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The Healthcare Investor

Insights on Issues & Trends that Impact Investments in Healthcare & Life Science Businesses

Healthcare & Life Sciences Private Equity Deal Tracker: DICOM Grid Secures $6 Million in Financing

Posted in Healthcare Services Investing

DICOM Grid has announced it raised 6 million in financing.

DICOM Grid, headquartered in Phoenix, Ariz., is a healthcare IT company that has made a cloud-based platform for medical image management and exchange.

The funding round was backed by Canaan Partners, CHL Medical Partners, Mayo Clinic and several individual investors.

DICOM said the funding will be used for product development and to open up additional strategic integration opportunities with EHR and RIS providers.

Healthcare & Life Sciences Private Equity Deal Tracker: CAS Medical Systems Secures $10 Million Loan Agreement

Posted in Healthcare Services Investing

CAS Medical Systems (CASMED) announced in late June that it entered into a $10 million loan agreement with General Electric Capital Corp.

CASMED, headquartered in Branford, Conn., is a developer and manufacturer of non-invasive vital signs monitoring technologies.

Under the terms of the loan agreement, General Electric Capital Corp. is providing CASMED with a secured term loan of $7.5 million and a revolving line of credit up to $2.5 million.

Healthcare & Life Sciences Private Equity Deal Tracker: Amedica Secures $26 Million in Financing

Posted in Healthcare Services Investing

Amedica Corp. has announced it secured up to $26 million in financing.

Amedica, headquartered in Salt Lake City, is a spinal and orthopedic implant and instrument company focused on silicon nitride ceramic technologies.

The funding consists of a $20 million debt financing with Hercules Technology Growth Capital and a private placement to MG Partners II, an affiliate of Magna, of 6% senior convertible notes in an aggregate principal amount of up to $6 million.

Amedica indicated that approximately $15.2 million of the financing proceeds will be used to retire senior secured credit facility with General Electric Capital Corp. The balance will go toward further commercialization and development of products and general corporate purposes.

Healthcare & Life Sciences Private Equity Deal Tracker: Dune Medical Devices Secures $21 Million in Financing

Posted in Healthcare Services Investing

Dune Medical Devices has announced it completed the first of a two-stage $21 million equity financing.

The initial closing was completed for $14 million. A second tranche of $7 million is expected be completed by October 2014.

Dune Medical Devices, with offices in Westborough, Mass., and Israel, develops and commercializes intraoperative, real-time, cancer detection devices, including the MarginProbe System.

Investors are both previous and new investors. They include the Kraft Group and Canepa Advanced Healthcare Fund.

Dune Medical indicated the financing will go toward expanding the sales and marketing efforts for the MarginProbe System.

What does Fresenius’s Investment of $600M in Sound Inpatient Physicians Mean?

Posted in Healthcare Services Investing

Fresenius Medical Care has announced it has entered into an agreement to invest approximately $600 million in Sound Inpatient Physicians.

Fresenius Medical Care, which has its North American headquarters in Waltham, Mass., specializes in the production of medical supplies that facilitate or aid renal dialysis.

Sound Inpatient Physicians, headquartered in Tacoma, Wash., is a hospitalist organization with more than 1,000 physician partners providing care in over 100 hospitals and post-acute care centers across the U.S.

Under the terms of the agreement, Fresenius would become majority shareholder as part of a recapitalization of Sound, alongside existing investor TowerBrook Capital Partners and Sound’s senior leadership team.

Fresenius Medical Care also announced it has acquired MedSpring Urgent Care Centers. MedSpring, headquartered in Austin, Texas, operates 14 urgent care centers in Illinois and Texas.

Considering Fresenius and DaVita are the two biggest dialysis companies in the world and are in frequent head-to-head competition both globally and locally for individual physician/clinic talent, the moves here by Fresenius — which has historically been a bit slower to diversify and look at unique opportunities — is likely in response to the DaVita purchase of HealthCare Partners in late 2012.

DaVita acquired HealthCare Partners, which managed medical groups and physician networks in three states, for $4.4 billion. With the acquisition, DaVita became known as DaVita HealthCare Partners.

As we noted in a 2012 column, DaVita’s acquisition was representative of the trend of dialysis providers expanding their services to renal patients. With news of Fresenius’s acquisitions, it is apparent this trend continues.

Recent Deals Highlight the Changing Role of Payors

Posted in Healthcare Services Investing

There has recently been significant attention on the role of new players in the healthcare market — both nontraditional healthcare investors and providers entering into the delivery of care spectrum as well as traditional players taking on new roles. One prominent example in the latter category is the changing role of the payor, which we’ve seen move from simple reimbursement party for traditional fee-for-service care to a more active participant as acquirers of providers and partners with providers in large-scale arrangements ostensibly aimed at driving down costs while increasing quality.

Some examples of payors investing in/acquiring providers include UnitedHealth Group acquiring Monarch HealthCare, an Irvine, Calif.-based independent physician group, in 2011; Highmark, a Blue Cross and Blue Shield licensee in Pennsylvania, acquiring West Penn Allegheny Health System, a financially troubled hospital system in Pittsburgh, in 2013; Humana acquiring Concentra, an urgent- and occupational-care provider, in 2010; Humana acquiring SeniorBridge Family Cos., a provider of in-home care for seniors, in 2012; and WellPoint acquiring CareMore Health Group, a Medicare Advantage plan that operates numerous neighborhood care centers.

Alternatively, one recent example out of the dialysis industry shows the value payors are seeing in an arrangement that isn’t a true investment/acquisition but does align large providers in significant ways with payors. In April, Highmark announced a partnership with kidney care services provider DaVita. Under the terms of the partnership, DaVita will provide an integrated care-management program designed for Highmark’s members with end stage renal disease. As the Pittsburgh Business Times reports, if DaVita meets the National Kidney Foundation’s metrics of quality care treatment criteria for kidney failure patients and does so while keeping down care costs, Highmark will split the resulting savings with the DaVita.

“We want to work with providers to pay for value,” said Robert Wanovich, Highmark vice president of market strategy & delivery, in a news release on the DaVita partnership. “This new, shared-savings program is a good example of a collaboration where both companies can benefit and ultimately deliver better care to the member.”

Healthcare & Life Sciences Private Equity Deal Tracker: Benvenue Medical Secures $64 Million in Financing

Posted in Healthcare Services Investing

Benvenue Medical has announced it completed a $64 million round of financing.

Benvenue Medical, headquartered in Santa Clara, Calif., is a developer of minimally invasive solutions for spine repair.

The financing is a combination of $40 million in series E equity supplemented with $24 million in debt. The series E equity financing was led by new investor InterWest Partners with all existing major investors participating.

Benvenue indicated it intends to use the funds to build its U.S. commercial presence, scale up manufacturing, increase administrative functions to support overall corporate growth and provide working capital to fund growth in operating activities.

Healthcare & Life Sciences Private Equity Deal Tracker: Senseonics Secures $20 Million in PE Financing

Posted in Healthcare Services Investing

Senseonics has announced it raised $20 million of PE financing.

Senseonics, headquartered in Germantown, Md., focuses on the development and commercialization of a fully implantable, long-term continuous glucose monitoring system.

Participating in the financing round were current investors Anthem Capital, Delphi Ventures, Greenspring Associates, Healthcare Ventures, New Enterprise Associates and other partners.

Senseonics said it plans to use proceeds from the round to continue product development initiatives including completing trials in Europe, obtaining CE mark and initiating IDE trials in the U.S.

“Disruption Breeds Opportunity”: Private Equity Investments and Legal Changes Leading New Developments in the Healthcare Sector

Posted in Healthcare Services Investing

By: Jennifer Wiegele, iGlobal Forum

We all know the healthcare sector has changed dramatically with the new implementation of ACA, but the major shift has occurred within the move from “fee-for-service to value-based healthcare.” In an interview with Geoffrey Cockrell, Partner & Co-Chair, Private Equity within McGuireWoods, and Amber Walsh, Partner at McGuireWoods, two speakers on iGlobal Forum’s upcoming Private Equity Investment in Provider Healthcare in New York on June 11th, we discuss the major changes that this new law and the surrounding developments have had on private equity investment and provider care within the healthcare sector.

Q: How does the new law directly affect private equity investments in provider healthcare?

GC: The biggest impact on the healthcare sector is only partially driven by the ACA. The big shift is the move from fee-for-service to value-based healthcare. This shift is occurring in many different areas – pilots by large payors, bundled payments, ACOs, etc.  As market participants begin absorbing outcome risk, they begin behaving differently and valuing different things. That is very disruptive to the market, and disruption breeds opportunity.

Q: What deals are currently in process that will add capability and scale to providers?

GC: Of keen interest to investors are sectors where relatively low-cost facility expansion is available and the market is generally fragmented – think dental practice management, urgent care, physical therapy, pain practices and other sectors where an investor can stamp out new locations without massive capital expenditures.

Q: How will these new deals affect provider care?

GC: Hard to say. When we did capitation last time, the problem was that it created incentives for denial of service. I think that we have learned a lot since then and have the benefit of observing other systems throughout the world who have managed to combine cost-containment with quality care. The risk of creating denial of service is real, but, I think, avoidable.

Q: What non-traditional industries are currently entering into the healthcare sector? 

AW: With the ongoing focus on innovation and ways that providers can be more efficient and effective in their delivery of care, we’re seeing providers partner with a whole host of unique players. One of the most prominent and interesting is the changing role of insurance payors, as they step into new positions of shared risk takers with their providers through joint venture models, ACOs etc.

Q: Where do you see these investment trends heading in the future?

GC: I think the hot sectors within healthcare will continue to be robust. I also think that payors and hospitals will increasingly become direct market participants. The shift toward value-based healthcare means that someone is taking the outcome risk and everyone else is a service provider. In many instances the risk takers will be the hospitals and the payors. To manage that risk, they will increasingly be buying into the sector to manage the risk.

Q: How are these new areas creating new opportunities for the development of the healthcare industry?

AW: Any time there is attention, like there is right now, on efficiency, change and innovation, it opens opportunities for investors who have both capital and knowledge from inside and outside the industry to offer.

The industry itself is in the midst of a huge overhaul, and private equity investors could change the direction of the new healthcare advancements within the field. The new law has led the way for new opportunities within the sector for investors and those working within the healthcare field alike.

Next week on iGlobal Forum’s Private Equity Investment in Provider Healthcare, Geoffrey Cockrell is speaking on the 9:30am session, “M&A 2014 Roundtable: Subsector Convergence as a Driver of 2014 Deals,” and Amber Walsh will be speaking on the 1:45pm panel, “Never-Seen-Before Provider Care Sprouts: How Private Equity Investors May Leverage Returns through the Unfolding of a New Kind of Supply Chain.”

The mission of iGlobal Forum is to connect business executives across the financial industry and provide an exchange platform for education and strategic relationships. We concentrate our events on the most pressing business issues, and our attendees get the opportunity to meet face-to-face and network with the leading experts in the field.

Top Physician Specialties For PE Investment

Posted in Healthcare Services Investing

Private equity investors discovered the opportunities in physician practice management (PPM) businesses long ago, and many firms have remained consistently interested in both forming and recapping those businesses.

In our Law360 column this month, we discuss top specialties for a PPM model and some common elements among successful PPM businesses.

View the column “Top Physician Specialties For PE Investment.” (pdf)