Declining PE/VC investments is bad news for pharma and related sectors

In a sign that does not augur well for the pharmaceutical and other related sectors in the country, Private Equity/Venture Capital (PE/VC) investments into healthcare have shown a declining trend during the financial year 2022-2023. Private equity is capital invested in a company or other entity that is not publicly listed or traded. Venture capital is funding given to startups or other young businesses that show potential for long-term growth. After a year of record performance during the financial year 2021-22 in PE/VC investments into the healthcare and related companies in the country, the financial year 2022-23 has reported a decline of 12.2 per cent in value terms as compared to the previous year. The total deals declined by 33 per cent during the comparable period.

As per the data from Venture Intelligence, a research service focused on private company financials, transactions, and their valuations, the PE/VC investments into healthcare and related companies has seen a decline in terms of value to $5.22 billion in 113 deals during the 12 months ended March, 2023, as compared to $5.95 billion in 169 deals, which was the highest in four years, in the financial year 2021-22. Compared to the last quarter of the fiscal year 2021-22, the deal value has seen a decline to $841 million in 31 deals during the fourth quarter ended March, 2023. In the fourth quarter of the previous fiscal year, the industry saw fund infusion of $1.4 billion in 45 deals from PE/VC firms.

Investments into pharma and Active Pharmaceutical Ingredients (APIs) has seen a decline of 9.6 per cent in value of investments during the year - the sub-sector attracted $1.53 billion in 10 deals in FY 2023, as compared to $1.7 billion in 19 deals in FY 2022. Hospitals and clinics sub-sector reported a growth in attracting funds of $1.78 billion in 25 deals, as compared to $668 million in 19 deals during the last quarter of the fiscal 2023. Business to Business software sector, including Software as a Service (SaaS), had increased fund infusion at $ 676 million in 12 deals as compared to $256 million in 16 deals from April, 2022 to March, 2023. Healthtech also was hit by a decline in fund infusion at $557 million investment in 34 deals as compared to $1.05 in 64 deals during the 12 months of previous fiscal year. Medical technology, a sub sector which attracted $373 million in 13 deals in the previous year, has a marginal decline in funding with a value to $337 million in 12 deals in 2022-23. E-pharmacy, which saw investors flocking during the year 2021-22 with high value transactions bringing in $1.36 billion in 10 deals, reported a decline in PE/VC investment at $188 million in four deals during the year 2022-23.

Fund infusion into the biotech sector, however, experienced a growth at $95 million in five deals as against $50 million in eight deals in the previous year. Nutraceuticals industry also witnessed a decline in funding activity with $32 million invested in four deals, as compared to $50 million in eight deals during the previous fiscal year. The last quarter of 2022 has shown increased funding in the hospitals and clinics sub sector compared to the corresponding period of previous fiscal year.

PE/VC investments into hospitals and clinics during the period went up to $428 million in seven deals as compared to $262 million in five deals during the same period of 2021-22, says Venture Intelligence data. Pharma and API industry has seen decline in fund infusion at $175 million in two deals, as against $262 million in seven deals during the same period of previous year.

The MedTech sector attracted $117 million in five deals during the last quarter, compared to $255 million in three deals during the same period of previous fiscal year. Healthtech has also seen fund infusion declining to $76 million in seven deals, as compared to $368 million in 18 deals during the same period of the previous year.

In terms of the top five investments in the sector, Suven Pharmaceuticalsby raising $762 million in December, 2022 from Advent International topped in terms of value. It was followed by Asian Institute of Gastroenterology (AIG) with $316 million from Baring Asia in July, 2022 and Sahyadri Hospitals raising $315 million from Ontario Teachers’ Pension Plan last August. The other major deals in the healthcare and related sector during the year 2022-23 include VLCC Wellness raising $300 million from Carlyle in January, 2023 and Intas Pharmaceuticals raising $262 million from Abu Dhabi Sovereign fund Abu Dhabi Investment Authority (ADIA) in April, 2022, according to the data. Overall, it was a lean year for the pharmaceutical and related sectors as far as PE/VC investment is concerned. It does not augur well for the sector.

(The author is freelance

journalist with varied experience

in different fields)