LeapFrog plants healthcare flag in the sand

The profit-with-purpose investor has sealed its first healthcare deal, investing $22m in a Kenyan retail pharmacy.

Emerging markets profit-with-purpose investor LeapFrog Investments has sealed its first healthcare deal, investing $22 million for a majority stake in Kenya’s GoodLife Pharmacy, according to a statement.

Previously solely focused on financial services, LeapFrog announced its intention to expand into the healthcare sector in February this year.

The firm has assembled a global team of eight specialists, led by Felix Olale, who joined the firm as a partner earlier this year, and LeapFrog partner and co-head of Asia Michael Fernandes, who oversee African and Asian investment respectively. The firm’s wider global network will support origination and execution, the firm said.

In the statement, LeapFrog said its expansion from financial services into healthcare will develop a platform that combines payers and providers, “thereby bringing consumers greater access to affordable, quality healthcare”.

“Low health insurance penetration, coupled with an increase in utilisation of services has an enormous impact on the ability of consumers to access and afford quality health care,” Olale said in the statement.

“By moving into health, we are taking a unique approach and addressing the challenge from both sides – investing in both health insurance companies and health service providers.”

In Africa, the firm is primarily targeting businesses in Kenya, South Africa, Nigeria, Tanzania and Ghana, Olale told PEI sister title Private Healthcare Investor in March. In Asia, LeapFrog is primarily targeting India and Indonesia, but also looking at Vietnam, Thailand and the Philippines.

“We like hospitals; outpatient speciality care; diagnostics, including pathology and radiology; retail pharmaceutical distribution and technology plays that may straddle financial services and healthcare,” Olale told PHI.

Goodlife provides pharmaceuticals and wellness products to more than 600,000 customers from 19 different locations across East Africa. With LeapFrog’s investment, Goodlife plans to expand its footprint to more than 100 stores over the next five years.

“The future of healthcare in emerging markets is about looking at a model that will endure for the 21st century. At the centre of this is a focus on consumer-centric and integrated healthcare,” Olale said in the statement.

“Goodlife’s business model delivers on this imperative. It is a pharmacy, a wellness outlet, a diagnostics centre, and in the future will also be a place where you can access clinicians through telemedicine. This is a model that markets like East Africa are ripe for, particularly as we see a dramatic increase in chronic lifestyle diseases.”

LeapFrog is about to return to market with its third fund, LeapFrog Investments Fund III, which is expected to target $800 million, as reported by PEI.

That fund will be seeded by a commitment of up to $200 million from Washington DC-based Overseas Private Investment Corporation (OPIC), the largest commitment ever to an impact fund.

LeapFrog has made a number of hires in the lead up to the fundraise, including bolstering its investor relations team through the hire of Xenia Loos and the appointment of Richard Brandweiner, chief investment officer at Australian superannuation fund First State Super, as a partner.

Brandweiner is due to join the firm’s Sydney team in January 2017, as reported by PEI.