Activity within life sciences subsectors evolved as investors adjusted to the ebb and flow of the economic and business landscape during the pandemic. 

“Biopharma notably had a banner year, and we’ve seen some interesting moves in tools and diagnostics, pharma services and healthcare IT funding, not just among our clients, but in the industry overall,” Meath says.

Take a deeper dive into these subsectors along with the DealForma data below. 

Biotech and Biopharma

Biopharma continues to dominate the industry landscape in terms of dollars invested and number of funding rounds. Investors are indicating record-high levels of innovation at a faster pace than before the pandemic. 

• Increasing activity in Series A and early rounds, as well as mezzanine financing, as companies and investors map to strong public market sentiment.
• Crossovers are increasingly contributing to earlier rounds, expanding their Series A participation to all-time highs.
• Oncology and platform companies continue to be hot, while central nervous system drugs have grown in importance.
• One surprise has been the decline in funding for orphan or rare diseases, perhaps signaling that investors diverted activity elsewhere during the pandemic. 

Tools and Diagnostics

The diagnostic space continues to take in new capital from tech investors who have only recently emerged on the life sciences scene. Meath says this is due, in part, to a growing crossover subsector that uses data, AI and machine learning in combination with diagnostic tools to better drive value delivery and clinical outcomes.

• Series A funding was a bit flat in the second half of 2020, but record levels of later-stage and mezzanine financing is still flowing in—especially for COVID-19 innovations.
• There’s more investor receptivity to growth stories, once again riding COVID-19 tailwinds as well as data, AI and machine learning trends.
• The market has valued the vaccine side of the COVID-19 wave but is still determining impacts on the tools and diagnostics segment. Meath says many larger partners may be looking for increased capacity building, and novel approaches continue to attract investor interest.

Pharma Services

COVID-19 has made the public, the market and investors rethink the pharma supply chain and its capacity to solve fast-moving problems. 

• Early disruption in supply chains for pharma led many to focus on building in more resiliency and redundancy, as well as evaluating multi-channel approaches to delivery. 
• The accelerating advent of innovations such as cell and gene therapies and other new modalities has pushed companies to find novel approaches to development and manufacturing. These approaches can also narrow supply chains and require new solutions for delivery. 
• Meath says companies are taking advantage of these supply chain and therapy trends, which may lead to a market that is more fragmented but also more resilient and receptive to innovation. 
• More consolidation may also occur, while still leaving the door open to newcomers.  

Healthcare IT

The healthcare IT space expanded rapidly last year as telehealth visits and other forms of virtual healthcare skyrocketed, setting the stage for continued growth and innovation in 2021. 

• Funding dollars hit an all-time high, boosted by the virtual care surge.
• Series A funding was flat to slightly down, but overall dollars were up, signaling a shift in focus to market-ready solutions and later-stage, mezzanine-focused COVID-19 ventures.
• Both fully virtual and hybrid platforms dominate the space, while provider and clinical trial solutions continue to perform well. 

Medical Devices

If there was one soft spot in life sciences investment in the latter half of 2020, it was in the medical devices space. Demand for medical devices—and funding—likely dipped, Meath says, due to patients delaying elective procedures to reduce COVID-19 exposure, coupled with the pandemic’s strain on healthcare systems.

• Based on a two-year trend, Series A funding declined overall, although investments in certain areas, including cardiology and neurology, remained strong and continue to increase.
• Investors tended to focus on later-stage and commercialized investments.
• Despite these challenges, Meath notes that deals with more innovative and novel medical device companies—those using AI or machine learning, for example—could see a rebound in 2021 given the overall dollars going into the space. 

Meath says the major question for this space is: “How long will COVID-specific moves last and how will their value be created and retained long term?”

No matter what comes next, we’re here to keep you informed. Our team of Life Sciences bankers and specialists focus on solutions for pioneering life sciences companies at all stages—from startups to established companies, pre-clinical through commercialization. 

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