China biotech makes Asia global healthcare PE leader

A surge in small-scale investment activity, driven by trends such as China biotech start-ups maturing into growth equity opportunities, prompted the Asia deal count to hit 156, up from 68 in 2019, according to Bain & Company’s latest global healthcare private equity and M&A report. This came even as cumulative transaction value fell to $11.5 billion from $16.9 billion.

On a global basis, healthcare private equity deal volume increased 21% to 380 deals in 2020, despite a 14% decline in PE activity across all sectors. A total of $66 billion was invested in healthcare, a 17% year-on-year decrease. In North America, deal volume and value were both down on 2019, coming in at 142 and $34.7 billion, respectively. In Europe, $14 billion was deployed across 75 transactions.

COVID-19 was in turns disruptive and transformative for healthcare. Lockdowns led to preventive and elective procedures being delayed or dropped, equipment and medicine supply chains were thrown awry, and clinical trials were put on hold. However, the pandemic also underlined opportunities in alternative sites of care, telemedicine, modernization of clinical trials, and healthcare provider consolidation, the report said.

The findings on Asia are consistent with AVCJ Research’s data on broader PE and VC activity in the sector. A total of $30.6 billion was deployed across 745 transactions, breaking the record of $18.5 billion and 591 deals set in 2019. While buyouts were roughly in line with 2019, growth equity and VC investment both doubled, reaching $14.5 billion and $8.2 billion, respectively.

Healthcare was comfortably the second most popular sector after IT and the gap between them is its narrowest in seven years. From 2014 – when IT investment in Asia really took off – to 2019, PE and VC commitments to IT were 4.5x those to healthcare. In 2020, it was 2.2x.

Of the major Asian markets, India, Japan and Korea all saw healthcare investment increase on the previous year. But China was the key growth driver, with deal value rising from $8.3 billion to $19.6 billion. Biotech and pharmaceuticals were the most active areas. Nearly $13 billion was put to work in 274 deals, up from $4.8 billion and 188 in 2019.

The Bain report identifies three major themes. First, growing investor support for promising cell and gene therapies. CAR T-cell treatments are the cited example, and while several Chinese start-ups specializing in this area received funding, money is also going into emerging areas such as immune checkpoint inhibitors and antibody-drug conjugates.

Second, there is a greater willingness to take on molecule-specific risk in early-stage investments, notably in China where there is substantial policy support for drug innovation. This may explain a blurring of the lines between venture capital and private equity. Third, Indian biopharma supply chain businesses are benefiting from multinationals looking to diversify their supply chains beyond China.

“Given the growth trajectory that Asia Pacific has shown, we expect investors to continue showing keen interest here, especially considering the sharp growth of local innovation from high-tech biopharma and medtech targets and the strong demand for high-quality care in emerging Asia Pacific. As private equity funds look for ways to put their capital to work, we expect fast transactions for those assets that can show early signs of returning to past performance levels,” the report said.

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• Topics
• Healthcare
• Expansion
• Buyouts
• Greater China
• Australasia
• South Asia
• North Asia
• Southeast Asia
• North America
• China
• Pharmaceuticals
• Japan
• Australia
• India
• South Korea