What new trends are driving investments in the biomedical industry? Which healthcare companies are most attractive to private equity firms? How are changing models of corporate R&D impacting the landscape for innovation?
These issues are a critical part of the national conversation on healthcare funding — funding which advances cures, drives economic growth and spurs technological innovation. With the Republican National Committee focusing all eyes on Cleveland for the next several months, I was pleased to host BioEnterprise’s Private Equity Roundtable last week, exploring key emerging trends in biomedical growth capital.
When Investment Rhymes with Canada
Canada has a proud history of achievement in the areas of science and technology, and the field of biomanufacturing and life sciences is no exception.
Geoff Colvin, senior editor-at-large of Fortune magazine, moderated a healthcare panel of investors, who all agreed that the high availability of growth capital is forcing private equity firms to take new and different approaches to investing in the biomedical space.
There is currently a high interest level in the biomedical space that has drawn a much broader universe of investors, according to Ravi Sachdev, of New York City-based Clayton Dubulier & Rice, which has led to unsustainable valuations requiring private equity firms to be more nimble in putting businesses together and partnering with strategics.
Other creative approaches that the panelists suggested include narrowing the search for investment opportunities to different sub-sectors of healthcare technology, taking a stronger operational interest in companies and building longer-term relationships with management teams.
They also identified types of healthcare businesses that are attractive targets for private equity investment, including medical device and pharma companies treating chronic disease. Guido Neels of Palo Alto-based Essex Woodlands recommended looking at biomedical companies focused on such global health problems as diabetes, heart failure, obesity and ophthalmology.
There are also strong market opportunities in applying technology to solve very specific healthcare problems, and in integrating new technology to improve existing systems, which can then potentially lead to better outcomes.
Panelists concurred that much of this technological innovation is now generated less from internal R&D departments within big medical device companies than by strategics acquiring or partnering early with startup companies with promising and validated new technology.
This type of co-investment is viewed as a more cost-effective method to drive and nurture innovation where synergies can be achieved by keeping R&D off the balance sheets and through incubating technology in more entrepreneurial environments.
BioEnterprise’s Private Equity Roundtable was sponsored by Britton Gallagher, KeyBanc Capital Markets and Thompson Hine, with MedCity News and WKYC as media partners.
Photo: Chung Sung-Jun/Getty Images
