Will healthcare investing reach new highs in 2021?

Fluctuat nec mergitur, the motto of the city of Paris could apply to the dynamics of investments in healthcare and life sciences (HLS) since the beginning of the Covid-19 crisis. A bit like a boat in heavy weather, investments plunged in March 2020 but held steady for the rest of the year despite jolts and slowdowns. 2021 should bring beautiful lightening.

Looking back on 2020: resilience and adaptation of the HLS sector

After a first side-effect in March/April 2020, the M&A market has either adjusted the timetable of transactions or has resumed prospecting opportunities by adapting the terms of negotiations (Example: Sanofi/Biopharma Inc. deal, finalised in September 2020).

And, when these negotiations continued, they did so cautiously, in particular by returning to rather buyer-friendly practices that had fallen into disuse (Example: completion accounts/versus locked box).

As in previous crises, deals have been transformed. Leaving the acquisition at 100%, the parties moved towards an acquisition of a majority stake (Example: Acquisition of Dentelia by Colosseum Dental). These transactions were sometimes accompanied by options to defer (and condition) the acquisition of the remaining share capital or took the form of asset acquisitions or partnerships. At the same time, new alliances have emerged to fight the virus, such as that of the French automobile industry with the pharmaceutical industry to accelerate the production of respirators. Partnerships are today stable or on the rise for 70% of the players questioned by France Biotech in its Panorama (February 2021).

A slower and thus more complex dynamic, with a tighter control of foreign investments in France (and in Europe), following recent reforms. Note however the great reactivity of the French Ministry of Economy and Finance and its pragmatism to maintain the fluidity of investments despite everything.

E-health during the Covid-19 crisis: a remarkable boom

Record investment volume in e-health (+15% according to KPMG) in 2020 and a great year 2021 in prospect. Long perceived as emerging, the biopharma, diagnostics and healthcare IT sub-sectors (including telehealth and telemedicine) are emerging as big winners of the health crisis. For instance, Wellium has attracted some fine investors such as Advent Biotechnologies and MACSF. These actors of the market provide a solution to adapt access to healthcare when confronted with national lockdowns and the imperatives of social distancing. An increased use of artificial intelligence solutions in research and clinical trials has also been observed in 2020.

Covid-19 crisis and HLS deals: what prospects for 2021?

As the health crisis is not over, the deal structures mentioned above will continue in 2021, with much more dynamism however and the resurgence of big deals stopped by the pandemic, which the market has been expecting since 2019. Moreover, the partnerships will continue (eg Sanofi and then Novartis declared that they would help Pfizer and BioNTech to manufacture 125 million doses of their mRNA vaccine exclusively for the EU).

In 2021, the boom in the e-health sector is expected to continue with investments in this area. Telemedicine and telehealth in particular should become the norm. Finally, the increased use of AI in the search for treatment is also expected to intensify.

More broadly, M&A players, observing a gradual return to the negotiating table of transactions put on hold in 2020, are hopeful of catching up by 2021 the accumulated delays in HLS deals.