European Trends in Healthcare Investments and Exits 2018

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1 European Trends in Healthcare Investments and Exits 2018 ANNUAL REPORT 2018 Nooman Haque Managing Director Life Science & Healthcare Bobby Anderson Senior Associate Life Science & Healthcare Vojtech Trebicky Financial Analyst Visit svb.com/uk Engage #SVBHealthcare

2 Table of contents 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 Predictions 20 Contacts 21 European Trends in Healthcare Investments and Exits

3 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 European Trends in Healthcare Investments and Exits

4 Angel, Seed & VC deals in Europe all sectors Capital Invested Deal Count $25B 9,000 8,000 $20B 7,000 6,000 $15B 5,000 $10B 4,000 3,000 $5B 2,000 1,000 $0M Dec'17 0 Dollars ($) $5.7B $9.2B $9.0B $11.3B $11.0B $15.3B $19.1B $15.6B $16.9B Healthcare 37% 24% 23% 28% 28% 31% 21% 22% 21% Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits

5 Healthcare investments European Trends in Healthcare Investments and Exits

6 Healthcare Angel, Seed, & VC deals in Europe Over 70% of all deals had at least one European Investor Capital Invested Deal Count 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 Dec'17 Dollars ($) $2.1B $2.2B $2.1B $3.1B $3.1B $4.8B $4.0B $3.5B $3.6B Deals (#) ,031 1,294 1, Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits

7 Strong year for Biopharma, Digital Health $2B Capital Invested Deal Count 150 BIOPHARMA $2B $1B $500M $0M Dec'17 0 $600M Capital Invested Deal Count 80 DEVICE $400M $200M $0M Dec'17 0 DIAGNOSTICS, HIT & TOOLS $800M $600M $400M $200M $0M Capital Invested Deal Count Dec' Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits

8 Series A at highest levels over last 5 years Series A ($) $192M $103M $542M $378M $644M BIOPHARMA # of Deals Even allowing for outliers like GammaDelta Therapeutics raise of $100M, the number of Series A biopharma deals illustrates the new ideas springing from innovation centres across Europe Dec'17 Series A ($) $47M $72M $9M $168M $151M DEVICE # of Deals The large increase in devices is partly due to a continued convergence with digital health, as entrepreneurs and investors see a benefit in smart hardware and innovations such as robotic surgery Dec'17 Series A ($) $33M $13M $75M $145M $211M Diagnostics, HIT & Tools # of Deals Dec'17 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

9 Investors continue to support healthcare Most Active VC, Corporate VC, and PE Investors in European Healthcare as at Dec 17 # of Deals # of Deals above $2 Million Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits

10 Avg. deal sizes for life sciences Avg. Deal Size ($M) Biopharma $28.5 $16.4 $11.5 $8.7 $ Dec'17 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. Avg. Deal Size ($M) Device $8.8M $7.9M $6.0M $3.9M $3.0M Dec'17 Device deal size dropped slightly in 2017 but, like Series A funding in Device, is expected to remain constant. Avg. Deal Size ($M) Diagnostics, HIT & Tools $10.7M $8.0M $2.3M $1.3M $5.5M Dec'17 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. Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits

11 European centres of activity UK maintains its strong position Healthcare Angel, Seed & VC deals in Europe as at Dec 17 Nordics $263M UK & Ireland $1.4B Benelux $170M France $471M Germany $543M Switzerland $506M Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits

12 Public investments & exits European Trends in Healthcare Investments and Exits

13 IPO activity in European life sciences $4B $3B With 28 IPOs as of December, 2017 is 6 deals behind on 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 Idorsia Pharmaceuticals, which spun out of Actelion Pharmaceuticals and received $1.2B in public capital on SIX Swiss Exchange Dec'17 IPO $2B $1B $0M 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 alltime high with $840M raised in This is driven by three large deals; Zur Rose Group ($228M), Cosmo Pharmaceuticals ($215M) and Prothena ($155M). Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits

14 Public deals in European life sciences Deals over $50M Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits

15 Public deals in European life sciences Deals below $50M Source: PitchBook and SVB proprietary data. European Trends in Healthcare Investments and Exits

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

17 Sources of funding European Trends in Healthcare Investments and Exits

18 Sources of funding in 2017 Healthcare Angel, Seed, & VC deals in Europe Total Investments 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 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 Family Offices are down 3 deals this year, however deal size totals $100M more than is 1 deal up on 2015 and 6 deals on Source: 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

19 VCs co-invest mostly with PE funds & Angels Investor Types # Deals $ Invested Venture Capital funds have completed 523 deals this year, by far the highest amount of transactions compared to other capital sources. 1 2 VC CVC 62 $728.2M VC PE 255 $2.52B VC Angels / Incubators Overlap 226 $3.90B 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 coinvestor 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. Investor Types 1 2 VC VC Strategic Acquires Family Offices # Deals $ Invested Overlap 82 $965.4M 10 $360.9M VC Universities 15 $96.0M 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 European Trends in Healthcare Investments and Exits

20 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 Q 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 European Trends in Healthcare Investments and Exits

21 UK Healthcare and Life Science team NOOMAN HAQUE Managing Director +44 (0) (0) IAN MURCHIE Vice President +44 (0) (0) BOBBY ANDERSON Senior Associate +44 (0) PAULA BURKE Senior Associate +44 (0) (0) HELENA FRASER Relationship Advisor +44 (0) (0) NISH PAREKH Senior FX Trader +44 (0) (0) JOHN SANDFORD Global Treasury Advisor +44 (0) (0) European Trends in Healthcare Investments and Exits

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