EUROPEAN INVESTORS CONTINUE ACTIVELY INVESTING IN HEALTHCARE
New Investor Survey Highlights Significant VC Funding Available in Europe
Clinical study delays seen as major concern
Critical need for clear communication to navigate investor landscape in COVID-19 context
Optimum Strategic Communications (Optimum), conducted a survey of European Venture Capital (VC) investors and the impact of COVID-19 on the Healthcare Sector. The survey held in May 2020 includes responses from 24 of the most influential European VCs, investing approximately EUR 15.5 billion in aggregate in the Healthcare sector. Of these, six have recently raised new funds totalling circa EUR 2 billion in 2019/20.
The COVID-19 pandemic has impacted us all in ways that were impossible to predict just a few months ago. The backdrop of limited face-to-face meetings and travel has affected levels of due diligence, raising the question on how this will impact investments in the Healthcare sector.
The survey findings show there is a substantial amount of money available for investment in European companies and investors are seeking and reviewing new opportunities. Crucially, the survey reveals how it is strategically important for companies to adapt to the new ‘virtual norm’ to ensure that they are communicating a strong and compelling investment story. Now more than ever, clear and open communication, local connections and investor syndicates will be in focus.
In addition to the marked impact of COVID-19 on business and operational activities in the Healthcare sector, our findings reveal:
- Investors are proactively looking for new investments and many are expecting to devote more time to them. Although many invest globally and tend to focus on Europe and the US, nearly 30% of investors are focused solely on Europe including the UK.
- All VCs are actively looking to invest. Of those funds disclosing current cash status only one had deployed over 50% of available funds with two thirds having deployed less than 30%.
- Europe remains a core focus area for VCs and many believe that throughout the COVID-19 pandemic and with subsequent travel restrictions, geography and local VC investor-led syndicates will become even more important. Many funds are indication agnostic and typically invest two-thirds biotech and one-third medtech. Companies looking for funding even in the longer term need to be prepared to talk to investors early.
- Overall, investors have not changed their investment foci (where they exist). Whilst investing in COVID-19 projects where it makes sense is seen as viable and important, there is (crucially) still a focus on many areas across a broad spectrum including oncology, immunology, innovative modalities / platforms, first-in-class, rare diseases, CNS, anti-infectives, vaccines etc.
- Investors want companies to focus on deliverables and prudently manage cash runway; strengthen the balance sheet through raising finance from existing investors, opening rounds to other investors or doing deals earlier.
- Investors believe in the next 12-18 months the impact of delays in clinical trials and knock on effect on milestones will be the biggest issues for the industry. Clinical trial delays and logistics will dominate everything and the industry will need to manage expectations on drug development timelines.
- While there has been no slow down on the rate of M&A/partnering to date, some investors believe this will be affected in the future as pharmaceutical companies focus on managing the impact caused by clinical trial delays. Furthermore, investors think there is likely to be a reluctance to travel, even when the lockdown is over. Investor focus will be on doing deals within their familiar geographies.
- One dynamic positive from the pandemic is that we are already seeing major changes to how healthcare is delivered and importance of telemedicine and digital health. Investors believe that this will lead to a re-evaluation of the Industry and a better understanding of the strategic importance of healthcare and innovation which will be a boost for R&D and manufacturing.
- In the markets, the Healthcare sector is already seen as defensive and majority of investors believe it will be more immune to economic downturn than other sectors. There is an increased interest in the sector which should lead to more generalist investors engaging in Healthcare stocks / companies.
Commenting on the survey, Mary Clark, Managing Director, Optimum Strategic Communications, said:
“The pandemic has brought the Healthcare Sector into the spotlight like never before. Governments and the general public now realise the importance of innovation and healthcare. While companies are facing disruption and adjusting to the new normal, it is important to take stock of the business, your assets and employees and plan for the period ahead.
“There is more money available for investment in European healthcare companies than ever before. Investors are proactively looking for new investments and many are expecting to devote more time to new investment ideas. Whilst it is going to be harder to meet potential investors and/or industry partners face-to-face, investors will be looking at independent information sources such as the media or peer review journals. It is essential to ensure that your story is known and to create a buzz and excitement around what you are doing. Now more than ever, European companies need to be communicating a strong and compelling investment story to ensure that they are on the radar and followed closely by the investment community.”
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Optimum’s European Healthcare Investor Survey 2020