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Warburg Pincus launches healthcare buyout firm

The global private equity firm has partnered with two medical technology executives to target acquisitions in the healthcare sector.

Warburg Pincus and two senior healthcare executives have launched Constitution Medical Investors, a healthcare-focussed private equity firm.

Boston-headquartered Constitution will acquire platform technologies and companies where principals Patrick Sullivan and Daniel Levangie will be able to leverage their product development, regulatory, clinical and commercial experience. The firm’s initial sector focusses will be surgical devices  and in vitro diagnostics.

Constitution is not a portfolio company of Warburg, said a source familiar with the situation. The two private equity firms have agreed to form a partnership for a defined period of time during which Constitution will work exclusively with Warburg. At the end of the agreed upon time period, the two firms may or may not choose to extend the partnership.

Sullivan was previously executive chairman of Hologic, a medical technology company geared toward women’s health, prior to which he was president and chief executive of Cytyc, a similar company that was acquired by Hologic in October 2007. Levangie is currently a director at Hologic and was president of Cytyc’s surgical products division.

“The experience we have at Cytyc is more heavily weighted towards commercialisation,” said Levangie. “Our sweet spot is more towards companies that are either just about to get an FDA approval of a major product or in companies that have a product on the market that is generating revenue but they’re in need of more senior level experience… in actually capitalising on the opportunity both in the US and outside the US.

 “Following the merger with Hologic, there wasn’t much reason for us to continue to stay there,” said Levangie of launching Constitution. Sullivan and Levangie spoke to a number of private equity firms before choosing to partner with Warburg.

Levangie serves on the board of medical device developer and Warburg portfolio company ev3 along with several Warburg executives which made him comfortable with the team, said Levangie also noting the firm’s healthcare expertise. “[Warburg’s] track record of identifying new technologies and platforms and then putting a management team around that and building value is very attractive.”

Warburg executives will act as senior advisors to Constitution and serve on the company’s board. “In the early days, as we’re starting out on this, they’ve got research capabilities to help us identify opportunities and conduct the appropriate level of due diligence and certainly the capital is a very important aspect of what they bring to the table,” said Levangie.

Warburg has more than $35 billion (€22.6 billion) in assets under management and closed its most recent global fund on $15 billion in April. Earlier this month, the firm realised a return of three times its original investment in Euromedic International, a pan-European healthcare services company. Euromedic was purchased by Ares Life Sciences and Merrill Lynch Global Private Equity for about €800 million ($1.2 billion).