Over the past few years, Healthcare and Life Sciences have been one of the strongest performing sectors. They have also shown a remarkable and robust response to the market downturns caused by the global pandemic, with the least impact in overall returns in 2020 and record amounts of capital being deployed by private equity.
While the future of the sector looks extremely promising from an investment standpoint, it is worth examining the implications of COVID-19, the most common pressures, and the shift in investment dynamics following the pandemic.
A dedicated two-day Healthcare and Life Sciences programme at SuperReturn Europe Virtual 2021 will start with an opening panel discussion exploring how the investment landscape has changed and evolved following the global pandemic. Some of the leading investment professionals, including Rasmus Molander, Partner of Adelis Equity Partners, and Pieter van der Meer, Managing Partner of Gilde Healthcare, will examine the key barriers when investing in Healthcare and Life Science companies and share their best practices and strategies for making investment decisions in the current climate.
Healthcare providers, such as owners and operators of primary healthcare hospitals, retirement and nursing homes, have been hit the hardest by COVID-19. Almost all elective activity, including procedures and appointments, have been put on hold to prioritise the containment and treatment of the virus.
As a result, these companies face a reduction in their revenue and more uncertainty for their financial future. A number of smaller providers simply don’t have the financial resources to survive this temporary interruption in activities as we stay on an uncertain path to the “new normal”. Based on Q1 2020 market data, Healthcare providers saw a 25% decrease in returns, followed by Med Tech and services with a 12% drop in returns. Biotech and Pharma sectors have proved to be most resilient with a consolidated market value of €1,460 bn and only a 5% and 7% drop in returns respectively.
An in-depth two-part discussion on the future of private equity investment in Healthcare will be featured at SuperReturn Europe Virtual conference on 2nd March. Some of the top market leaders sharing their expertise include Laurent Ganem, Founder and CEO of G Square Healthcare Private Equity, Marc Benatar, Partner of Apax Partners, Kevin Ryan, Partner of Ares Management, Christian Dubé from August Equity and Liz Jones, Partner of Livingbridge. They are set to examine the current market conditions and discuss necessary structural changes required post- COVID-19 to create opportunity for PE to help their businesses emerge strongly.
The pressure is on
Along with the resumption of activity in the Healthcare sector, which was temporarily paused during the pandemic, several other significant developments have taken place. The COVID-19 pandemic has substantially increased demand for mental health services and solutions from both patients and front-line clinical staff. Consequently, mental health platforms, facilities and other solutions that cater to specific mental health demands that had arisen from COVID-19 are likely to be highly favoured by investors.
Supply chain has also been put under extreme pressures, which resulted in cost, quality, and availability trade-offs. The Life Sciences sector has also experienced high demand for vaccines and therapeutics for COVID-19 and other similar infectious diseases. And due to the over-reliance of manufacturing supply chains on Asia, Life Science companies have been under a lot of pressure. One of the top priorities for management in Big Pharma companies has been to focus on restructuring API supply chains to reduce reliance on China and India, as well as looking at API manufacturers in lower cost European and other Western countries.
The growth of digital health
In terms of ongoing structural changes accelerated by the pandemic, one of the most important shifts has been towards an increased adoption of digital health solutions. As a result, the digital health sector has seen enormous growth, with telehealth and telemedicine services experiencing huge demands from patients, clinicians, and investors alike. Increased baseline adoption of telehealth and other digital health solutions is expected to drive a very prominent investment theme with a special focus on offerings across telemedicine, remote monitoring, at-home diagnostics, at-home pharmacy delivery and the like.
At SuperReturn Europe Virtual we will be covering various aspects of digital health, including Digital therapeutics and digital drugs, Healthcare IT and Technological innovation with contributions from Regina Hodits, Managing Partner of Wellington Partners, Dr. Markus Müschenich, Managing Partner, of Eternity.Health, François Robinet, Managing Partner of AXA Venture Partners (AVP), Michael Cole, Managing Partner of Global Neurohealth Ventures, Alexander Frolov, General Partner and CEO of Target Global and Jean-Marc Patouillaud, Co-Managing Partner of Partech Partners.
Going digital has also driven a big data and analytics revolution. We have seen an accelerated adoption of AI in drug discovery and development, as well as better data availability and improved analysis capabilities, as patients are becoming more willing to share their data.
Biotech and Pharma
With clinical trial activity on hold, Biotech and Pharma companies are under a lot of pressure from investors to kick-start their development pipelines as things return to normal. From an investment perspective, this means that any company that can ensure that the trials are designed and run more quickly and efficiently will be in great demand.
In addition, Pharma continues to be under increasing pressure to reduce the time and cost related to bringing new products to market. The Life Sciences space has shown the entire world its remarkable efforts in developing COVID-19 vaccines and treatments, highlighting the potential for faster and lower cost drug development. This has been made possible by utilising technology platforms that leverage data and AI for development of new drugs, as well as repurposing existing drugs and revisiting previous clinical trial data. These technologies are very likely to attract lots of interest from investors.
A new way of doing business
In summary, dealmakers continue to be cautious and selective, but buyers are looking to take advantage of opportunistic acquisitions. There is a substantial amount of capital available for investment in European companies, and investors are proactively looking for new opportunities. The pandemic has brought Healthcare and Life Sciences sectors into the spotlight like never before, and these are certainly unique times for change, innovation and a new way of doing business.