Admittedly, the investment picture worldwide hasn't exactly looked all that great recently. Even healthcare has found some limits involved in drawing private equity and venture capital (PEVC) investments, what with the ongoing wrangling over healthcare regulation in the United States and the economy in general looking a bit shaky from the Eurozone clear into the Asia-Pacific region. But a new report from Frost & Sullivan suggests that this trend is likely to turn around in the near-term future thanks to a variety of mitigating factors about to come into play.
The report in question, titled “Private Equity and Venture Capital Investments in Global Healthcare Industry,” shows that a clear decline in PEVC deals took place between 2011 and 2013. While in 2011 there were a reported 2,721 PEVC deals taking place, 2013 saw just 1,453, which is a pretty pronounced drop no matter how you slice it. Further, there was something of a dichotomy at work between private equity deal values—which increased on average by six percent in the 2011-2013 time frame—and venture capital transactions, which dropped fully 37 percent in 2011-2012, then held fast for 2012-2013.
What this suggests, according to Dr. E. Saneesh, financial analyst with Frost & Sullivan, is that mid-sized deals have been heading up since 2011, and high-dollar deals are on the decline. Indeed, as Saneesh pointed out, “Conspicuously, the volume of high-value deals has been falling, with no deals made in this category in 2013.”
The deals in particular, meanwhile, are starting to cluster into two different categories: quick returns with less risk as exemplified by the healthcare providers field, and long-term waits with high risk for potentially huge reward with the more mechanical fields: biotechnology, healthcare equipment and pharmaceuticals. The United States is expected to continue being a major source of PEVC deals, thanks to its recent changes in the healthcare system as expressed by the Affordable Care Act.
Beyond that, however, is an overall fundamental change in key demographics. Increasingly, the populations of several major nations are undergoing a “graying” process, in which the average age is increasing, a development which requires several key modifications, particularly in the healthcare sector. As the average age of a population increases, so too do its demands on healthcare, posing the possibility of big returns in the various sectors that comprise this market.
These changes are likely to make for some impressive opportunities to emerge in the healthcare market, as more and more patients require more and more treatments. While the big deals may be on the way out, at least temporarily, the mid-sized deals have been stepping up, and may well continue as more firms enter the market and go looking for funding to get projects off the ground. Only time will tell how accurate Frost & Sullivan's projections turned out to be, but when it comes to healthcare, it's not a good idea to be against it.
Edited by
Alisen Downey
