Venture financing holds steady for device makers

Medtech VCs have plenty of cash, which is just as well because the IPO window is shut and locked.

So far, so average. In the first half of 2022 private medical device companies raised $4.4bn in venture funding, putting the year’s total on course to fall neatly between what was raised in the past two years.

The picture is very different when it comes to the other main means of raising cash available to private groups: IPOs. Only three medtechs have braved the falling markets, and the biggest such deal, the spinout of Bausch & Lomb, priced at a heavy discount.

While VCs are not throwing money at the medtech sector with the same abandon as they were a year ago, they are still backing device makers in a major way. Partly this is a consequence of the dire state of the IPO market; venture firms must fund their portfolio companies for longer than they might otherwise, as floating them is not a realistic option.

But that perhaps does the sector a disservice. The most common investment rounds so far this year have been A and B rounds, and companies at these early stages are unlikely candidates for flotation. While these rounds were, naturally, smaller than the sums raised in later rounds, their popularity is heartening for those who would like to see backing for early innovation. 

Most common rounds in H1 2022
Round Number Total value ($m) Average value ($m)
Seed capital 4 89 22
A 20 431 22
B 20 956 48
C 18 1,110 62
D 11 1,009 92
E 4 278 70
F 3 115 38
Undisclosed 11 389 35
Source: Evaluate Medtech.

And much of that innovation is in the digital health arena. 2022’s biggest VC tranche so far went to Biofourmis, which straddles the two main subsectors of digital medical technology – telehealth and therapeutic apps, though none of the latter have yet reached market. The $300m round allowed Biofourmis to secure two things: a unicorn valuation, and the former Medtronic chief exec Omar Ishrak as chairman of its board. 

Other digital medtech groups that scored it big included Aidoc, Mindmaze and Viz AI. Mindmaze works on digital therapeutics, including a video game for stroke rehabilitation, but the other two are pursuing a technique of increasing interest to investors: the use of artificial intelligence to evaluate diagnostic images and flag those most in need of further investigation. 

Top 5 VC rounds of H1 2022
Date Company Investment ($m) Round Focus
Apr 26 Biofourmis 300 D Digital heath
Jan 27 Enable Injections 215 C Drug delivery
Jan 12 Noah Medical 150 B Robotic surgery
Mar 30 BillionToOne 125 C In vitro diagnostics
Mar 2 Saluda Medical 124 D Neurostimulation
Source: Evaluate Medtech & Vantage.


Only three device companies went public in the first half of 2022, and all three might well be wishing they had not. 

While Bausch & Lomb was the only one of the select group to have to take a haircut upon its listing, the other two, the Chinese hospital equipment supplier Meihua and spine implant maker Tenon Medical, have lost around half their value in the few months they have been publicly traded. 

H1 2022's medtech IPOs so far
Date Company Focus Amount raised ($m) Premium/
Share price chg to Jun 30 Exchange
Feb 16 Meihua International Medical Technologies General & plastic surgery 36 0% -47% Nasdaq
Apr 27 Tenon Medical Orthopaedics 16 0% -55% Nasdaq
May 6 Bausch & Lomb  Ophthalmology 630 -20% -15% NYSE
Source: Evaluate Medtech.

Remarkably there are still some groups willing to brave these choppy waters. The UK diagnostics group Virax Biolabs brought in $6.8m with its Nasdaq listing on July 20, and another AI image analysis company, Seoul-based Lunit, raised KRW36.4bn ($28m) on the Kosdaq a day later. But Virax’s deal was tiny, and Lunit had to price at a discount. 

The summer months often see a lull on the stock exchanges. Perhaps the atmosphere will improve when autumn arrives; then again, perhaps it will not. Medtechs seeking cash have always tended to rely more in VCs than public investors, and this will not be changing in the foreseeable future.

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