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The healthcare investment ecosystem in the BioRegion of Catalonia is increasingly solid and connected. On top of specialized local investors, the BioRegion of Catalonia has also seen a significant increase in international investors, which have gone from 0 to 50 in the past 10 years and grown tenfold in just the past five years. In fact, for the third year in a row, the Financial Times has recognized Catalonia as the best region for investment in southern Europe for 2020-2021. In these uncertain weeks, the question is inevitable: could the Covid-19 crisis bring all this tumbling down?

In a recent post on Forbes, Bruce Booth, a partner in US venture capital fund Atlas Venture, reminded readers that the biopharmaceutical sector isn’t directly tied to conventional economic cycles, unlike traditional industries that are highly dependent on demand and spikes in unemployment. “That disconnect from conventional economic cycles is one of the reasons why biopharma tends to outperform other sectors during financial recessions,” Booth highlights. In fact, according to Pitchbook, the first quarter of 2020 was the biggest quarter ever for biopharma venture capital in the United States ($5.5 billion). In Europe, according to data from Crunchbase, investment in the sector was up year on year for the first quarter of 2020, from $1.2 billion to $1.4 billion. “In light of this, I believe private biopharma venture funding levels will likely stay healthy over the coming quarters,” Booth says.

In the BioRegion of Catalonia, investors who specialize in the sector agree with this prediction. “Our message is that we can’t stop,” warns Lluís Pareras, founding partner of Invivo Ventures. So, Invivo Ventures continues to study and execute the investments it had on the books, and expects to close some rounds before summer. They’ve demonstrated this recently by announcing a €2-million round in Pulmobiotics. “Stopping now would be a mistake, because science and biotechnology will play a huge role in society and, for those who don’t stop now, having the advantage of these 2 quarters will be key,” warns Pareras. “It is time to execute everything we had planned,” confirms Clara Campàs, partner and co-founder of Asabys Partners, as they put the final touches on a couple of rounds with international participation: “Everything is still going forward and at the same pace.”

The Alta Life Sciences fund hasn’t changed its investment forecasts either. “Right now, we’re very focused on closing the operations we already had underway, both with companies we’ve already invested in and some new ones. For now, the problems are more due to logistics than because investment has been curbed due to the pandemic,” explains Montserrat Vendrell, partner at Alta Life Sciences. “In some operations we’ve even had to turn away potential investors.”

Ysios Capital also plans to close some operations before the summer. “They will be bigger operations, because in the face of uncertainty there is a tendency towards larger rounds to fund companies until they have very robust data that can attract pharmaceutical corporations,” explains Joël Jean-Mairet, managing partner at Ysios Capital, which is currently preparing its third fund. “Since the crack in March, we’ve stopped fundraising because all the investors have other concerns right now. But that doesn’t affect the size of our new fund, planned for €200 million, because a significant part of this is already committed and we expect to get back to our usual fundraising in June.”

Nina Capital, an international VC based in Barcelona and focused on healthtech, was also raising capital just before the pandemic. “We were lucky to be almost fully subscribed as of early March, and we had already stopped actively fundraising –said Dr. Marta-Gaia Zanchi, founder and partner of Nina Capital-. We know many other emerging fund managers who are reducing targets or postponing a first closing, especially Micro VCs, as the limited partnership base for many of them include family offices and HNIs (high-net-worth individuals) most impacted by the pandemic”.

Dr. Zanchi’s forecast for healthtech investment are cautious. “For the rest of the year, we will see lower total amount of investment in health technology concentrated in fewer deals; part because there'll be less capital, period, part because some firms especially the largest and most active are not very active right now”, she said. “I wonder if we will see a redistribution of capital from other sectors which have been most impacted by COVID-19 to ours, which if it happens would in part balance out the net loss on aggregate”, Dr. Zanchi added.


Investment in healthcare, an alternative to the stock market and other sectors

Some stock market investors are looking into funds that specialize in healthcare these days. “This isn’t the time for aggressive fundraising, but we’re still getting calls from investors who want to invest in healthcare,” says Clara Campàs. There is growing interest in the healthcare sector and in venture capital in general, because there are many investors who are tired of the standard market and want to move into venture capital, which is more acyclical.” What does the healthcare sector have to offer these investors? “They see it is a sector with longer cycles and right now is a safer investment than the stock market. Investments always move to cover unmet needs, and Covid-19 is opening a lot of doors for business and investment opportunities in this sector,” adds Montserrat Vendrell.

Health research has been in the media constantly during this crisis, making the public more interested and knowledgeable on this topic. Will that translate into more investment in the sector? “Biotechnology will be even more prominent after Covid-19, as it is attracting interest and its visibility will be boosted,” says Lluís Pareras. “But that also depends on the overall situation of the economy, not only in biotechnology: if the economy really suffers, it will be a bit more difficult to invest, in any sector.”

And in the healthcare sector, will the distribution of investment change? Of the 10-15 opportunities Ysios Capital receives each week, most are still in oncology and the central nervous system. “We have, however, noticed that we’re getting more projects for antivirals or vaccines in the past few months,” notes Joël Jean-Mairet. At Asabys, “We’ve seen tons of projects on infectious diseases and when we calculated the return on investment, it never came out positive. But now we’ll rethink that.” “I’m sure we’ll see more investment in infectious diseases,” predicts Clara Campàs. “More than projects focusing on Covid-19, we like projects that can adapt to any epidemic or pandemic that may pop up.” Pareras adds, “investors don’t invest in a topic; we invest in good science.”

“Many venture capital funds, including Alta Life Sciences, don’t prioritize investment in diagnostic companies because the risk/reward ratio is less attractive than therapeutic companies,” Montserrat Vendrell confirms. “A crisis like this one with Covid-19 will come back periodically every 10-15-20 years, because this is what has happened throughout history, and that should make us take note and learn that we can’t stop investing in infectious diseases.”


Advice for portfolio companies

Sifted, the Financial Times publication that specializes in European start-ups, estimated a few days ago that companies’ valuations are dropping between 10% and 30% and, to avoid this, some companies could be prioritizing internal rounds with current investors. They also highlighted that investors are spending less time searching for new dealflow and concentrating on keeping a close eye on their own portfolio.

Certainly, venture capital funds in the BioRegion of Catalonia are carefully watching how the Covid-19 uncertainty is affecting the companies in their portfolio. “They have to revise the budgets for this year and next very carefully to keep as much cash as possible for as long as possible to face delays,” highlights Joël Jean-Mairet, managing partner of Ysios Capital. “In this situation, there are companies that won’t be able to carry on with their research as usual (for example those in the clinical phases) and they’ll see delays of 3-6 months that they have to be able to cover.”

Foreseeing this situation, Alta Life Sciences recommends “closing the biggest rounds possible, instead of doing several small ones in a row. This way, companies will be more liquid and can better face the operational delays that will come.”

Invivo Ventures has asked its companies for an impact report and contingency plans, taking into account all possible scenarios: best-case, worst-case and something in the middle. “Our advice depends on each company, but we require focus and pressing to keep going and try to move forward as much as possible during this time,” Lluís Pareras notes.


On the other hand: companies that are raising funds

The situation of companies in the BioRegion varies widely. Some say it has been impossible for them to get ICO lines of credit because they don’t have consolidated, recurring business, as many don’t have turnover; those in the clinical phase are finding it difficult or impossible to start or continue recruiting patients, which drives down the value of the company. Others have opened rounds smack in the middle of the pandemic. One example is Chemotargets, which just a few days ago announced it is looking to raise between €5 million and €15 million.

CreatSens Health had planned to launch a round of investment this month, too. “We’re looking into delaying it until things calm down a bit,” explains Adrià Maceira, CEO and co-founder of the company. This situation creates uncertainty that causes risk when investing and that can have an impact on a round of funding. We can’t calculate the impact but I’m pretty sure it would affect us.”

MOWOOT, created from the Biocat d·HEALTH Barcelona program, had opened a series A round just a few weeks before the lockdown began. “We had a European roadshow planned, including several medtech investment conferences that have now gone digital. It isn’t the same as meeting in person, but in some cases the number of participants tripled, suddenly and without having to travel,” explains Markus Wilhelms, CEO and co-founder of MOWOOT. “Now we’re in contact with many international investors, we’re starting due diligence with some of them and it’s too early to say whether the pandemic will affect how long it takes them to make decisions and value our company, but we hope not.”

IOMED was putting the finishing touches on a round of funding when the pandemic hit and will close it this year. “We’re already pretty far along in the round and we’re carrying on, but the current situation has made investors more cautious when they see more risk in the market and want to reevaluate if it’s worth it for them to take the specific risk in each operation,” explains Javier de Oca, CEO and co-founder of IOMED. “We have a certain history and turnover, so we can afford to wait, but in the healthcare sector many companies with long turnover cycles can be particularly vulnerable if venture capital activity comes to a standstill. And right now it wouldn’t be appropriate at all for this type of companies to be in trouble,” warns De Oca.

Sifted noted that the contracts signed with investors these days are including more ‘investor-friendly’ clauses than ever, to protect their interests. “Investors’ business is a tightrope act balancing risk and profit: it’s normal that they try to shield themselves from it when things get riskier,” says Javier de Oca.

Other companies in the BioRegion have been caught in the middle of a round. ADmit Therapeutics  currently has a crowdfunding campaign open with Capital Cell. “During lockdown, the small contributions have continued coming in, but the larger amounts that had committed are being delayed because investors are looking at the economic situation to come,” says Marta Barrachina, CEO and co-founder of the company. “Plus, we’re facing an ethical dilemma in promoting the campaign, as the pandemic makes it more difficult to raise awareness of the middle-to-long-term impact of other diseases that, unfortunately, will continue to be unmet medical needs.”

ZeCardio Therapeutics also has a crowdfunding round underway with  Capital Cell and, since early March, has gotten support from over 70 new investors with an average contribution of €1,000 each. “These figures show that small investors haven’t changed their minds about investing,” analyzes Davide D’Amico, CEO of ZeCardio Therapeutics. “They also tell us, however, that the same isn’t true of more professional investors, who are used to investing more and prefer to see how the crisis evolves, surely because their investments in other sectors are generating losses due to the generalized drop in the stock markets.” Nevertheless, D’Amico believes they will be able to successfully close the campaign.


Read the full interview with Joël Jean-Mairet, managing partner of Ysios Capital.

Read the full interview with Clara Campàs, partner and co-founder of Asabys Partners.

Read the full interview with Montserrat Vendrell, partner at Alta Life Sciences.

Read the full interview with Lluís Pareras, founding partner of Invivo Ventures.

Read the full interview with Marta-Gaia Zanchi, founder and partner of Nina Capital.

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Silvia LabéDirector of Marketing, Communications and Competitive Intelligence
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Laura DiéguezHead of Media Relations and Content(+34) 606 81 63
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