The COVID19 pandemic has dramatically impacted many aspects of life and will continue to do so at least for the better part of 2021. While the full extent of the effects still needs to be understood, many consequences can already be seen. Due to worldwide restrictions of elective procedures, healthcare providers suffered which will drive further consolidation of providers. The first months of 2020 saw an almost complete stop of M&A transactions, followed by an unexpected recovery of M&A activity in the second half. Governments across the world expanded their controlling power over M&A activity to secure medical resources. The German government e.g., has vetoed against non-EU bids for German manufacturers of vaccines, ventilators, protective equipment and other supplies of emergency and intensive care.
The acceleration of the digitalization due to the pandemic is expected to lead to more cross-sector deals. We have already seen large tech companies entering the Life Sciences space, now the pharmaceutical sector is acquiring digital companies to modernize their development processes. The social distancing rules during the pandemic led to a significantly improved acceptance of remote healthcare increasing the need for digital tools. COVID-19 has instantly changed consumer patients’ and consumer behavior towards accepting and adopting telemedicine. Valuations for digital companies are expected therefore accepted to remain high.
Artificial Intelligence will play a major role in drug discovery and device development. While prior to 2020 concerns about data privacy have slowed down big data and AI driven business models, the pandemic accelerated this process. Pharma companies used AI to crunch clinical trial data to test whether their medicines are effective against COVID-19 and thus speeding up the approval process. AI is likely to revolutionize diagnostics by analyzing data generated by wearables and apps.
Long before the pandemic wearables have begun to play an increasing role in healthcare. Smart health products are now offering analytics way beyond the standard fitness trackers, including the detection of cardiac arrythmia and nocturnal breathing disorders. Wearables are becoming an important part of telemedicine, as they help to monitor patients remotely.
Disruptions of manufacturing processes and the supply chains have also impacted medical device and pharma industries. The pandemic has caused many players to re-evaluate their value chains. Closer proximity of suppliers, more flexibility and less dependence will lead to higher valuations for European contract manufacturers.
Government spending and market support measures of central banks to fight the economic recession has left financial markets with high liquidity pushing up asset prices in sectors which have shown to be resilient or even winners of the structural changes induced by the current crisis.