With Covid-19, PE investments in key healthcare segments at a feverish pitch

The healthcare sector has been garnering a lot of attention — in India and across the world — ever since the onset of the Covid-19 pandemic. The need to find a vaccine and the additional expenses incurred in curing the virus has put the sector in the spotlight.

But, the private equity (PE)–venture capital (VC) investments that went into the sector in the January-September period in India, declined 12.5 per cent this year to $2.25 billion as against $2.57 billion in same period last year, according to data from Venture Intelligence, a firm that tracks private companies’ investments, financials and valuations.

A closer look at the sub-sector investments in the segment, however, showed that three specific fields — drug/API (Active Pharmaceutical Ingredient) companies, biotech companies, and firms in the consumer health and wellness space actually raked in more investment in the January-September period, compared to 2019.

For instance, the funding that went into drug manufacturing/API companies from January to September this year was $1,549.43 million, 195 per cent higher than last year’s $525 million. Similarly, biotech companies raked in $186.69 million, a whopping 413 per cent higher than last year’s $36 million. Likewise, firms in the consumer health and wellness space garnered $53.83 million this year, 27 per cent higher than $42 million in the same period last year.

Increased interest

Experts said though this interest is not out of the blue, the pandemic has accelerated funding in these segments.

“The Covid-19 pandemic has definitely resulted in an increased interest among investors for (the) simple reason that most of these biotech companies globally, including a few in India, are working on creating a vaccine for the coronavirus. The investments are also likely to grow in the coming months as vaccines are likely to be released by end of this year or mid-next,” said Anuj Golecha, Co-founder, Venture Catalysts, adding, “Besides, there is also a huge demand for certain healthcare products right from hand sanitizers to PPE kits and protective gears. The manufacturing of these products will increase.”

Among the biotech companies that received the highest funding in the January-September period are Biocon Biologics and MedGenome. While Piramal Pharma and JB Chemicals are among the firms that received the highest funding in the drug/API manufacturing space, the consumer health and wellness space saw firms including Practo and Pristyn Care garner maximum investments.

The road ahead

Experts said in the post-Covid world too, the interest towards these sectors will be a sustained, long-term phenomenon, because the public, as well as the governments, would want to prevent such pandemics in the future and keep healthcare the top priority.

Golecha said drug discovery, formulations, and API will attract more investments in the post-Covid world too, as researchers and pharma companies are likely to work on the prevention of diseases.

“Clinics, hospitals and diagnostic services face the biggest challenge due to Covid and saw 70-80 peer cent drop in patient footfall for selective procedures. Even in case of serious ailments patients were seen to be shying away from visiting health facilities. While the situation has improved, still most facilities are operating at 50-60 per cent of their pre-Covid capacity. This has also limited the capacity for health facilities to invest in procuring medical devices,” said Himanshu Sikka, Lead – Health, Nutrition & WASH, IPE Global, adding, “As the sector picks up, in post-Covid world, diagnostics and medical devices will be two sub-sectors to closely look at.”