European Trends in Healthcare Investments and Exits 2018€¦ · Perhaps surprisingly was the strong attraction of the Swedish market for life science companies ... • 2017 is on

European Trends inHealthcare Investments and Exits 2018ANNUAL REPORT 2018

Nooman HaqueManaging DirectorLife Science & Healthcare

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Bobby AndersonSenior Associate Life Science & Healthcare

Vojtech TrebickyFinancial Analyst

Table of contents

European Trends in Healthcare Investments and Exits 2018 2

2017 Key Highlights 3

Healthcare Investments in Europe 5

Biopharma, Devices, and Diagnostics, HIT & Tools 6

Series A 7

Most Active Investors 8

Deal Sizes 9

Geographical Centres 10

Public Investments 11

Early Stage Exits 15

Sources of Funding 16

2018 Predictions 20

Contacts 21

2017 Healthcare and Life Science highlights


• Whilst deal volumes continue to fall from the highs of 2015, total funding has increased from 2016

• The early stage ecosystem is incredibly strong with Series A in biopharma, device and digital health all at the highest levels for the last 5 years

• The increasing importance of digital technologies in healthcare is illustrated by the increase from 2014 when $13m was invested to over $200m in 2017

• The UK retains its strong lead in terms of value & volume of deals – almost 3 times the value of the number 2 country (Germany)

• IPOs of European companies remains strong by historical standards though a little down (as of writing) compared to recent years. Perhaps surprisingly was the strong attraction of the Swedish market for life science companies

• M&A volumes were down globally, but large pharma & biotech have record cash piles and with continuing declining ROI at those firms, there will be increased pressure to do deals. We expect to see an uptick in M&A in 2018

• For the first time, our European analysis examines the sources of funding. This confirms the anecdotal view that incubators and angels continue to be an important source of capital for companies. This group participated in 370 deals with an announced value of $1bn. Almost of half of angel/incubator deals were not syndicated with any other investor

Angel, Seed & VC deals in Europe – all sectors

4Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits 2018

Dollars ($) $5.7B $9.2B $9.0B $11.3B $11.0B $15.3B $19.1B $15.6B $16.9BHealthcare 37% 24% 23% 28% 28% 31% 21% 22% 21%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

$0M

$5B

$10B

$15B

$20B

$25B

2009 2010 2011 2012 2013 2014 2015 2016 Dec'17

Capital Invested Deal Count

5

Healthcare investments

European Trends in Healthcare Investments and Exits 2018

• 2017 is on pace to surpass 2016 in terms of total capital invested after a slower start to the year. We will end the year below the total number of deals we have seen over the past two years, near 2013 levels, and see the first substantial decrease in total deals for the better part of a decade.

• Larger deal sizes are a result of the overall generally positive fundraising environment over the past few years. As a result, syndication among firms has grown accordingly.

• Looking backwards, 2015 appears more like an outlier in terms of deal count.

Healthcare Angel, Seed, & VC deals in Europe

6

Over 70% of all deals had at least one European Investor

Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits 2018

Dollars ($) $2.1B $2.2B $2.1B $3.1B $3.1B $4.8B $4.0B $3.5B $3.6BDeals (#) 401 530 585 655 923 1,031 1,294 1,230 891

2009 2010 2011 2012 2013 2014 2015 2016 Dec'17


BIO

PHAR

MA

DEVI

CEStrong year for Biopharma, Digital Health

DIAG

NOST

ICS,

HIT

& T

OO

LS


0

50

100

150

$0M

$500M

$1B

$2B

$2B

2013 2014 2015 2016 Dec'17


0

20

40

60

80

$0M

$200M

$400M

$600M

2013 2014 2015 2016 Dec'17


0

50

100

150

$0M

$200M

$400M

$600M

$800M

2013 2014 2015 2016 Dec'17


BIOPHARMA

DEVICE

Diagnostics,HIT & Tools

Series A at highest levels over last 5 years

8

• Even allowing for outliers like GammaDelta Therapeutics raise of $100M, the number of Series A biopharma deals illustrates the new ideas springing from innovation centres across Europe.

• The large increase in devices is partly due to a continued convergence with digital health, as entrepreneurs and investors see a benefit in smart hardware and innovations such as robotic surgery.

• It has been a banner year for digital health. Companies like Ieso, BioSerenity, and Ada Health show investors have interest in larger Series A investments after early traction from previous investment. The hope of advancing innovation through artificial intelligence has driven a sizeable increase in this area.


Series A ($) $192M $103M $542M $378M $644M

Series A ($) $47M $72M $9M $168M $151M

Series A ($) $33M $13M $75M $145M $211M

2218

19

23

56

2013 2014 2015 2016 Dec'17

# of

Dea

ls

1212

3

19 19

2013 2014 2015 2016 Dec'17

# of

Dea

ls

1410

7

18

38

2013 2014 2015 2016 Dec'17

# of

Dea

ls

Investors continue to support healthcare

9

Most Active VC, Corporate VC, and PE Investors in European Healthcare – as at Dec’17

Source: PitchBook and SVB proprietary data.

# of Deals


# of Deals above $2 Million

• Biopharma average deal size declined from 2015 and 2016 levels but still significantly higher than 2014 levels. This can be contributed to a higher amount of Angel and Seed rounds being completed in 2017 than in years prior.

• Device deal size dropped slightly in 2017 but, like Series A funding in Device, is expected to remain constant.

• Much like Biopharma, a large number of Angel and Seed rounds have pulled down the overall average for Diagnostics, HIT & Tools. We find a tepid connection between the new investors and the reduction in average deal size but more so that HIT requires less initial funding than traditional Diagnostics and Tools companies.

Avg. deal sizes for life sciences


$8.7$5.7

$28.5

$16.4$11.5

2013 2014 2015 2016 Dec'17

Biopharma

Avg.

Dea

l Siz

e ($

M)

$3.9M$6.0M

$3.0M

$8.8M$7.9M

2013 2014 2015 2016 Dec'17

Device

Avg.

Dea

l Siz

e ($

M)

$2.3M $1.3M

$10.7M$8.0M

$5.5M

2013 2014 2015 2016 Dec'17

Diagnostics, HIT & Tools

Avg.

Dea

l Siz

e ($

M)

European centres of activityUK maintains its strong position

11

Healthcare Angel, Seed & VC deals in Europe – as at Dec’17


UK & Ireland$1.4B

Switzerland$506M

France$471M

Germany$543M

Nordics$263M

Benelux$170M

12

Public investments & exits


IPO activity in European life sciences


• With 28 IPOs as of December, 2017 is 6 deals behind on 2016. Despite large deal sizes in first half of the year, the full year average is down $12M compare to 2016 to $84M. This is driven by second half of 2017, especially Q3 where the average deal size was $34M. The largest IPO of this year still remains as IdorsiaPharmaceuticals, which spun out of Actelion Pharmaceuticals and received $1.2B in public capital on SIX Swiss Exchange.

• Sweden continues to be the most common market to go public. It has seen $320M raised across 14 deals. In spite of being home only to one deal this year, Switzerland retains its first place in total capital raised thanks to Idorsia’s IPO. France and US had both 4 deals and there were 2 IPOs in the UK. Canada, Norway and Poland each had one European healthcare company float.

• Secondary Offerings have reached an all-time high with $840M raised in 2017. This is driven by three large deals; Zur Rose Group ($228M), Cosmo Pharmaceuticals ($215M) and Prothena ($155M).

2009 2010 2011 2012 2013 2014 2015 2016 Dec'17$0M

$1B

$2B

$3B

$4B

IPO

Public deals in European life sciences


Deals over $50M

Public deals in European life sciences


Deals below $50M

Early stage exits in European life sciences


• Several interesting exits in 2017 deserve attention. Ziarco was acquired by Novartis for an estimated value of $1B, Ogeda was taken over by Astellas Pharma for €800M expanding Astellas' late stage pipeline and contributing to its long term growth and Rigontec was bought by Merck & Co for €464M. There were 19 additional, relevant deals with undisclosed amounts, not shown.

17

Sources of funding


Sources of funding in 2017

18Source: PitchBook and SVB proprietary data. * $ invested/capital deployed refers to a sum of deal sizes that the investor participated on European Trends in Healthcare Investments and Exits 2018

• Investors listed in the table on the left jointly participated in 679 deals, which account for 76% of all healthcare transactions in Europe and 92% of total capital invested.

• Venture Capital funds remain a major source of funding for healthcare. They have been involved in the largest amount of deals and capital deployed* though, naturally, growth focused funds have invested in de-risked later stage businesses.

• Universities were involved in 11 deals less than record levels of 2016.

• Family Offices are down 3 deals this year, however deal size totals $100M more than 2016. 2017 is 1 deal up on 2015 and 6 deals on 2014.

Healthcare Angel, Seed, & VC deals in Europe

Investor Types # Deals $ Invested

VC 523 $3.24B

Angels/Incubators 370 $987.0M

PE 255 $2.52B

Strategic Acquires 94 $979.1M

CVC 64 $730.0M

Universities 17 $96M

Family Offices 10 $361M

Total Investments

VCs co-invest mostly with PE funds & Angels

19European Trends in Healthcare Investments and Exits 2018

• Venture Capital funds have completed 523 deals this year, by far the highest amount of transactions compared to other capital sources.

• Private Equity investors were involved in 255 deals which were all shared with one or more VC investor. Private Equity investors are the most common co-investor for Venture Capital funds, participating in 49% of all VC deals though these deals are later stage given PE involvement.

• Angels/Incubators are the second most common to invest alongside VCs and participate on 43% of all VC deals.

• Corporate VCs work closely with PE and VC funds. Less than 3% of all CVC deals didn’t involve a PE or VC investor. The increase of CVCs, especially at the Series A stage, has become a familiar pattern in recent years.

• Both Family Offices and Universities work closely with VC funds and share 100% and 88% of deals with them, respectively. However, Family Offices tend not to get involved in any deals involving universities, which is a long term trend.

Source: PitchBook and SVB proprietary data. * $ invested/capital deployed refers to a sum of deal sizes that the investor participated on

# Deals $ Invested

1 2

VC CVC 62 $728.2M

VC PE 255 $2.52B

VC Angels / Incubators

226 $3.90B

Investor Types

Overlap

# Deals $ Invested

1 2

VC StrategicAcquires

82 $965.4M

VC FamilyOffices

10 $360.9M

VC Universities 15 $96.0M

Investor Types

Overlap

2018 Outlook


• We will see continued flow of non-traditional healthcare investors and entrepreneurs entering the healthcare market, specifically within digital health

• The recent successes in Q4 2017 of UK companies listing on Nasdaq will lead to an increase in European companies looking to go down this route, at the expense of European exchanges

• European Biopharma investors will maintain their deal pace, unlike their US counterparts

• Globally, biopharma M&A deals will reach 20-plus big exits based on available acquirer cash and the need to replenish pipelines

• A market driven by a steady pipeline of crossover investor-backed oncology companies should achieve between 28 and 32 US IPOs. There were 31 US IPOs in 2017

• Due to a steady M&A market and quick exits in PMA/De Novo 510(k) companies, investments in medical device will increase. Traditional venture investors will lead this upswing

• Early stage device M&A will continue. Neuro and drug delivery companies may join cardiovascular companies to spur the next flurry of early-stage device acquisitions

• European Dx/Tools investments in 2018 will decline marginally in 2018, but the pace will depend on the degree of convergence with digital health

• We anticipate more investments in the Dx Analytics subsector as companies develop AI-assisted technologies. Increasingly, these companies will receive backing by tech-focused investors. We will also see R&D Tools companies spin off Dx Test and Dx Analytics companies, as their research technologies develop into clinically relevant approaches

• Liquid biopsy investments will slow, as current companies will look to validate their technologies

• Despite no Dx/Tools M&A activity in 2017, we anticipate a few exits in R&D tools companies. Tech giants may make move from investing to acquiring promising Dx Analytics companies

UK Healthcare and Life Science team

21European Trends in Healthcare Investments and Exits 2018

NOOMAN

HAQUEManaging Director

[email protected] +44 (0)20 7367 7894+44 (0)77 1230 0394

HELENA

FRASERRelationship Advisor

[email protected] +44 (0)20 7367 8137+44 (0)78 0324 5515

BOBBY

ANDERSONSenior [email protected] +44 (0)77 1474 7145

NISH

PAREKHSenior FX [email protected] +44 (0)20 7367 8130+44 (0)77 1370 8904

PAULA

BURKESenior [email protected] +44 (0)20 7367 7817+44 (0)77 1448 1035

JOHN

SANDFORDGlobal Treasury Advisor

[email protected] +44 (0)20 7367 7825+44 (0)77 1370 8919

IAN

MURCHIEVice [email protected] +44 (0)20 7367 8141+44 (0)77 0373 1735

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European Trends in Healthcare Investments and Exits 2018€¦ · Perhaps surprisingly was the strong attraction of the Swedish market for life science companies ... • 2017 is on