After two years of euphoria, 2023 reflected a correction in the investment market that tied up most of the capital. However, investors predict an increase in the number and quality of operations for 2024, according to Study on investment in the Life Sciences and Healthcare industry in Catalonia 2023, prepared by CataloniaBio & HealtTech and EY, and presented today as part of the second edition of Connection Day, in La Farga de L'Hospitalet de Llobregat.

Venture capital, although it suffered a decrease in operations, has been the first source of financing, contributing more than half of the total investment, with 51.8%, of which almost 60% was international participation captured by local managers. Public aid, which doubled in 2023, ranked second among the instruments used for investment, with 60.8 million euros. The study also highlights the entry of 15 new national investors into the sector, attracted especially by the biotechnology and digital health sub-sectors. In parallel, there was also an all-time high in capital raised through debt transactions, with a sum of €28 million; a decrease in investment rounds, which at the same time were prolonged in time; and a large amount of non-publicly visible investment through internal rounds, extensions of existing projects or internal fund conversions. This implies that there was considerable portfolio investment last year that went unnoticed.

Restrictive international monetary policies, inflation, market volatility and other factors such as the war in Ukraine put investment funds on alert and they chose to hold back assets. Despite this, last year saw significant growth in international investment in the biotech sector, with a 46% increase, with a combined total of $79.748 billion invested in the US and Europe. In Europe, despite an increase of 37.7% to $11.194 billion, the pre-pandemic levels have not yet been recovered.

Figures on investment in startups in Catalonia reached 220 million euros, an amount that maintains an investment trend higher than the figures recorded before the pandemic, with a growth of over 96% since 2018. These data indicate a faster recovery of investments in the health sector in Catalonia than at European level. In this environment, capital increases predominated as an investment method, both globally and in Catalonia, where crowdequity experienced an increase of 13%, becoming a prominent financing channel.

According to the study, capital disbursement in Catalonia grew from €33.22 million in 2022 to €48.60 million last year, increasing local investment by 46.2% and quadrupling compared to the last four years. Most of these investments were concentrated, both globally and in Catalonia, in biotech companies (48% and 53% respectively), followed by medical technology companies (24% and 26% respectively) and digital health companies, which in Catalonia have increased their investments by 61.5% compared to 2022, reaching an investment of 63 million euros, a figure that practically equals its historical maximum in 2021, which was 64 million euros.

The analysis also shows that almost 18% of healthcare companies have invested in oncology, as has been the case since 2016. Following in importance, 12% of companies have invested in the central nervous system, 3.2% more than the previous year, an area where investment has increased by 96% between 2018 and 2023. The third position is occupied by companies in the respiratory system, with 9% of investments. Other areas that have also proved attractive are otolaryngology and vision. These data highlight the fact that Catalonia is aligned with global trends.

The investors participating in the survey predict that 2024 will be a year marked by intense growth, with an increase in both the quality and quantity of investment opportunities. On the other hand, investment in Catalonia has aroused the interest of international investors, who have already begun to operate in Catalonia. In this context, the participation of North American and European investors in advanced stages of investment is expected to intensify, reflecting confidence in the solidity, maturity and growth potential of the health sector in Catalonia.

With regard to startup funding, the study observes that the founders (89%) assume almost all of the initial cost, gradually decreasing their participation to 65% in the first round and 47% in the second round. The biotech sub-sector is the one that experiences the greatest dilution in these financing processes. In this sense, medical technology emerges as the segment with the highest proportion of Catalan shareholders (89%), followed by biotechnology (79%) and pharmaceuticals (74%).

The gender issue continues to be unbalanced. Although there has been a slight increase in the presence of women in healthcare, with 54% of the total number of professionals, 3% more than the previous year, there has been a decline in the representation of women in management positions, with only 38% occupying top executive positions, 4% less than in 2022. However, it is worth noting that in 46% of the companies, half or more of the executive positions are held by women, although there are still 20% of companies that have no women in the management body.

The report, promoted by CataloniaBio & HealthTech and EY, also indicates that Catalonia continues to stand out as the main centre for R&D investment in the health sector, accounting for 52% of the total. The pharmaceutical sector leads investment in research and development, allocating 63% of the budget, closely followed by medical technology companies, which allocate 50%. Internationally, investment in R&D projects is consolidated as the second preferred option for companies, with an average of 25%, although investment in other Spanish regions has grown by 10% compared to 2022.

The study also shows companies' concerns about limited physical resources, which affect their growth and development. These include the widespread perception that they do not have sufficient and adequate space, a concern that particularly affects companies in the health sector that have laboratories with current biosafety levels, wet and dry laboratories, as well as clean rooms. This finding suggests the need to assess and improve the infrastructural capacity for these specific facilities to ensure an optimal working environment for workers.

This year's edition of the study incorporates a detailed analysis of the tax landscape and incentives for research, development and innovation in Catalonia, comparing them with Flanders, Switzerland, Sweden and Denmark. The conclusions highlight that Catalonia and Switzerland are the geographies that most benefit personal income, with an effective marginal tax rate of 46% and 54.1% respectively. On the other hand, Catalonia occupies an intermediate position with respect to the tax burden on companies.

"We have full confidence in the strength of the biotech and healthtech ecosystem. We see a lot of appetite from investors, and we expect that in the coming months significant transactions will continue to be confirmed. In particular, Catalonia continues to demonstrate its ability to maintain and strengthen its position as an entrepreneurial hub and attractor of investment, and we expect this to continue in the coming years. Furthermore, if the macroeconomic situation clears up, with lower interest rates and the geopolitical context stabilises, we expect many transactions to be unblocked and a very active second half of the year," says Borja Sangrador, partner at EY Healthcare and Life Sciences.

Photo: Representatives from CataloniaBio & HealthTech and EY, promoters of the study