Healthcare firms are at the forefront of vital global innovations. The right investor can boost their progress through flexible funding and experience in accelerating growth, according to Ben Long, Partner and Head of Healthcare at Inflexion.
Private equity can be a great way to grow your business further and faster. But healthcare is under-penetrated by private equity, despite the value it can bring to businesses in the sector.
The mere presence of a new shareholder can often heighten a founder’s risk appetite as they’ve already taken some upside off the table, and this can inspire new areas for a business to grow. Ditto companies carved out by PE firms, with erstwhile un(der)loved captives often growing impressively once their ambition is unleashed through independence.
Just as no two businesses are alike, all private equity firms are different, too. Most will be looking for a business with a unique value proposition for customers, ambitious plans, strong incumbent leadership and the potential to scale internationally. Investors need to focus on investing in high quality providers that serve growing markets. These could be ‘hidden technology champions’ with significant growth potential that can be further developed and expanded.
The right PE firm can also bring a valuable network with it, with some well connected to other institutions backing existing or prospective clients to your own firm – and so offering introductions that are as helpful as they are warm. These soft factors are in addition to some proven growth acceleration strategies employed by experienced and well-resourced PE firms, with some illustrated below.
Building a future-proof platform – Making sure the business has the right infrastructure to enable it to scale.
Driving organic growth – Driving commercial excellence, building out teams and enhancing digital capabilities can make very positive changes to businesses.
Partnering for international expansion – Whether looking to new markets to be closer to clients or to establish new ones entirely, expanding globally can help a business grow faster.
Support for M&A – Acquiring other businesses can complement or entirely transform your business, particularly with access to new patents and markets. Private equity can help with this complex task.
It’s important that healthcare businesses ensure they find a backer that fits their own plans – finding chemistry with a PE firm is hugely important as you’ll work closely with them for years. A good start is to ensure they’ve worked with other businesses on similar journeys to your own, since that experience will be crucial in making your own a success.
Building a future-proof platform
Now more than ever, it’s important for businesses stay ahead of the curve when it comes to digital. Implementing ERP systems is a necessary chore in this space, and having a backer experienced in this complex task can mean the difference of a project finishing on time and within budget.
Another area increasingly important is generative AI. A small but growing number of PE houses have in-house experts that can help cut through the noise and highlight the implications for your business – a real asset when the backdrop is evolving so quickly.
Niche pharma specialist CNX Therapeutics has been on this journey, with automation providing better visibility and insight into commercial channel data. The business was carved out of its former parent Sunovian in 2021 by Inflexion and the following year acquired Synchrony Pharma to grow its UK hospital channel presence. Maximising commercial potential was high on the priority list post-acquisition. Together with Inflexion, CNX established automation processes and analytics to collate, curate and analyse relevant data that permitted more effective real time channel management. The data could then be turned into insights for people across the business to consume. It is not applying this to its broader portfolio.
Driving organic growth
There are a number of firms on successful PE growth journeys. Pharmaspectra, a provider of medical affairs data and analytics to the pharmaceutical and biotech industry, had Inflexion backing for three years, during which time its client base grew 160% as the PE house supported investment into the team, tech platform and international growth.
Upperton Pharma Solutions received funding from Inflexion in 2022 and is using it to expand its scale and capabilities at home and abroad. The first step is building a new, dramatically larger manufacturing facility which will allow Upperton to extend its services to support later stages of clinical trials and commercial manufacturing. The facilities represent a ten-fold increase in manufacturing capacity with an associated four-fold increase in analytical space. This and a trebling of headcount over the last 18 months means the firm will be better able to support existing and new customers into larger stage development and into commercial production for smaller volume, high value products.
Liquid pharmaceuticals specialist Rosemont was carved out of its listed parent in 2020 by Inflexion and annual turnover has more than doubled since then to £110m, largely off the back of over 10 new product launches and a £5m expansion in capacity.
A partner for international expansion
Well-resourced PE firms can help take businesses to new markets.
Proteros is a case in point, having received minority PE capital from Inflexion in 2023. The Germany-based founder-led contract research organisation focuses on early-stage drug discovery and aims to scale globally both organically and through acquisition, particularly in the US. They pioneered much of the science in the field and industrialised the process of structural biology-led research. PE backing is helping them with operational improvement topics spanning technology stack, finance function and sales and marketing approach.
Lintbells, a pet nutritional supplements specialist, has also expanded into the US with our support, having collaboratively assessed the market before finding a complementary business to acquire. The business is now rapidly expanding in this core market.
Rosemont Pharmaceuticals derives most of its income from the UK now, but expects its future growth will largely be international. As part of this drive, the end of 2023 saw Rosemont sign strategic partnerships with Juno covering Canada and Jacobson Pharma in Hong Kong which will see the corporation exclusively license, supply and distribute a range of Rosemont products in the Hong Kong and Greater Bay Area (GBA) in mainland China. Going forward, Rosemont will focus on four key markets; the main one is the US, which has a large population and the advantage of dealing with a single regulator; and the others are Canada, France and Germany. The firm already sells into 27 countries via partners.
Support for M&A
Helping businesses growth organically and through acquisitions is the bread and butter of PE, and healthcare is no exception. Acquisitions can help businesses to expand into new verticals or geographies or even bring in new IP. They’re complex to source, negotiate and integrate but if done correctly, can make a meaningful difference to a company.
Rosemont further illustrates the positive impact the right PE backer can have with its acquisition of Lucis Pharma, helping broaden Rosemont’s portfolio and enter the unit dose / sachet market through the pipeline products. Looking ahead, Rosemont aims to double turnover over the next four to five years and launch multiple new products per year, while it’s currently looking at further international acquisitions.
At the end of 2022, SteriPack Group, a global contract manufacturer serving the medical device, pharmaceutical, and diagnostic markets, acquired Kinneir Dufort, a Bristol-based user-centred design and product development firm which expanded its offering.
CNX Therapeutics has thrived since being carved out from Sunovion, doubling revenue within a year through the acquisition of Synchrony Pharma and in 2023 it more than doubled again through further expansion in line with strategy by acquiring a portfolio of cancer support products from Clinigen and two CNS products from Sanofi. Its efforts were boosted at the end of 2023 with a debt facility secured to add additional capital to support its broader organic and inorganic growth agenda.
Inflexion’s flexible approach allows it to back both majority and minority investments, typically investing £10m to £400m of equity in each deal. Healthcare forms one of Inflexion’s six key sector focuses, with 15 firms backed to-date and recent successes including Pharmaspectra, a provider of medical affairs data backed in 2019 before it was sold to a NYSE-listed trade buyer in 2022, and Medivet, a UK veterinary pet-care business Inflexion provided minority capital to in 2016 to fund acquisitive and organic growth before its sale to CVC Capital Partners in 2021.