Opportunity for med tech amid consolidation
By Katie Pfaff
Commercial-stage health care, pharmaceutical and medical technology investor, 1315 Capital LLC, closed a growth equity fund at more than $300 million, surpassing its target of $250 million. The fund, 1315 Capital II, is the firm's second fund after a 2016 closing, and was financed by endowment, foundation, family office partners, and public and private pension.
Marking more than $500 million in total managed assets, 1315 Capital connects investors and experienced operations personnel to bolster efforts within portfolio companies, speeding their growth and adding value. "Our operating team model remains a unique and powerful part of our strategy," stated Michael Koby, founding partner, 1315 Capital. "The teams help to identify compelling potential portfolio investments, as well as add to the success and growth of these companies."
East Coast innovation
Philadelphia-based 1315 Capital will plan to invest about $10 million to $30 million with existing companies or to launch a "jumpstart" company.
"Our firm leverages a 'jumpstart' model where we partner with experienced management teams on acquiring or licensing commercial stage assets as a platform for growth," Adele Oliva, founding partner, 1315 Capital, told BioWorld MedTech. "Examples of 'jumpstarts' in the first fund include CHC Solutions, Encore Dermatology, Genoptix and Onkos Surgical. In all four examples, the management teams and/or the divestitures had ties to the [Philadelphia or New Jersey] region."
The firm invests across the country but has found the "Philadelphia/New Jersey corridor remains a stronghold for commercial management talent across pharmaceuticals, medical technologies, and health care services. Many global health care companies have major operations in this region and with the massive consolidation that has occurred the last 10 to 15 years across the health care industry, substantial opportunities exist to carve out assets and build companies around important areas of need."
1315 Capital closed a $200 million inaugural fund just under two years ago with the same focus on niche markets that might be underserved with large companies. (See BioWorld MedTech, June 17, 2016.)
Consolidation in medical devices
Following recent consolidation in medical device companies, smaller firms may not receive attention or capital, providing an opportunity for 1315 Capital.
"The same consolidation that has occurred in the pharmaceutical industry also has been happening across medical technologies, and we believe there is significant opportunity to carve out neglected assets from larger strategic companies," said Oliva. "We seek innovation and solutions across health care and gravitate toward commercially capital-efficient business models where 40-60 sales reps can effectively cover the U.S. market."
A series of mergers and acquisitions set off in 2014 in med tech, beginning with Zimmer Holdings Inc.'s deal to acquire Biomet Inc. in a cash and stock sale worth $13.35 billion. (See BioWorld MedTech, April 25, 2014.) Shortly after, Medtronic plc reported its $43 billion purchase of Covidien. (See BioWorld MedTech, June 17, 2014.) At the start of 2017, another large merger occurred when Abbott Laboratories Inc. acquired St. Jude Medical Inc. for $25 billion. (See BioWorld MedTech, Jan. 12, 2017.) Becton, Dickinson and Co. later acquired Murray Hill, N.J.-based C.R. Bard Inc. in a $24 billion cash and stock deal last year, creating a third company segment, BD Interventional. (See BioWorld MedTech, April 25, 2017.) Bard previously acquired Lutonix Inc., of Minneapolis, for $225 million six years earlier. (See BioWorld MedTech, Dec. 21, 2011.)
Investment in specialty markets
CHC Solutions Inc. provides medical equipment and supplies for adult special needs, enteral/nutritional, incontinence, ostomy, orthopedics, urology and wound care under its family brands, including Continuum, Healthsource and Burmans Medical Supplies. Private company Encore Dermatology Inc. offers a portfolio of specialty dermatology creams, ointments and devices, many of which were acquired from Valeant Pharmaceuticals North America LLC and affiliates. Genoptix Inc. provides personalized diagnostics for cancer, bone, bone marrow, blood and lymph node diseases, and solid tumor molecular testing. Onkos Surgical Inc. makes implants for patients with musculoskeletal tumor, soft tissue implants, and uses 3-D printing for personalized implants. Onkos raised $17.6 million in a series B financing last spring, led by Canaan Partners to commercialize and develop its portfolio. (See BioWorld MedTech, April 21, 2017.) The company also closed a $10 million series A in October 2015.
London-based Truffle Capital last month reported the first closing of its biomedtech fund for $102 million, with a total 2018 target of $240 million. Among its investees are cardiac devices, neurovascular devices and nanoscale drug delivery mechanisms, driven by a move toward digital, artificial intelligence, and macrobiotics. (See BioWorld MedTech, Jan. 12, 2018.)
Published February 13, 2018