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Lingering market disruption increasingly keeps orthopedic investors on the sidelines. However, recent trends point to changing investor attitudes around growth and profitability while activity shifts to focus on innovative segments like enabling technology and sports medicine.
We sourced data for the exhibits below from 282 orthopedic funding announcements we’ve recorded since 2016. The press releases do not always include funding details, but we collected enough information to reveal some trends. For our purposes here, we’ll take 2016 through 2019 as our pre-COVID years, while post-COVID covers 2020 through 2023. Unless otherwise stated, all funding dollar amounts are given in millions of U.S. dollars.
Slowing Pace but Bigger Checks
Total orthopedic funding announcements increased a modest 5% post-COVID, with 142 investments compared to 135 in the prior period. The unprecedented market conditions of 2021 drove the acceleration as investors sought to deploy a war chest of capital in the immediate aftermath of the pandemic.
However, lingering economic disruption and market uncertainty slowed investment activity. The number of investments declined in each of the last two years. The 28 investments during 2023 represented a 40% dropoff from the 2021 activity peak.
Looking only at investments with disclosed funding amounts, check sizes grew 10% after the pandemic. That increase grew more pronounced in recent years as investors prioritized later-stage companies and big-ticket items that can pave a path to profitability.
Steadily Increasing Focus on Digital Technologies
Spine is the most active segment for orthopedic funding post-COVID, accounting for 27% of all investments. The fast-growing segments of enabling technology and sports medicine round out the top three.
However, enabling technology and trauma are the only two segments with more activity post-COVID. The number of enabling technology investments increased by nearly 60% to 30 post-COVID after totaling 19 in the prior period. Trauma grew 50% from 12 to 18. All other segments saw a modest slowdown.
Trauma’s growth came during the frenetic period of investment and consolidation for the foot and ankle market in 2020. However, enabling technology’s steady growth underscores the increasing importance of technology for orthopedics. Enabling technology accounted for just 10% of investments in 2016 but rose to 32% by the end of 2023.
Notable Recent Orthopedic Investments
Enabling technology, spine and sports medicine account for nearly 80% of all orthopedic investments over the last 12 months. Below is a quick round-up of notable raises in those segments:
- Augmedics Raises $82.5 Million (enabling technology). The company successfully closed its Series D financing in mid-2023 to expand the U.S. commercial footprint and next-generation advancements for its vision Spine System.
- Companion Spine Closes $60.1 Million Series A (spine). The company topped off its Series A with a final $5 million to eclipse the $60 million threshold for the round as it seeks to globalize its DIAM and LISA implants.
- Miach Secures $40 Million Financing (sports medicine). The company closed a $40 million financing round to expand the U.S. commercial rollout for its Bridge-Enhanced ACL Restoration (BEAR) Implant.
Outlook for 2024 and Beyond
We expect the funding environment to remain pressured through 2024 and into 2025 at least. While inflation moderated recently, prices remain significantly higher than in 2019 and consumers face dwindling incomes and negative real earnings. Uncertainty abounds in the orthopedic market, especially in the typically active spine segment that underwent consolidation and leadership changes.
The IPO market remains frozen for orthopedics and general medtech after a highly favorable environment dried up in 2021. Bioventus, Paragon 28 and Treace Medical went public during that period. Even then, the IPO pathway proved challenging. A third of all orthopedic IPOs announced between 2016 and 2021 were ultimately withdrawn.
As market uncertainty settles, or investors acclimate to it, we could see the window crack open for some companies to go public during 2025 or early 2026 according to Charles Hamilton, Managing Director of Piper Sandler.
Orthopedic investors tend to require clear proof of improving market conditions, so funding activity could remain depressed for the foreseeable future. During that time, however, we expect innovative segments like enabling technology and sports medicine will command much of the activity and funding.
Lingering market disruption increasingly keeps orthopedic investors on the sidelines. However, recent trends point to changing investor attitudes around growth and profitability while activity shifts to focus on innovative segments like enabling technology and sports medicine.
We sourced data for the exhibits below from 282 orthopedic funding...
Lingering market disruption increasingly keeps orthopedic investors on the sidelines. However, recent trends point to changing investor attitudes around growth and profitability while activity shifts to focus on innovative segments like enabling technology and sports medicine.
We sourced data for the exhibits below from 282 orthopedic funding announcements we’ve recorded since 2016. The press releases do not always include funding details, but we collected enough information to reveal some trends. For our purposes here, we’ll take 2016 through 2019 as our pre-COVID years, while post-COVID covers 2020 through 2023. Unless otherwise stated, all funding dollar amounts are given in millions of U.S. dollars.
Slowing Pace but Bigger Checks
Total orthopedic funding announcements increased a modest 5% post-COVID, with 142 investments compared to 135 in the prior period. The unprecedented market conditions of 2021 drove the acceleration as investors sought to deploy a war chest of capital in the immediate aftermath of the pandemic.
However, lingering economic disruption and market uncertainty slowed investment activity. The number of investments declined in each of the last two years. The 28 investments during 2023 represented a 40% dropoff from the 2021 activity peak.
Looking only at investments with disclosed funding amounts, check sizes grew 10% after the pandemic. That increase grew more pronounced in recent years as investors prioritized later-stage companies and big-ticket items that can pave a path to profitability.
Steadily Increasing Focus on Digital Technologies
Spine is the most active segment for orthopedic funding post-COVID, accounting for 27% of all investments. The fast-growing segments of enabling technology and sports medicine round out the top three.
However, enabling technology and trauma are the only two segments with more activity post-COVID. The number of enabling technology investments increased by nearly 60% to 30 post-COVID after totaling 19 in the prior period. Trauma grew 50% from 12 to 18. All other segments saw a modest slowdown.
Trauma’s growth came during the frenetic period of investment and consolidation for the foot and ankle market in 2020. However, enabling technology’s steady growth underscores the increasing importance of technology for orthopedics. Enabling technology accounted for just 10% of investments in 2016 but rose to 32% by the end of 2023.
Notable Recent Orthopedic Investments
Enabling technology, spine and sports medicine account for nearly 80% of all orthopedic investments over the last 12 months. Below is a quick round-up of notable raises in those segments:
- Augmedics Raises $82.5 Million (enabling technology). The company successfully closed its Series D financing in mid-2023 to expand the U.S. commercial footprint and next-generation advancements for its vision Spine System.
- Companion Spine Closes $60.1 Million Series A (spine). The company topped off its Series A with a final $5 million to eclipse the $60 million threshold for the round as it seeks to globalize its DIAM and LISA implants.
- Miach Secures $40 Million Financing (sports medicine). The company closed a $40 million financing round to expand the U.S. commercial rollout for its Bridge-Enhanced ACL Restoration (BEAR) Implant.
Outlook for 2024 and Beyond
We expect the funding environment to remain pressured through 2024 and into 2025 at least. While inflation moderated recently, prices remain significantly higher than in 2019 and consumers face dwindling incomes and negative real earnings. Uncertainty abounds in the orthopedic market, especially in the typically active spine segment that underwent consolidation and leadership changes.
The IPO market remains frozen for orthopedics and general medtech after a highly favorable environment dried up in 2021. Bioventus, Paragon 28 and Treace Medical went public during that period. Even then, the IPO pathway proved challenging. A third of all orthopedic IPOs announced between 2016 and 2021 were ultimately withdrawn.
As market uncertainty settles, or investors acclimate to it, we could see the window crack open for some companies to go public during 2025 or early 2026 according to Charles Hamilton, Managing Director of Piper Sandler.
Orthopedic investors tend to require clear proof of improving market conditions, so funding activity could remain depressed for the foreseeable future. During that time, however, we expect innovative segments like enabling technology and sports medicine will command much of the activity and funding.
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ME
Mike Evers is a Senior Market Analyst and writer with over 15 years of experience in the medical industry, spanning cardiac rhythm management, ER coding and billing, and orthopedics. He joined ORTHOWORLD in 2018, where he provides market analysis and editorial coverage.
