How did you get involved in the aquaculture industry?
PHARMAQ was a deal that was expected and unexpected. We had been doing a lot of work in unusual sectors within healthcare and that was predicated with thinking about how to continue to differentiate ourselves from aggressive and smart peers in the sector.
We identified areas within the health care space we call ‘unloved.’ Animal health, which is now becoming a large sector, at the time wasn’t what it is today. So we spent quite a lot of time looking at opportunities within this space. We were out there screening animal vaccine companies. Our network in Norway identified a fish vaccine business servicing the expanding aquaculture market. It was one of those eureka! type of moments.
What was interesting about a company like PHARMAQ in a less-well known sector?
PHARMAQ is a clear market leader, in an industry with high barriers to entry, and as such was a high priority opportunity for us. We had a discussion with the management team and went to signing the deal within 27 days.
Aquaculture, or the intensive farming of fish, is a high growth market. Fish is the fastest growing source of protein on the planet because it has the greatest efficiency in terms of conversion of plant matter into protein. But when you put a lot of fishes together they get ill, this is why vaccines are so critical.
This is a real biotech story and within aquaculture, it was an incredibly hard find. Not a lot of GPs have focused on this area before.
We spent a lot of effort building the organisation within PHARMAQ but also supporting expansion in Asia to turn it into a global company. That ranged from having the head of Asia for PHARMAQ work out of our Hong Kong office for months to working with them to build out an Asia and China strategy, as well as looking at M&A for distribution and entering those markets.
Why the food chain and what do investors think about it?
It’s one of those slightly unusual themes with strong growth that we want to back. Our funds have made investments in Netafim [a drip and micro-irrigation product company] and Sushiro, which is a large sushi restaurant chain, as well as Provimi, an animal nutrition company, and Arysta Lifescience, a manufacturer of crop protection chemicals. In many ways PHARMAQ fit into that theme of increasing productivity in the food chain.
Investors are sometimes surprised in the beginning by this focus but as we talk about these investments in more detail and take them back to the fundamentals of growing population, growing wealth, need for protein, growth of aquaculture, and need for environmentally safe solutions, they get it and find it exciting.
PHARMAQ was highly strategic for us in that theme as our previous investments tended to be industrial deals. The company’s strategic value was also evident as it was bought by a leading corporate buyer, as many of our funds’ other recent investments.
What is your view on healthcare investing generally?
We think health care an incredibly attractive place to invest. There are of course challenges. It’s a massively highly valued sector at the moment. Even more regular subsectors within healthcare are valued invariably in the double digits. We try to scratch the surface and take those obvious trends mentioned above and find subsectors or derivatives of trends where “rough diamond” companies operate. It’s a thematic approach rather than a deal-flow approach, which means we spend a lot of time proactively developing a proprietary target list and aim to stay away from expensive auctions.