Pitchbook: Ageing Population Attracting Cash Into Healthcare

Healthcare is seen as a compelling investment opportunity for investors across the globe.
Pitchbook report on investment in the healthcare sector shows that VCs are drawn to life sciences and pharma because they are resistant to economic swings
Pitchbook: Fund managers in North America and Europe hold ...
  • $162bn for healthcare transactions
  • $39.7bn for life sciences venture capital transactions
  • $41.9bn for other healthcare venture capital transactions

The healthcare sector remains attractive to investors because of its reputation for being resistant to economic peaks and troughs, an in-depth study shows.

The report, from Pitchbook – a  research and technology funding database – shows that 87% of limited partners view healthcare and pharmaceuticals as appealing sectors for private equity investment. 

It adds that healthcare as a sector is seen as unique, because of its robust regulatory systems and revenue models, as well as the scientific rigour underpinning technology projects, particularly in life sciences. 

Another factor making healthcare attractive to investors is said to be long-term societal trends, such as ageing populations and growing demand for enhanced patient care experiences, trends that are attracting a welter of tech-based innovation.

The PitchBook report shows that healthcare-focused private equity fundraising reached a record high in 2023, of US$18.3bn. It estimates that fund managers in North America and Europe currently hold $162bn for healthcare transactions; $39.7bn for life sciences venture capital transactions and $41.9bn for other healthcare venture capital transactions. For context, US healthcare expenditures were $4.5 trillion in 2022. 

The report also reveals several companies exceeded fundraising goals in 2023, including EW Healthcare Partners, Martis Capital, and Varsity Healthcare Partners. 

It shows, too, that although fundraising in healthcare and life sciences was strong in 2023, it did not reach the levels seen in 2021, in the midst of the Covid-19 pandemic.

In life sciences, fund managers secured US$15.2bn in fund closures in 2023, which was similar to 2020 and 2022, and nearly twice the average from 2017 to 2019. 

Why is healthcare so attractive to investors?

The healthcare sector – encompassing pharmaceuticals, biotechnology, medical devices and healthcare services – is seen as a compelling investment opportunity for investors across the globe. 

This stems from several factors driving long-term growth prospects, Demographic shifts, such as an ageing population and rising life expectancy, are fuelling demand for healthcare products and services. 

Continuous advancements in MediTech – coupled with robust research and development initiatives – are also fuelling innovation and the introduction of novel therapies, treatments, and healthcare solutions. Plus the sector's inelastic demand provides resilience during economic downturns.

In North America, the average annual investment in the healthcare industry is estimated to be around $100bn. Meanwhile, in Europe – a hub for pharmaceutical and medical device companies – the average yearly investment is approximately $60bn. 

Southeast Asia, an emerging market with a rapidly growing middle class and increasing healthcare expenditure, has seen an average annual investment of $10bn in the healthcare sector.

Certain areas of healthcare have seen significant investor interest. 

One of these is biotechnology, which is being driven by groundbreaking discoveries and the development of innovative therapies for previously untreatable conditions. 

The medical device industry is also buoyant, fuelled by tech advancements and the demand for minimally invasive procedures. Digital health and telemedicine are also performing strongly, particularly in the wake of the COVID-19 pandemic, attracting substantial investment as healthcare delivery models evolve.

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