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Private Equity Health Care Trends 2024 Forecast

Private equity healthcare fundraising has continued to stretch well into the billions year after year.

Posted: 17th October 2023 by Finance Monthly
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More than $17 billion was collected in 2021, according to data by Private Equity International, followed by $14.5 billion in 2022. This year will likely end at a similar figure as several high-profile healthcare firms have received funding stretching into the tens of millions and beyond. 

These figures show that private equity firms still have a big appetite for the healthcare industry despite wider macroeconomic concerns. As always, there are several key trends driving funding opportunities in the space in 2024. 

A Rebound of Investor Funding From Armistice Capital and Others

Both 2021 and 2022 saw a strong rebound of venture capital funding flowing into health care and, if the countless examples of recent funding announcements are accurate, this rebound is ongoing. 

A lot of this funding has gone to pharmaceutical companies like Eledon Pharmaceuticals, a clinical-stage biotech that’s developing treatments for people undergoing organ transplants. Eldeon raised more than $185 million in April. Investors included BVF Partners LP and Armistice Capital.

The biotechnology and pharmaceutical industries have remained highly attractive to investors due to the cutting-edge research and development of new treatments, vaccines, and therapies currently taking place, many of which were fueled by the pandemic. Advances in gene editing technologies, immunotherapies, and personalized medicine are among the areas of interest to investors. 

Personalized medicine is also a concept that’s gained considerable momentum. Promising to offer tailor-made treatments based on a patient’s genetics, lifestyle, and other individual characteristics, advances in genomics and biomarker research have paved the way for more effective therapies. Investors are drawn to companies at the forefront of developing personalized medicine approaches.

The COVID-19 pandemic also put a spotlight on vaccines, leading to increased investments in vaccine development and manufacturing capabilities. Additionally, there’s been growing interest in vaccine research for other infectious diseases and cancers.

Competition Regulations and Artificial Intelligence

Competition and antitrust enforcement in the United States are expected by many to accelerate and potentially lead to the delay of many high-profile mergers. This is because healthcare is a highly regulated sector. 

As new deals gain traction, it’s entirely plausible that competition bodies may pay closer attention to — and scrutinize — cross-sector convergence with companies outside of the industry. The U.S. Department of Justice is particularly interested in roll-up transactions, which consolidate market share and negotiating power.

Investment continues to flow into health care toward firms specializing in using artificial intelligence and data analytics to improve diagnostics, drug discovery, and personalized medicine. 

AI, machine learning, and data analytics together have a substantial range of applications in the healthcare space, from using them to identify potential drug targets quickly to using AI and big data to help users access accurate information on their symptoms and connect with physicians. There are very few if any, areas in health care where these disruptive technologies will not have an impact. 

Mergers and Acquisitions

Finally — and as always — healthcare companies continued to engage in mergers and acquisitions to expand their product portfolios, pipelines, and geographic reach, a trend driven by the need for diversification and the pursuit of cost synergies.

This is particularly true for emerging markets such as Asia, where pharmaceutical companies have been looking to expand their presence in regions with growing healthcare needs and middle-class populations.

Looking to 2024

The private equity healthcare investment landscape has demonstrated remarkable resilience and sustained growth in recent years despite the pandemic, with billions of dollars pouring into the sector from investors like Armistice Capital. Despite economic uncertainty, 2021 and 2022 witnessed an impressive influx of capital, a trend that’s continued this year and is set to do so again in 2024.

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