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Late-Stage Companies Spur Rally in Medical-Device Venture Capital
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By Brian Gormley, WSJ Pro
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Good day. Venture funding for medical devices is rallying this year as investors bankroll later-stage companies in hopes of generating relatively quick returns.
While startups in medical devices—such as instruments used to treat heart disease—capture less funding than those in the biotechnology and digital-health sectors, they are a significant market for venture capitalists. U.S. and European medical-device startups collected $5.1 billion in 225 venture deals in the first half, putting this year ahead of the 2024 pace, when startups raised $7.4 billion in 407 financings for the full year, according to HSBC Innovation Banking.
Companies with medical devices on or close to the market are closing large financings while earlier-stage businesses struggle. Device-makers closed 40 seed and Series A deals in the first half, according to HSBC.
If that pace continues, startups this year will raise far fewer early-stage financings than in 2024, when they sealed 108 seed and Series deals for the full year, according to the firm.
Many investors are favoring later-stage companies because they need to make returns soon to bolster their prospects for their next fund, said HSBC Innovation Banking Managing Director Jonathan Norris.
Mergers and acquisitions of venture-backed device companies have been sparse lately, with only three in the first half, according to HSBC. But Norris sees reason for optimism about M&A for the rest of this year.
Several companies have devices in clinical trials and may soon have data that entices buyers to act, he said, potentially even before the product has received approval from the Food and Drug Administration.
“I’m holding out hope that despite a lackluster first half, the second half is going to be better,” Norris said.
And now on to the news...
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Life-sciences executives say new legislation will spur innovation in treatments for rare disorders. PHOTO: VLADIMIR SMIRNOV/ZUMA PRESS
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Orphan drugs. President Trump’s “one big beautiful bill” will slash medical spending, but one group should benefit: drugmakers that develop treatments for rare diseases.
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Folded into the blockbuster law that passed this month was the Orphan Cures Act, a measure that spares drugs approved for more than one orphan disease from Medicare price negotiation.
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The Inflation Reduction Act of 2022 gave Medicare the power to negotiate drug prices, but it exempted treatments for orphan diseases, or disorders affecting fewer than 200,000 Americans. However, the exemption applied only to drugs that target one orphan disease.
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Now, under the new legislation, drugmakers will be able to market a medicine for multiple orphan diseases without it being subject to price negotiations. Drugs effective for one disease often work for others, proponents say, and the law removes a deterrence to searching for new orphan indications for existing medicines.
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$1.3 Billion
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The approximate amount glucose-monitor company LifeScan would reduce from its debt through its bankruptcy and restructuring plan.
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Platinum Equity’s LifeScan Files for Bankruptcy
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Glucose-monitor maker LifeScan filed for bankruptcy in Houston with an agreement to reduce most of its $1.7 billion in debt while handing control to its lenders. The Malvern, Pa.-based health technology company said the restructuring plan would cut more than 75%, or roughly $1.3 billion, of its debt, according to a company press release. Under the current agreement, the Platinum Equity-owned company’s second-lien lenders will own roughly 75% of the reorganized business, and the first-lien creditors will own a minority stake, according to a person with knowledge of the matter.
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RFK Jr.’s Top Ranks Rocked by Personality Clashes
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Health and Human Services Secretary Robert F. Kennedy Jr.'s top aides have become embroiled in personality clashes, culminating this week in a White House-backed shake-up to calm infighting at the department. Kennedy’s chief of staff, Heather Flick Melanson, and his deputy chief of staff for policy, Hannah Anderson, are no longer working for the secretary, according to people familiar with the matter. The departures came Tuesday after months of personality clashes between the two women and Kennedy’s longtime aide Stefanie Spear, who was press secretary for his presidential campaign and now serves as deputy chief of staff and a senior counselor.
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Funds
Houston-based Modi Ventures, which invests at the intersection of AI, biology and medical technology, closed its second fund with $88 million in commitments.
People
Red Cell Partners, an incubation firm focusing on sectors including healthcare, cyber and national security, appointed Michael Kilberry as chief product and technology officer.
Automated IVF technology provider Overture Life appointed Matthew Combs as chief commercial officer. He most recently served as chief growth officer at Amalgam.
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OpenEvidence, a medical search and AI application, scored $210 million in Series B funding, valuing the company at $3.5 billion. GV and Kleiner Perkins co-led the round, which included participation from Sequoia Capital and others.
Centivax, a South San Francisco, Calif.-based vaccine startup working to commercialize the world’s first universal flu vaccine, closed a $45 million Series A round led by Steve Jurvetson of Future Ventures. Additional investors in the funding included NFX, BOLD Capital Partners and Amplify Partners.
Fellow Health, a San Leandro, Calif.-based startup offering a mail-in male fertility test, landed $24 million in Series B funding led by 5AM Ventures.
BiomEdit, a Greenfield, Ind.-based animal health biotechnology startup, secured about $18.4 million in Series B financing led by Anterra Capital.
Asepha, a Toronto-based startup leveraging AI agents for pharmacy automation, picked up $4 in million seed funding from investors including Core Innovation Capital.
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Coldwater Creek, a tributary of the Missouri River in St. Louis County. PHOTO: JEFF ROBERSON/ASSOCIATED PRESS
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DeepMind’s AlphaGenome aims to decode DNA’s ‘dark matter’ (Scientific American)
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The first babies have been born following ‘simplified’ IVF in a mobile lab (MIT Technology Review)
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Upended by meth, some communities are paying users to quit (New York Times)
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Well-placed biotech investor says U.S. policies are straining life-sciences startups (STAT)
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