After a number of quarters of little to no exit exercise within the medtech sector, a number of VC-backed startups pulled out within the second quarter of this 12 months, in response to a brand new report from PitchBook revealed this week.

“From an M&A perspective, massive medtech strategics have been constructing capital to place to work and have usually shifted from cost-cutting to extra growth-oriented initiatives. Startups are beginning to transfer away from outdated valuations and could also be extra keen to contemplate being acquired as elevating capital stays troublesome,” mentioned Aaron DeGagne, a senior healthcare analyst at PitchBook.

Public markets which can be vibrant — or a minimum of secure — can enhance the potential worth for a profitable IPO, he added.

This implies late-stage medtech startups can now see an affordable path to an IPO, DeGagne defined.

He pointed to Tempus’ June IPO for instance, elevating greater than $400 million for the AI-powered precision drugs firm. Tempus lately traded at a market cap of practically $7 billion, down from its final personal valuation of round $10 billion in October 2022, in response to the PitchBook report.

The report additionally famous that Tempus' IPO is important as a result of the corporate is presently loss-making — and profitability has traditionally been seen as a prerequisite for a public exit. The IPO could possibly be a turning level in buyers' willingness to again loss-making firms if a public itemizing turns into a sensible risk, the report mentioned.

Different public exits within the medtech sector within the second quarter included the acquisitions of Belkin Imaginative and prescient, C2i Genomics, Attune Medical and Blackrock Neurotech.

DeGagne expects that acquisitions of personal firms by massive public firms will proceed to outpace IPO exercise within the medtech sector going ahead.

“Megadeals will possible be on maintain till 2025 as firms await the election and the related antitrust uncertainty. I predict that there will likely be a handful of medtech IPOs in the direction of the tip of the 12 months as some startups try to comply with Tempus’ lead. However most IPO-ready medtech firms will likely be getting ready for 2025 at this level as the very best high quality startups will look ahead to others to check the waters first,” he famous.

DeGagne added that he expects enterprise capital funding for the medtech sector to stay roughly flat via 2024, according to the $6.8 billion raised within the first half of the 12 months.

Photograph: Feodora Chiosea, Getty Pictures