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SVB Crisis Puts Pressure on Healthcare Venture Financing Market
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By Brian Gormley, WSJ Pro
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Good day. Silicon Valley Bank’s crisis puts pressure on a venture financing market that had already compressed for healthcare startups.
SVB emerged as a go-to financial partner for startups and venture capitalists because of its willingness to tailor loans and lines of credit to their needs, entrepreneurs and investors said.
Now startups could face a tougher road when seeking venture debt, said Heath Naquin, who helps digital-health startups navigate the venture landscape as vice president of government and capital engagement for University City Science Center, a Philadelphia-based nonprofit.
"If those products and services they offered go away, it will slow down both the pace of the growth of those companies as well as the pace of investment," he added.
Venture investment into healthcare-IT and digital-health startups has fallen recently as these companies have faced headwinds when selling to hospitals, health systems and employers, according to Rebecca Springer, senior analyst and healthcare lead for market tracker PitchBook Data Inc. That is likely to make general partners of venture firms more cautious.
“SVB’s collapse will make GPs even more risk-averse, leading to limited funding options for startups that do not have a clear path to profitability in this challenging climate,” Dr. Springer said. “We expect deal figures to remain low and to see further valuation declines and consolidation in many corners of the healthtech ecosystem.”
During the financing boom of 2020 and 2021, biotechnology startups raced to go public. Now initial public offerings have grown scarce, and SVB’s troubles threaten to make going public even more difficult.
“This event extended out the concept that it may be a little while longer before that IPO market comes back robustly,” said Chris Garabedian, founder and CEO of life sciences accelerator Xontogeny.
And now on to the news...
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About 12% of Silicon Valley Bank’s client deposits of $173 billion came from the life sciences and healthcare sector. PHOTO: BRIAN L. FRANK FOR THE WALL STREET JOURNAL
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Biotechnology. The sudden collapse of Silicon Valley Bank was supposed to have been fixed by Sunday afternoon when federal regulators said they would make depositors whole starting Monday. But early this week, some companies were still left hurrying to make sure they could make this week’s payroll, The Wall Street Journal reports.
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In biotech—a sector where many startups relied on SVB—some were still finalizing the opening of new checking accounts to pay their employees from; and many of those who tried to move their funds out of their SVB accounts were unable to do so because the bank’s website kept crashing.
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Many biotechs used their SVB accounts to pay their bills and to draw their payroll funds. Making payroll was foremost among many executives’ minds—payments to vendors could be delayed, but state and federal laws require companies to make timely wage payments to employees.
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About 12% of SVB’s client deposits of $173 billion came from the life sciences and healthcare sector, SVB said in its fourth-quarter earnings report.
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With SVB Stabilized, Some Restore Banking Relationship
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Venture investors and startups are starting to return deposits to the revamped Silicon Valley Bank, whether in hopes of helping stabilize the institution so it survives, or out of necessity, WSJ Pro’s Yuliya Chernova and Marc Vartabedian report. The reversal comes as the chief executive of Silicon Valley Bridge Bank—created by federal regulators to manage Silicon Valley Bank deposits and assets—has gone on a charm offensive to persuade clients to stay with the bank.
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$43 Billion
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The amount drugmaker Pfizer Inc. agreed to pay to acquire biotechnology company Seagen Inc.
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First Drugs Facing Medicare Price Penalty Are Named
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U.S. health officials released the first list of drugs paid for by the government’s Medicare insurance program whose prices went up more than the rate of inflation and will face a penalty under a new federal law, WSJ reports. The Centers for Medicare and Medicaid Services on Wednesday named 27 drugs that had the large price increases, including rheumatoid-arthritis treatment Humira from AbbVie Inc. and Yescarta lymphoma therapy from Gilead Sciences Inc., and will face the price-increase penalty in the form of a rebate.
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People
Bryn Pharma LLC, an anaphylaxis treatment startup, named Sandy Loreaux to the post of chief executive, replacing David Dworaczyk. Ms. Loreaux most recently led Covis Pharma’s U.S. operations.
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Switch Therapeutics, a South San Francisco, Calif.-based startup using RNA science to treat diseases, secured $52 million in Series A financing co-led by Insight Partners and UCB Ventures.
Fount, a Los Angeles-based startup offering customized health and performance optimization programs, nabbed $12 million in Series A funding led by Amity Ventures.
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As a result of the cuts to list prices of insulin, uninsured people and those with high-deductible health plans could see reduced costs. PHOTO: ALEX FLYNN/BLOOMBERG NEWS
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In Minnesota, researchers explore how to audit health AI models on a patient level (STAT)
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The future of Covid-19 research. (New England Journal of Medicine)
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Bristol-Myers meets some diversity goals early, while missing others (Endpoints News)
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Opioid settlement hinders access to a wide array of drugs (New York Times)
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