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European Health & Biotech 2021 half-year update 1 July 2021 x Today’s data will be available on health.dealroom.co Healthcare shifting gears Investment in European Health & Biotech Investor landscape 1 2 3 Table of contents. 1 Healthcare shifting gears Page / 5 1. Dealroom analysis of Eurostat and OECD data. Chart Inspired by LocalGlobe presentation. $300 $50 $83 $83 $100 $200 $283 Monthly household expenditure in Europe (1) Healthcare is one of the largest spending categories for households. But almost all spending is indirect (insurance & tax). Consumer influence is limited, but growing. <20% Media Energy Fashion Mobility Health Holidays Consumers: out-of-pocket payments and voluntary insurance (growing!) > 80% Gov’t & insurers In healthcare, it’s the insurers and governments (“payers”) that hold the power. They want to control costs and improve outcomes — an opportunity for tech. Providers (health professionals, hospitals) Consumers Payers (insurers, governments) Biopharma Page / 6 Spending $8 trillion Funding $8 trillion Reimbursement Payers want to control costs and improve outcomes. In order to achieve this they need data transparency to follow the patient journey, have predictability and be able to measure the ROI of interventions. Providers want to align themselves more closely with payers. Professionals want to increase their productivity and reduce burnout due to admin (1). Biopharma wants to find treatments for big markets and bring down cost of discovering new drugs. Consumers want better healthcare and expect it to be more like other consumer products. Source: Dealroom analysis of data from OECD, Eurostat, CMS, WHO. 1. According to Medscape, administration is the main cause of physician burnout. USA In the US, employers play a big role in private insurance. Those employers want to control their healthcare premiums. This means startups can go to market by striking deals with corporates; even with a product that does not yet have clinical evidence. An example is Livongo. 16.9 Page / 7 Source: Dealroom analysis of data from OECD, Eurostat, CMS, WHO. $0.1T $3.9T $0.4T $0.3T NetherlandsUSAGermanyFrance84% 16% Spain79% 21% Sweden$0.3T $0.1T 5% 17% 78% 19% 6% 75% 16% 6% 78% 67% 29% 4% Private insurers (for profit, regulated) UK$0.1T 56% Medicare, medicaid, other 10% 34% ▉ Consumers (out-of-pocket) and other ▉ Compulsory insurance ▉ Government schemes State provided healthcare Europe In Europe, governments, private insurers and regulators have the power together. They want to control costs, but coordination is required to get things done. This means significant time between when a technology is accepted by regulators, when it is adapted in the healthcare system and when innovators are able to generate revenue. In Europe, government and insurers have the power. In the USA, employers play an important role and they can adopt innovation much more easily. Governments and regulators are increasingly putting incentives in place to improve outcomes and reduce costs - a huge opportunity for tech companies. Sweden Integrated electronic health record solutions (EHRs) and e-prescriptions in Sweden’s 21 regions since 2018 Teleconsultation reimbursed since 2016, enabling startups (KRY, Min Doktor, Doktor.se) Germany Digital Healthcare Act adopted in 2019 to support digital health innovation €500 incentive for startup video consultations First country to cover prescribed apps: Kalmeda (tinnitus), Velibra (anxiety) UK NHSX Innovation Accelerator and $330M AI in health investment pledged Central digital records locator and booking app Video consultation available through every doctor’s surgery France Online diagnosis & treatment since 2018 Cross-border treatment: EU doctors teleconsulting patients in France KRY (Livi) and Doctolib market leaders in French telemedicine Page / 8 Classification according to Boehm model. Adapted by Dealroom. State is provider of healthcare Private for-profit providers State financed Private for-profit providers Compulsory insurance Regulated, private for profit insurance and providers More state influence Less state influence Source: Dealroom.co. Covid-19 accelerated telehealth across the continent. Page / 9 Covid-19 was merely a catalyst for underlying trends that were already long underway. The more meaningful shift will occur in the next two years and beyond. Page / 10 Source: Dealroom.co Payers pushing for value-based care Growing number of connected devices/IoHT Accelerations in AI, NLP, DNA sequencing, editing, digital therapeutics Digitally native population Regulations around virtual care loosened Trust in virtual care increased The US finalized new rules around data interoperability Tech’s been proven in battle (e.g. mRNA) Some new regulations made permanent Providers need to align with payers more than ever: more focus on value-based care Consumers expecting increased virtual care Large amounts of late-stage venture capital Leading up to 2020 Covid-19 and its second-order effects Industry-wide shifts Healthtech impact Time Page / 11 Healthcare ≠ better health: healthcare is only a 10-20% contributing factor to quality and length of life. Tech plays role across all four. Smoking Diet & exercise Alcohol & drugs Sexual activity Access to care Quality of care Education Employment Income Family & social support Community safety Air & water quality Housing & transit Health behaviors Clinical care Social economic factors Physical environment 30%+ 10-20% 40%+ 10%+ Source: County Health Rankings. Ranges added by Dealroom to reflect other studies. Page / 12 83% 39% 61% The holy grail for healthcare = prevention and early detection. This paradigm shift has been long in the making, now accelerated by tech. 18% █ Prevention & well-being █ Care and treatment Source: Deloitte. 2019 2040E Deloitte estimate European Health & Biotech investment 2 Page / 14 Investment in European healthtech grew 2.6x, hitting €4.9B in the first half of 2021. VC investment in European healthtech startups » view online Source: Dealroom.co. €1.0B H1 2016 H1 2017 H1 2018 H1 2019 H1 2020 H1 2021 €2.0B €3.0B €4.0B €5.0B ▊ Series C €40–€100m ▊ Series B €15M-€40M ▊ Megarounds plus €250M+ ▊ Megarounds €100–€250m ▊ Series A €4M-€15M ▊ Seed €1M-€4M ▊ Pre-seed €0M-€1M $600M Series D $525M Series D $312M Series D £195M Series H $245M Series D €185M Series D $130M Series C $115M Series C $104M Series E Top rounds in 2021 €4.9B €1.9B €0.8B €0.8B €1.5B €1.4B €2.0B €0.8B €0.9B €1.2B €1.7B 2.6x Page / 15 Source: Dealroom.co and Google Finance. Note: Sum of the valuations of all startups founded after 2000. Using estimated valuations based on most recent VC rounds, public markets and publicly disclosed valuations as of June 30th, 2021. European Healthtech companies are now worth €50 billion. Combined enterprise value of European healthtech startups Most valuable European healthtech companies Drug discovery with AI Nanopore DNA sequencer Drug discovery with AI Digital care Digital care Health insurance Psilocybin therapy Health insurance Digital care 2016 2017 2018 2019 2020 Today €10.0B €20.0B €30.0B €40.0B €50.0B €49.7B €29.9B €25.3B €17.4B €12.7B €9.4B ▊ Unicorn €800M+ ▊ Future Unicorn €200M-€800M ▊ €0M-€200M Page / 16 Investment in European biotech is also on a record level. Source: Dealroom.co. VC investment in European biotech startups » view online €1.0B H1 2016 H1 2017 H1 2018 H1 2019 H1 2020 H1 2021 €2.0B €3.0B ▊ Series C €40–€100m ▊ Series B €15M-€40M ▊ Megarounds plus €250M+ ▊ Megarounds €100–€250m ▊ Series A €4M-€15M ▊ Seed €1M-€4M ▊ Pre-seed €0M-€1M $250M Series A €160M Series A $168M Series B $157M Series D $148M Series C €127M Series B $125M Series B $110M Series C $92M Series C Top rounds in 2021 €2.9B €2.0B €0.9B €0.7B €1.3B €1.2B €1.6B €0.8B €2.1B €1.4B €2.6B 1.4x €42B Page / 17 Source: Dealroom.co and Google Finance. Note: Sum of the valuations of all startups founded after 2000. Using estimated valuations based on most recent VC rounds, public markets and publicly disclosed valuations as of June 24th, 2021. Europe’s Healthtech & Biotech companies are now worth €231 billion. €9.4B €13B €17B €25B €30B €51B €68B €93B 2016 2017 2018 2019 2020 Today €115B €166B €50B €231B Combined enterprise value of European healthtech & biotech startups created since 2000 €55B €75B €90B €136B €181B ▊ Biotech = 78% ▊ Digital health = 22% Page / 18 Source: Dealroom.co and Google Finance. Note: Sum of the valuations of all startups founded after 2000. Using estimated valuations based on most recent VC rounds, public markets and publicly disclosed valuations as of May 3rd, 2021. The top 10 most valuable European Biotech companies represent 65% of the value. €46B €22B €13B €10B €7.8B €7.3B €7.0B €4.3B €2.6B €2.0B mRNA applications mRNA applications Autoimmune diseases Gene editing Endocrinology diseases Drug discovery Hematology medicines Nanomedicine Cell therapies Psychedelic drugs Top 10 European Biotech companies founded after 2000 R&D layer Intelligence layer Infrastructure layer Engagement layer Professionals Providers Biopharma Payers Page / 19 Source for valuations: Dealroom.co analysis of private and public valuations. Most global VC investment activity and value creation has been in the engagement layer: building new user experiences. $90B Digital pharmacies $90B Digital care incl telemedicine $45B AI-first drug discovery $40B Digital health insurance $25B Continuous remote monitoring <$10B AI decision support <$10B Surgical robots <$10B Home tests $15B Hospital operations $5B Practice management $10B Software for clinical trials $10B Digital therapeutics Combined enterprise value of companies founded since 2000 by segment and innovation layer B2C has been scaling faster. B2B takes longer to unlock, but is at least as big an opportunity. Page / 20 Source: Dealroom.co. 2005 2010 2015 2020 $0.5B $1.0B $1.5B $2.0B $2.5B Enterprise value $3.0B $3.5B $4.0B Patient-facing Monetized via deals with payers and/or reimbursement systems. Provider-facing Investor landscape 3 European Healthtech & Biotech investors. Source: Dealroom.co. Not exhaustive. Funds selected based on number of investments in Healthtech and (future) unicorns. Seed Series A Series B+ European funds with dedicated Healthtech focus Sector agnostic European funds U.S. / Asian funds active in Europe Page / 22 European funds that do biotech and healthtech European funds with dedicated Biotech focus Source: Dealroom.co. Page / 23 Investment in European healthtech startups by source of capital Investment in European biotech startups by source of capital 2016 2017 2018 2019 2020 2021YTD Domestic European cross-border USA Asia RoW Unknown HQ 56% 54% 51% 43% 44% 32% 19% 29% 19% 36% 28% 21% 9% 11% 16% 11% 12% 27% 15% 3% 10% 10% 8% 12% 2% 5% 2% 6% 2% 3% 2016 2017 2018 2019 2020 2021YTD Domestic European cross-border USA Asia RoW Unknown HQ 38% 18% 31% 42% 27% 30% 32% 15% 24% 24% 23% 15% 25% 45% 36% 26% 27% 42% 4% 21% 9% 5% 18% 5% 7% 4% 1% 2% US investors account for nearly half of investment in European health & biotech startups. VCs are the main contributors in funding for European healthtech and biotech startups. Source: Dealroom.co. Page / 24 Investment in European healthtech startups by source of capital Investment in European biotech startups by source of capital 2016 2017 2018 2019 2020 2021YTD Venture Capital Corporate VC Corporate Other 2016 2017 2018 2019 2020 2021YTD 67% 62% 77% 66% 58% 62% 11% 5% 7% 7% 6% 5% 10% 30% 8% 22% 13% 11% 12% 3% 9% 6% 22% 22% 72% 70% 64% 81% 60% 60% 3% 6% 2% 3% 5% 6% 6% 8% 18% 7% 15% 14% 19% 15% 16% 9% 20% 22% Venture Capital Corporate VC Corporate Other Exciting things are happening at the intersection of Health & Biotech. Digital therapeutics: software is the treatment, requiring clinical validation in trial and demonstrating cost effectiveness in studies General AI which solved a major protein folding challenge (AlphaFold) potentially enabling a step change in drug discovery Acceleration of drug discovery using AI identifying new targets, mutations, etc Page / 25 Healthtech Software Biopharma Biochemical formulas Accelerating clinical trials. Establishing efficacy earlier (e.g. in phase II with 100-200 patients vs. Phase III with 1,000 patients) Better insights in patients beyond the clinical trial phases, improving transparency towards payers Improving patient selection, thereby reducing the need for large patient cohorts ✔ Better alignment between biopharma, providers, payers ✔ Faster development of treatments ✔ Better data on (cost) effectiveness Source: Dealroom.co. Graduation rates between rounds ▊ Biotech ▊ Deeptech ▊ Healthtech ▊ Other startups Source: Dealroom.co. Page / 26 2nd round 3rd round 4th round 36% 32% 28% 24% 15% 15% 12% 6% 4% 6% 5% 12% Seed round Graduation rates of Biotech startups are higher initially, and then fall in line with Healthtech and the broader market. 2 years 3 4 5 6 7 8 years 5 10 15 20 25 30 35 40 45 Years since Seed round (median) Round size in $M (median)Time between rounds and amounts raised ▊ Deep tech ▊ Tech startups ▊ Biotech ▊ Healthtech 5 3 2 2 2 4 3 4 5 Deep tech Tech Biotech Round 2 means the round after seed round (considered first) For tech startups, the first follow-on round over $4M happens 1.5 years after seed round but for biotech and healthtech, 2.2 and 2.6 years, respectively. 5 4 3 2 3 5 Healthtech 4 Page / 27 It takes (a bit) more time and capital to build a healthtech and biotech startup. Source: Dealroom. Convergence of Bio & Healthtech bodes well for hubs that are strong in both. Basel, Leiden, Lausanne, Dublin Cambridge, Oxford, London, Munich Paris, Stockholm, Berlin, Barcelona, Zurich Healthtech Clusters (startups, investors, academia) Page / 28 Biotech clusters (startups, investors, academia) Source: Dealroom.co. European healthtech: 13 unicorns and 40 future unicorns (57% in UK+France). Page / 29 Unicorns Future Unicorns European Healthtech unicorns and future unicorns 7 United Kingdom 10 3 France 1 Germany 20 1 Switzerland 6 Belgium 3 5 1 Sweden 3 2 Ireland 2 1 Netherlands 2 1 Poland 1 1 Russia 1 1 Finland 1 1 Spain 1 13 7 5 4 1 1 Source: Dealroom.co. European biotech: 31 unicorns and 51 future unicorns (40% UK+France). Page / 30 European Biotech unicorns and future unicorns 8 United Kingdom 10 1 France Germany 24 5 Switzerland 9 Denmark 3 9 4 Netherlands 8 3 Belgium 7 3 Ireland 7 2 Sweden 3 1 Spain 2 1 Iceland 1 1 Italy 1 16 9 4 4 3 1 5 4 5 Unicorns Future Unicorns Source: Dealroom.co. Access now! 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