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European Trends inHealthcare Investments and Exits 2018ANNUAL REPORT 2018
Nooman HaqueManaging DirectorLife Science & Healthcare
Visit svb.com/ukFollow @SVB_UKEngage #SVBHealthcare
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
European Trends in Healthcare Investments and Exits 2018 3
• 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
Capital Invested Deal Count
BIO
PHAR
MA
DEVI
CEStrong year for Biopharma, Digital Health
DIAG
NOST
ICS,
HIT
& T
OO
LS
7Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits 2018
0
50
100
150
$0M
$500M
$1B
$2B
$2B
2013 2014 2015 2016 Dec'17
Capital Invested Deal Count
0
20
40
60
80
$0M
$200M
$400M
$600M
2013 2014 2015 2016 Dec'17
Capital Invested Deal Count
0
50
100
150
$0M
$200M
$400M
$600M
$800M
2013 2014 2015 2016 Dec'17
Capital Invested Deal Count
BIOPHARMA
DEVICE
Diagnostics,HIT & Tools
Series A at highest levels over last 5 years
8
• Even allowing for outliers like GammaDelta Therapeutics raise of $100M, the number of Series A biopharma deals illustrates the new ideas springing from innovation centres across Europe.
• The large increase in devices is partly due to a continued convergence with digital health, as entrepreneurs and investors see a benefit in smart hardware and innovations such as robotic surgery.
• It has been a banner year for digital health. Companies like Ieso, BioSerenity, and Ada Health show investors have interest in larger Series A investments after early traction from previous investment. The hope of advancing innovation through artificial intelligence has driven a sizeable increase in this area.
Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits 2018
Series A ($) $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
European Trends in Healthcare Investments and Exits 2018
# 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
10Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits 2018
$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
Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits 2018
UK & Ireland$1.4B
Switzerland$506M
France$471M
Germany$543M
Nordics$263M
Benelux$170M
12
Public investments & exits
European Trends in Healthcare Investments and Exits 2018
IPO activity in European life sciences
13Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits 2018
• 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
14Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits 2018
Deals over $50M
Public deals in European life sciences
15Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits 2018
Deals below $50M
Early stage exits in European life sciences
16Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits 2018
• 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
European Trends in Healthcare Investments and Exits 2018
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
European Trends in Healthcare Investments and Exits 2018 20
• 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
nhaque@svb.com +44 (0)20 7367 7894+44 (0)77 1230 0394
HELENA
FRASERRelationship Advisor
hfraser@svb.com +44 (0)20 7367 8137+44 (0)78 0324 5515
BOBBY
ANDERSONSenior Associatebanderson2@svb.com +44 (0)77 1474 7145
NISH
PAREKHSenior FX Tradernparekh@svb.com +44 (0)20 7367 8130+44 (0)77 1370 8904
PAULA
BURKESenior Associatepburke@svb.com +44 (0)20 7367 7817+44 (0)77 1448 1035
JOHN
SANDFORDGlobal Treasury Advisor
jsandford@svb.com +44 (0)20 7367 7825+44 (0)77 1370 8919
IAN
MURCHIEVice Presidentimuchie@svb.com +44 (0)20 7367 8141+44 (0)77 0373 1735
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