Forget about beaches, sangria and flamenco. Long a popular tourist destination, Spain is increasingly becoming known for its continent-leading role in hosting clinical trials, signalling high potential for its growing pharmaceutical and biomedical sector.

Spanish healthcare centres were involved in more than 40% of clinical trials authorised by the EU via the Clinical Trials Information System, which launched in early 2022, according to the national association Farmaindustria. Spain’s glowing performance left France and Germany out in the cold, the association also said.

This simmering activity “may attract more attention” from global pharmaceutical and biotech companies that are looking to expand via M&A deals, said Roger Villarino, Partner responsible for Life Sciences & Healthcare at Deloitte Financial Advisory.

There is an ongoing slow cook in Spain’s pharmaceutical and biomedical space, with deals seeing an upward trend over the last decade, Mergermarket data shows.

The year 2021 saw a wave in investments in Spanish targets as the COVID-19 pandemic shone the spotlight on biotechnology and pharma research globally. One of the biggest deals in the space was the EUR 375m takeover of Sanifit Therapeutics by the Swiss firm Vifor Pharma.

The following years failed to meet this high watermark as frigid biotech markets around the world starved small and mid-cap healthcare companies of capital and cut off exit options. In 2023, however, deal volumes were still higher than those of any year preceding the pandemic.

As global biotech and pharma markets begin to warm up once again this year, Spain’s sector is showing hints of reignition, with one example being a recent EUR 7m funding round raised by the Catalan company Ability Pharmaceuticals. The firm is using the cash to finance the clinical development of a treatment for various types of cancer.

Consolidate for R&D

A closer look at the numbers highlights strong local consolidation, with almost 45% of deals since 2015 involving domestic deals. Standout deals include the EUR 216m takeover of NATAC by IFFE Futura in 2023 and Sanifit’s EUR 72.2m Series C round in 2019 led by Caixa Capital Risc. Players across Europe are also cashing in on Spain’s offerings, including in Sweden and Germany.

Consolidation helps pharmaceutical productivity and innovation as larger companies can increase their research and development (R&D) budgets. Sunny Barcelona is now second only to London in terms of nurturing European biotech startups and investments, according to a writeup from the pharmaceutical manufacturing events platform CPHI.

This potential aligns with Spain’s pharmaceuticals market, which is projected to grow by around 5% per year between 2024 and 2028, said Villarino, adding that some subsectors such as outsourcing pharmaceutical services are expected to outstrip this growth.

Other factors behind the increasing interest in the sector include the country’s public healthcare system, which is among the leaders in the EU in terms of funding.

Pipeline hot

Big pharma companies globally have a growing appetite for replenishing their lucrative pipelines with targets backed by venture capital (VC) firms. This could benefit Spain’s emerging startup scene.

One sizzling candidate is the gene therapy player SpliceBio, according to Mergermarket‘s Likely VC Exit predictive algorithm.* Its score of 64 out of 100 is driven by management experience and is backed up by a EUR 50m Series A round in 2022 to finance the development of its ophthalmological treatments. SpliceBio also landed a EUR 200m (USD 216m) licensing deal with Roche’s [SWX:RO] Spark Therapeutics last year.

Minoryx Therapeutics is another target warming up for the market with a Likely VC Exit score of 28. The firm bagged a EUR 51m Series C round in 2022 with the mission to commercialise its Phase III-stage candidate leriglitazone for the treatment of the rare disease chromosome X-linked adrenoleukodystrophy.

Meanwhile, Laminar Pharma is mulling an IPO in 2025, as reported in January. The company is using recent financing rounds to fuel the development of its glioblastoma treatment in Phase III clinical development as well as other programmes in its pipeline.

Core challenges remain for M&A in this space, including a higher cost of capital than before that may deflate valuations and eat into investors’ returns, Villarino said. Nonetheless, Spain radiates potential for growth in the coming decades, with demand for high-volume or high-technology products turbocharged by an increased focus on healthcare affordability and government policies favouring a democratization of medicine, he said.

by Jonathan Smith with analytics by Santosh Shetty

*Mergermarket’s Likely VC Exit predictive analytics assign a score to VC-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.

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