When it comes to life science investors looking at deals in the booming field of health IT, some are sticking with the old line, “It’s not you; it’s me.”
Certainly many life science investors are making bets in health IT, but many others have shied away, even as the market matures and exits pick up. According to panelists at Cleveland Clinic’s Medical Innovation Summit, the hesitancy is not necessarily because investors aren’t convinced of the value of these companies.
In fact, Domain Associates partner Brian Dovey said he’s sure there is an opportunity in those deals, but it’s just not really a fit with what Domain is good at. “We did a number (of health IT deals) before in the ‘90s and demonstrated we were pretty bad at it,” he said. “Domain does mostly technology — things in which there’s usually a strong proprietary position. The IT area is much more execution-driven. It’s kind of a different business model.”
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Anthony Viscogliosi is a principal at Viscogliosi Bros., a venture firm devoted to the musculoskeletal and orthopedics sector of healthcare. He emphasized that the business model difference was a key point for him as an investor. “In our world […] there’s intellectual property and there’s regulatory property. In health IT there’s not so much of that,” he said. “It’s difficult (for us to evaluate) how someone can’t execute just a little bit better than the next business that’s doing about the same thing.”
Corporate investors might be more likely to take an interest in health IT companies, but there are other considerations that must be weighed there. Brad Vale, head of venture investments at Johnson & Johnson Development Corporation, said he’s listening to pitches from health IT companies but isn’t sure the organization has a comprehensive strategy for that sector yet.
Plus, J&J acquired HealthMedia back in 2008, which makes tools for a healthy lifestyle, so most of the health IT companies J&J would look at would look to disrupt that business. “We’re somewhat comfortable with that core offering,” he said. “If there’s an improvement in patient engagement or customization of one of the programs or collaboration tools for physicians, we’re listening for things that would enhance that existing business.”
