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Pulse of the industry: medical technology report 2012 - Financing: Europe - EY - Global

Pulse of the industry: medical technology report 2012 – Industry performance

Financing: Europe

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European medtech financing by year


Source: EY, BMO Capital Markets, Dow Jones VentureSource and Capital IQ.

Funding for European medtech companies declined in all four categories in 2011–12. However, despite the 5% decrease in year-over-year financing to US$5.9 billion, European medtechs still enjoyed the second-highest level of funding since at least 2005–06.

Like the US, the vast majority of funding (US$4.8 billion, or 80% of the total) came in the form of debt. Nearly 85% of European debt was raised by Fresenius Medical Care and Covidien. Fresenius alone raised more than US$2.7 billion, which it primarily used for the acquisition of Liberty Dialysis. Venture capital investment was down for the second year in a row, reaching its lowest level (US$676 million) since 2005-06.



European venture capital by year


Source: EY, BMO Capital Markets, Dow Jones VentureSource and Medtrack.

In the year ending June 2012, venture capital raised by European medtech companies fell to US$676 million — the lowest level since at least 2005–06. With increased uncertainty in the Eurozone and a challenging exit environment, venture funds have been raising and distributing less capital. While the number of rounds was up 14% to 184 versus the prior year, the average deal size fell 16% compared to 2010-11 and remained much lower than their American counterparts (US$4.1 million, vs. US$9.2 million).



Top 10 European venture rounds, 2011–H1 2012



Company


Region


Product type (disease)
Gross raised
(US$m)


Quarter

Round type
Agendia Netherlands Non-imaging diagnostics 65 Q2 2012 Late stage
InSightec Israel Therapeutic devices (oncology) 31 Q2 2012 Late stage
Osford Immunotec United Kingdom Non-imaging diagnostics 28 Q1 2012 Late stage
Atlas Genetics United Kingdom Non-imaging diagnostics 27 Q3 2011 Late stage
Amplitude France Therapeutic devices (orthopedic) 24 Q1 2012 Late stage
Curetis Germany Non-imaging diagnostics 22 Q4 2011 Early stage
Tobii Technology Sweden Other 21 Q1 2012 Late stage
BrainsGate Israel Therapeutic devices (neurology) 20 Q3 2011 Late stage
MyoPowers Medical Technologies Switzerland Therapeutic devices (urology/pelvic) 18 Q3 2011 Early stage
Occlutech Sweden Therapeutic devices (cardiovascular) 18 Q3 2011 Early stage

Source: EY, BMO Capital Markets, Dow Jones VentureSource and Medtrack.

As in the US, the bulk of Europe’s 10 largest venture financings were later-stage investments. Investors also gravitated away from therapeutic devices and toward categories such as non-imaging diagnostics, which are often perceived as having easier paths to regulatory approval and reimbursement — a trend we have noted in previous Pulse of the industry reports.



US and European IPOs, July 2011–June 2012



Company


Ticker


Location


Product type (disease)
Gross raised
(US$m)


Quarter
ZELTIQ Aesthetics ZLTQ US - North California Therapeutic devices (aesthetics) 91 Q4 2011
GI Dynamics GID US - Massachusetts Therapeutic devices (gastrointetinal) 83 Q3 2011
Mauna Kea Technologies MKEA France Imaging 68 Q3 2011
DBV Technologies DBV France Non-imaging diagnostics 53 Q1 2012
EOS imaging EOSI France Imaging 49 Q1 2012
Sphere Medical SPHR United Kingdom Non-imaging diagnostics 22 Q4 2011
Osprey Medical OSP US - Minnesota Therapeutic devices (cardiovascular) 21 Q2 2012
Vexim ALVXM France Therapeutic devices (orthopedic) 14 Q2 2012
Visiomed Group ALVMG France Non-imaging diagnostics 7 Q3 2011
Intrasense ALINS France Imaging 6 Q1 2012
Brighter BRIG Sweden Therapeutic devices (hematology/renal) 2 Q1 2012

Source: EY, BMO Capital Markets, Dow Jones VentureSource and Medtrack.

Post-IPO returns were depressed, and only one company — Sweden’s Brighter — experienced an increase in share price as of 30 June 2012, with a relatively minor 2% gain. The performance of this IPO class is unlikely to boost investor sentiment for new issues in the medtech sector.



US and European IPO performance, July 2011–June 2012


Source: EY and Capital IQ.



Capital raised by leading European countries, July 2011–June 2012


Source: EY, BMO Capital Markets, Dow Jones VentureSource and Medtrack.
Size of bubbles shows relative number of financings per region.

Companies in Germany raised nearly US$3 billion in the year ending June 2012 — half of the European total. Almost all of this amount (99%) was the result of two debt offerings by Fresenius Medical Care. Sweden (US$525 million) and France (US$345 million) rounded out the top three countries for total capital raised.



Capital raised by leading European countries without debt, July 2011–June 2012


Source: EY, BMO Capital Markets, Dow Jones VentureSource and Medtrack.
Size of bubbles shows relative number of financings per region.

As with the US, the distribution of funding in Europe was altered significantly when debt was omitted from the funding analysis, as Germany fell from first to sixth overall. For the first time in several years, Israel did not attract the largest amount of venture capital in Europe. That distinction went to the United Kingdom, where companies raised US$187 million, besting Israel, which garnered US$130 million. In another sign of the challenging funding environment, the UK and Israel were the only countries that crossed the US$100 million threshold in 2011–12, down from four countries during the prior year.

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