Introduction Fig. 3: European Biotechnology & Pharmaceuticals Analysis in 2019 by Country excl. BioNTech Deals All Countries – Average Deal Volumes in 2019 by country EURm a trend that is in line with the increase in European deals and volumes. However, there is still a considerable amount of catching up to do compared to the USA. US funds are more active and have been able to collect significantly more money than in previous years, also recording a new high in 2019 with EUR 13.8 billion raised. Europe, and Germany in particular, appear more hesitant compared to the USA: German investors accounted for just 10% of fundraising in Europe over the past five years. US investors, on the other hand, raised four times more than their European counterparts during this period and 35 times more than German investors. The specific funds and drivers behind the European vintage 2019 funds may only be impressive at first glance. After all, the top five of these funds raised a total of EUR 2.2 billion out of around EUR 3.9 billion. More- over, six of the ten largest funds raised in 2019 originate from the UK and France; Germany – with Wellington Partners and a volume of EUR 210 million – ranks at the 7th place. In line with the fundraising activities, the most active investor hubs also originate from the UK (London, Cambridge and Oxford) and France (Paris) while German hubs are not represented in the top ten. Munich only ranks at 11th place with Fig. 2: Most Active European Life Science Countries (L5Y) Top 5 Active Countries – Deal Volumes over Time EURm 3.000 2.500 2.000 1,944 1,389 1.500 1,476 1.000 500 0 2015 = 4,440 2016 2017 2018 2019 Source: PitchBook as of 14.01.2020, FCF Equity Research approximately EUR 108 million invested in 2019. Again, the comparison with the USA is illumina- ting: In the USA, the fund volumes of the top five vintage 2019 funds are sig- nificantly higher (EUR 5.4 billion), investors collect around three times as much as their Euro- pean counterparts. An era of funds of more than “one billion US dollars” has long since begun. the Europe’s dependency on the USA Analysing the origin of VC investments shows that in recent years, significantly more capital has come from foreign investors. In 2019, the share of such “cross-border volumes” amounted to 63% in Euro- pe, underpinning the fact that life science compa- nies are simply becoming increasingly dependent on foreign capital. Especially in later rounds – in which funding requirements become larger –, cross-border investors have become increasingly important in European deals. Within Europe, the UK and France are setting the tone as the major cross- border investors. In 2019, Germany ranked second in Europe thanks to Frese- nius’ EUR 60 million Uni- cyte deal. Not counting this deal, however, Ger- many falls behind as in the previous years. In short, Germany is not a relevant cross-border in- vestor and plays only a minor role within Europe. = 1,160 = 878 = 1,500 = 1,865 2,868 2,167 The biggest and un - challenged contributor, however, is the USA With EUR 683 million in- vested capital in 2019, the US leads the top ten rank ing. Throughout the last five Source: PitchBook as of 14.01.2020, FCF Equity Research 29,4 19,0 16,0 15,4 Without BioNTech 12,4 10,9 9,7 9,7 7,6 7,6 6,7 2 Deals 14 Deals 32 Deals 8 Deals 20 Deals 79 Deals 15 15 DealsDeals Deals 12 Deals 10 Deals 3 Deals 2 Deals 2 Deals 4 Deals 11 Deals 1 Deal 1 Deal 1 Deal 3,5 2,8 2,5 2,3 1,0 0,2 0,0 years, US investors were responsible for around 50% of the cross-border volumes in the top ten ranking in each year. In other words, the European life science industry is heavily dependent on US investors. Within Germany, a weak home bias of German investors is a major cause of the problem. While British and French life science companies have drawn 50% to 60% of the capital raised from domestic investors in the last five years, 66% to 84% of the invested capital was put in domestic companies by British and French inves- tors in this period. Such home-biased investment activities support the dome- stic market. In contrast, German life science compa- nies have only obtained 25% of the capital raised over the last five years from domestic investors, and only 54% of the invested capital was put in domestic companies by German investors during this period. It is a paradox that is causing problems for the life science sector in Germany: German investors invest more abroad than the UK and France; at the same time, German companies must raise more money abroad, and most likely in the USA. 01-2020 “Financing Life Sciences“ ls 13