarter of 2022, domestic VC-backed healthcare startups raised over RMB 100 billion (around $15.71 billion) over 420 deals, according to incomplete information. [2] Sequoia Capital China, IDG Capital, and Shenzhen Capital Group were among the new investors.

In H1 (first half of the fiscal year, from April to September) 2022, there were 1,598 financing events in the global healthcare industry, with an increase rate of 6 events year-on-year. [3] Total financing of the industry worldwide amounted to $42.7 billion (approximately 277.734 billion RMB), ranking second in history, and dropping approximately 43% from the historical peak in H1 2021, with an overall calming trend. In 2022 H1, the total amount of investment and financing in China’s healthcare industry was nearly $10 billion (about 64.759 billion RMB), dropping over 40% year-on-year. In the meanwhile, the number of domestic financing deals was 623, and 77 more than in 2021 H1. The reason for this phenomenon is the increase in early-stage investment projects happening in China. 180 early-stage investment and financing (including seed, angel and pre-A rounds) events occurred in China’s healthcare sector in 2022 H1, with a cumulative financing of nearly $900 million, both in terms of the number of financing events and the total amount of financing, which is directly close to the indicator for the whole year of 2021 (296 financing events over $1.194 billion, about 7.76 billion RMB).

In H1 2022, the global biopharma sector was the top sub-segment of healthcare industry with 565 deals and $19.63 billion investment amount (approximately 131.605 billion RMB). The digital health and medical devices sectors followed with 484 and 447 deals respectively. [3] The digital healthcare sector is growing steadily. There were 257 financing events in China in 2021 in the digital healthcare sector, with a total funding amount of 55.3 billion yuan (around $8.2 billion), and increase rates of 66% and 93% respectively from the previous years. [4] The average single funding amount of the digital healthcare sector was about 200 million yuan (around $30 million). In 2021, a total of six companies went public with IPOs, and the overall issue market capitalization also reached 50.6 billion RMB (around $7.5 billion), marking the IPOs in the digital healthcare sector moving from large platform incubation companies to independent market-based companies.

The different sub-sectors in the healthcare technology sector are experiencing different development phases. The research and development of AI+ drug are in the validation stage in China. [4] It has rapidly moved from the start-up phase to the growth phase, and will gradually heading toward the middle and late stages in the future. The medical robots sector is entering the key junction of clinical validation, among which surgery and rehabilitation robots are most recognized by the industry, and further commercialization breakthroughs to improve the installation and start-up rates are expected. The extended reality (XR) is emerging and will be gradually applied to multiple scenarios such as disease treatment, clinical assistance, rehabilitation training, medical education and training, and medical care in the future. It will bring unprecedented user experiences and innovative treatment paths into reality. The applications with greater commercialization potential in the healthcare industry will first be transformed in digital drug testing models, precision medicine, health monitoring and management, and other pharmaceutical companies and patients. The digital therapy (DTx) sector is gradually developing and maturing. Digital therapy companies (such as ophthalmology and psychiatry) with “three indications and three highs” (clear indications and principle mechanisms, clear evidence-based medical evidence, clear payers and high base patient numbers, high growth rates and high willingness to pay) will continue to receive the investors’ attentions. The first-mover advantage of the head companies will enable themselves to quickly compete with other companies. [4]

Investment in the medical and healthcare industry needs to be rational. [4] Investors should think rationally about the market demand, commercialization, i.e. business model, project teams, stakeholders’ willingness to pay, and the capability as well as the sustainability of payment. Besides, the regulations regarding the industry, i.e. the understanding of today’s and future related policies, should also be taken into consideration while investing.