PitchBook News - How resilient is healthcare, really?

Plus: Reviewing US VC's 2022, checking in on public market comparables, how PE adjusted as lenders disappeared & more
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The Weekend Pitch
January 15, 2023
Presented by the U.S. National Science Foundation
(Jenna O'Malley/PitchBook News)
It was perhaps apt that I had a migraine on one of the days I spent covering JP Morgan's healthcare conference this past week in San Francisco. I've suffered from this benign, but often debilitating, condition for a big part of my life. Over the years, I've spent tens of thousands of dollars out of pocket—a fraction of what it cost my health insurance—trying to manage the pain.

At a time when tech executives are bracing for a slowdown in revenue growth, many at the JPM conference sought to remind investors of the economic resilience of their sector by emphasizing that illnesses, either acute or chronic like mine, don't disappear during economic downturns. JP Morgan said in its earnings call on Friday that the bank's economists are expecting a mild recession to hit in the fourth quarter of this year.

However, most digital health and device companies aren't expecting revenue pressure. The same goes for pharmaceuticals with FDA-approved drugs. "Healthcare spend is mostly fixed," as one investor told me this week.

The objective for these companies has always been to capture a bigger slice of the enormous "fixed" pie, which in 2021 accounted for over 18% of US GDP. Nevertheless buzzwords like "margin expansion" and "path to profitability" were the phrases du jour heard from established public and VC-backed companies alike.

This is The Weekend Pitch, and I'm Marina Temkin. You can reach me at marina.temkin@pitchbook.com or on Twitter @MTemkin.
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A message from the U.S. National Science Foundation  
Invention to impact
Oscilla Power, developer of an advanced wave energy converter, generates renewable energy from the world's oceans. The company aims to harness the untapped potential of marine energy.

Oscilla Power (NSF-1127503) is one of hundreds of deep tech startups funded annually by the U.S. National Science Foundation (NSF), a government agency that plays a central role in accelerating discoveries into the marketplace.

Each startup can receive up to $2 million to support translational research & development. By investing roughly $200 million in startups annually, NSF helps teams navigate the earliest stages of technology translation. In the past five years, these companies have gone on to raise billions in follow-on capital, and the portfolio has had 300+ exits.

Learn more about NSF funding at seedfund.nsf.gov
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Trivia

VC exit activity declined significantly in 2022 amid market headwinds and rising inflation, generating only $71.4 billion. This is the first time exits have come up short of $100 billion since:

 A) 2019
 B) 2011
 C) 2016
 D) 2018

Find your answer at the bottom of The Weekend Pitch!
 

The long goodbye for VCs in Q4

Last year brought with it all kinds of highs and lows for VCs and startups alike. The highs of 2021 carried throughout the year, but began to fade in the waning months. Fundraising reached record highs, but exit activity hit decade lows.

Find out the details behind these dizzy trends in our Q4 2022 PitchBook-NVCA Venture Monitor.
 

Private credit rescued US PE in 2022

When many traditional lenders pulled back from the LBO market, it could have halted dealmaking—but the PE industry adjusted. Leveraged deals shrank overall and found backing from less-typical sources; growth-equity deals, which often don't require debt, gained popularity.

Explore how the industry churned along in 2022—despite strong headwinds—in our 2022 Annual US PE Breakdown.
 

Checking in on comparables

The trials and tribulations of the public markets are a sign of things to come for private companies.

Our latest series of public valuation guides breaks down recent stock performance, revenue forecasts and market caps of stock exchange giants to provide a glimpse into what's in store for the private markets in the coming year.

Check out the three guides:
 

Quote/Unquote

Janet Yellen
(Andrew Burton/Getty Images)
"Failure to meet the government's obligations would cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability."

—Treasury secretary Janet Yellen in a letter to House Speaker Kevin McCarthy on the US hitting its impending debt limit.
 

Stay tuned

Keep an eye out for these insights and research reports coming out this week.
  • Sustainable and Digital Infrastructure in the Private Markets

  • 2022 Annual European PE Breakdown

  • 2023 JP Morgan Healthcare Conference Recap

  • 2022 Annual European Venture Report

  • The Role of Placement Agents in GP Fundraising
 

Recommended Reads

How much more Netflix can the world absorb? [The New Yorker]

From disciplinarian to cheerleader: Why China is changing its tone on business. [The New York Times]

Silicon Valley can't quit its pizza robot obsession. [Bloomberg]
 

Trivia

(Net Vector/Shutterstock)
Answer: C)

In 2022, exit activity dipped below $100 billion for the first time since 2016, according to PitchBook data. Learn more in the Q4 2022 PitchBook-NVCA Venture Monitor.

This edition of The Weekend Pitch was written by Marina Temkin, Emily Burleson and Jacob Robbins. It was edited by Alexander Davis and Sam Steele.

Were you forwarded The Weekend Pitch? Sign up at pitchbook.com/subscribe.
 
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