Investment in European healthcare delivering innovation and improved patient care – Euractiv
Europe as a centre for health technology innovation has taken off, with dozens of European companies leading the way in developing innovative solutions with the potential to raise the standard of healthcare and health systems globally.
Healthcare innovation is a broad spectrum – from wearable technology, digital health platforms and AI-powered diagnostics to telemedicine and novel pharmaceuticals. Yet the healthcare industry is heavily regulated – this is often cited as a barrier deterring private equity and venture capital investors. But times are changing.
Last year, private equity and venture capital invested €11.4bn in healthcare in Europe alone – double the €5.7bn invested in 2016.
Despite early concerns, private equity investment is now often associated with improved efficiency and quality in care.
Healthy leveraged buyouts
A Harvard Business Review study of 45 leveraged buyouts in the US showed the acquisition of a hospital by a private equity firm, led to the improvement of their financial performance with no deterioration in clinical outcomes. On the contrary, patients admitted for heart attacks were found to receive better quality care in terms of lower all-cause mortality within 30 days of admission.
The push to increase efficiency, quality and innovation in healthcare is driven in part by ageing populations and the too-fresh memory of the COVID-19 pandemic. Better preventive medicines, and the increasing reliance on the private sector to help societies pay for ballooning healthcare costs explain why the average share of private equity in total healthcare expenditures in European countries in 2020 was 4.4%.
Investment banks too are getting in on the action. Just this month, Belgian medtech, Nyxoah, secured €37.5 million in EIB venture-debt financing.
Nyxoah, which is developing innovative solutions to treat obstructive sleep apnea, will use the funding for research and development as well as scale-up manufacturing capacity to meet demand in Europe and the US. The agreement was backed by the InvestEU Life Sciences programme.
Olivier Taelman, CEO of Nyxoah, said: “We are excited and grateful for the support and confidence in our cutting-edge technology shown by the European Investment Bank. This loan follows our recent successful equity offering where we raised €48.5 million. Combined, this capital will aid in the commercialisation of Genio [the company’s flagship solution] in the US and Europe while helping increase production capacity and sustain innovation.”
Dealmaking boosts innovation
Mergers and acquisitions have also been prevalent in the European healthcare sector.
“Dealmaking has long been a hallmark of the biopharma industry, playing a crucial role in most firms’ growth strategies. Historically, the sector has seen more and bigger transactions than even the tech industry. Because innovation comes slowly in biopharma, mergers, acquisitions, and other partnerships to boost the new-product pipeline have been an existential necessity for successful companies,” explained McKinsey’s Life Sciences Practice in a published report.
They added: “That’s been especially evident in recent years – with some notable shifts. Mergers and acquisitions activity has increased over the past five years, but steady growth in deal volume and relatively stable deal value (except in 2019) indicates that the relatively small number of mega deals seen in the early 2010s have given way to a greater number of smaller transactions.”
Partnerships increasing
McKinsey’s report highlights that “partnerships have increased over the same period, including some notably unconventional pairings in therapeutic areas not known for collaboration and between players teaming up for the first time.”
Take for example Vivalto Santé – in February the company announced the acquisition of three clinics in France and six in Europe after a recent capital increase of €65 million. The group now owns 100 healthcare establishments in six European countries, and is the third-largest private hospital group in France, with more than 6,000 practitioners and 20,000 employees across the bloc.
It was founded in 2009 by Daniel Caille and taken over in 2021 by the management company he created in 2021, Vivalto Partners. This fund is the majority shareholder, alongside the group’s historical institutional shareholders (MACSF, Arkéa capital, BNP Paribas développement, the Crédit Agricole group, Mubadal and Bpifrance) and two investors (IK Partners and Hayfin). Since March 2022, 34% of Vivalto Santé employees are shareholders of the company.
“Medical excellence driven by committed practitioners at the cutting edge of new technologies: this unique governance model was designed to combine the financial base of investors and the vision of healthcare professionals. This is the essential guarantee to always do more for our patients,” said Dr Patrick Le Bars, Gastroenterologist and hepatologist, Practitioner Member of the Supervisory Board at Vivalto Santé.
Investment in healthcare in Europe looks certain to continue to grow and funding models must be innovative to keep pace with the needs of the sector… and the European people.
Life expectancy a market driver
According to Science Direct, using sample data from Invest Europe, World Bank, OECD and Eurostat databases covering 23 EU/EEA countries between 2000 and 2019, there is evidence that venture capital healthcare investments and the age of the VC industry increase healthcare sector growth in Europe.
“Life expectancy (one of the proxy variables for health sector growth) shows increasing trends in Europe. We also find that innovation, financial sector development, macroeconomic variables and healthcare infrastructure significantly increase health sector growth,” said the report.
The Science Direct study comes down firmly on the side of private-public partnerships to support health sector growth stating: “We recommend more funding support and inducement policy models tailor-made to reap benefits from overall health sector growth.”
[By Jennifer Baker I Edited by Brian Maguire | Euractiv’s Advocacy Lab ]
