1 Technology is transforming healthcare…
According to Silvia Oteri, partner and head of healthcare at Permira, healthtech has come of age during the covid-19 era.
Oteri says healthcare had traditionally been slow to embrace the opportunities that tech offers, but the pandemic has “broken technological inertia” and dramatically accelerated adoption. “At the same time, more capital is flowing into the sector, fuelling growth and helping companies reach a size where they hit our radar,” she says. “Whilst it is still early days, we have a long-term focus, and the plan is to be an early mover so that in four to five years, the Permira funds are amongst the strongest investors in this space.”
And there is plenty of room for growth in the healthcare market. “The sector is huge, representing 14 or 15 percent of GDP,” says Ben Long, partner at Inflexion Partners. “And private equity is currently just a small proportion of that, equating to 8 percent of transactions completed in Western Europe.”
2… and the future is virtual
One of the biggest trends is virtualisation, which enables healthcare teams to perform important functions, such as accessing medical records, reading radiology scans or delivering telehealth visits, regardless of their location.
Rowena Gracey, director at 3i, argues that the pace of change in the healthcare market has been accelerated exponentially in recent years, and not just by covid. “The industry is on a journey towards adoption,” she says. “We are now at a real inflexion point, which is being driven by underlying factors like the consumerisation of healthcare – where we see patients acting more like consumers – and constraints on the system from increased demand and budgetary issues. There needs to be more productivity in the system and advances in technology are facilitating that.”
3 Collaboration is the new watchword
The rush to develop testing, treatment and vaccinations in response to the covid-19 pandemic has driven a wave of collaboration among healthcare peers unlike anything seen in the past.
Cathrin Petty, managing partner and global head of healthcare at CVC, describes the past 18 months as an “extraordinary period for partnership and collaboration” in healthcare. “What has occurred is the result of the extraordinary partnerships between peers and close collaboration in vaccine development globally. This is a real step-change,” she says.
“Historically, the healthcare industry has been very siloed, largely because of intellectual property challenges that encouraged people to keep information to themselves. Now, covid has created a kind of open-source environment. The partnerships we have seen really would not have happened in the past.”
4 Diagnostics are driving change
The pandemic has highlighted the importance of diagnosis – an area ripe for private equity investment. There was already a tremendous amount of steam building behind diagnostics before the outbreak of covid, says Glenn Mincey, national practice leader of private equity at KPMG. “Diagnostics has always been the engine that ensures people find their way to the right therapy at the right time,” he says. “But this whole area has stepped up a gear in recent years, with the advent of precision medicine – the ability to make decisions on patient care based precisely on their diagnostic testing.”
“Diagnostics have experienced a covid bump, certainly, and it is hard to gauge what the new normal will be,” says Tom Allen, managing director at Advent International.
5 The role of KOLs is growing
Sales strategies were becoming more nuanced and data-driven even before covid, but the pandemic has given an even greater role for a group of key opinion leaders, or KOLs, who have become critical to the healthcare sales model. The top scientists are clinicians themselves and have a significant academic presence, speaking at conferences and publishing articles.
Partner and head of healthcare at Nordic Capital Dr Raj Shah says the time that sales reps have with healthcare professionals and prescribers has gone down significantly: “Nordic Capital’s pharma companies have responded to this change by upgrading their go-to-market and sales teams, as well as leveraging digital tools to access KOLs with the latest relevant information – be that research, data or the positioning of their products in relation to the competition.”
6 Eldercare is ripe for investment
Private equity funds are enhancing the sophistication of offerings in the eldercare market by building at scale and expanding their suite of services.
“The obvious levers are around market consolidation, greenfield roll-out and digitisation, as well as expanding through the value chain to offer a broader range of services covering a longer part of a guest’s journey,” says Boris Zoller, managing partner at Capvis.
Cross-border consolidation has started in Europe, Zoller says: “Investor appetite for elderly care has increased steadily. A few years ago, we looked at these opportunities and people probably paid around 10x for these platforms; pre-covid that had increased to 12x and now it is sometimes beyond 14x. The appetite is high because the market is still highly fragmented and that creates real consolidation opportunities.”