What do you think has been the most innovative development in the PE healthcare sector in recent years?

Sofia Gerard: Member of management, private equity health and life, Partners Group
Andreas Kumeth: Partner and co-head of healthcare, PAI Partners
Elizabeth Todd: Private equity partner, Ropes & Gray

Sofia Gerard: The most innovative development has undoubtedly been the adoption of technology. This includes digital solutions reinventing how patients access care, artificial intelligence in clinical development to enhance outcomes, and software services that enable value-based care.

Andreas Kumeth: The ever-improving diagnostics have been a key driver of change in the sector. We are witnessing high demand for personalised medicine thanks to developments in sample sequencing and gene therapy, as well as big data analytics both on the lab and pharmaceutical side.

Elizabeth Todd: The covid-19 pandemic has been a catalyst in a range of areas – a focus on quicker drug and vaccine development, the necessity of virtual care delivery, the focus on mental health issues and wellbeing. Our sophisticated investors are seeing the opportunities and committing their capital in enterprises leading that change.

What kind of market appetite are you currently seeing for healthcare-related deals?

SG: There is strong market appetite for companies with specialisation and expertise. The “one-stop-shop” companies are less prominent in the market today given there has been a shift towards specialisation within niche subsegments.

AK: Macroeconomic uncertainty and the decrease in software assets’ valuations have led to increased dealflow in the healthcare vertical. Long-term capital appetite for the sector is likely to continue increasing as investors aim to target non-cyclical, defensive assets with long-term value creation.

ET: Strong appetite for healthcare investment continues, particularly in the digital health space and in value-based care (linking payments to the cost and quality of healthcare). We expect continued innovation and investment in those areas, as well as healthcare IT.

What most excites you about working in the healthcare vertical?

SG: The opportunity to achieve positive stakeholder impact through improving the healthcare system. Partners Group’s thematic investment approach enables us to identify companies that help lower healthcare costs, improve quality of care and enhance patient access.

AK: There is significant potential for professionalisation in healthcare, which currently lags other industries. At PAI, we see an opportunity in helping companies in attractive subsectors become market leaders, offering a clear, long-term path towards improving medical outcomes for millions of patients, and creating shareholder value.

ET: From a personal perspective, our PE clients are often bringing capital, advice and experience to firms and people who have big ideas that could substantively improve healthcare but need help in bringing those ideas to market and creating a sustainable business. Playing even a small part in that is a privilege.

What do you think will be the most significant trend impacting the sector over the next five years?

SG: I think value-based care and the decentralisation of clinical trials will be the most significant trends impacting the sector.

“Digital health will continue its accelerated growth – not least because of the consumer demand for it”

Elizabeth Todd, Ropes & Gray

AK: Having invested in all relevant subsectors of healthcare, we see different outlooks for the various subsectors. We expect that positive trends such as improved diagnostics and medical access, personalised medicine and the consumerisation of healthcare will counterbalance the sector’s headwinds of inflationary pressure and post-covid austerity measures imposed by payors.

ET: For pharma companies, the movement away from cost-based pricing towards value-based pricing will continue alongside increasing interventionism in drug pricing by governments and a trend to international reference pricing. Digital health will continue its accelerated growth – not least because of the consumer demand for it, particularly amongst younger generations.