Novo Holdings’ purchase of pharma services company AltaSciences marks the first for the new team steering the Principal Investments arm’s push into US healthcare investing.
The Danish firm’s Principal Investments team will soon have feet on the ground based out of Boston – expanding Novo’s existing office space where its US ventures team is currently based.
Those efforts will be led by longtime investor Abhijeet Lele, who joined Novo in September as a senior partner to head US Principal Investing. Lele most recently led US healthcare investing for Temasek, which he joined from Investor AB/Patricia Industries. At the latter, Lele led US healthcare investing and spearheaded its shift to healthcare buyouts.
Ex-CVC Capital Partners healthcare investor Jonathan Levy joined at the same time as a senior partner in Novo Principal Investments. Levy was previously on the investment teams of LetterOne Health and Tailwind Capital Partners.
Principal Investments, which takes control and minority positions in well-established healthcare businesses, aims to build out its US-based roster with up to 10 hires, Lele told PE Hub in an interview. Both Lele and Levy plan to move to the US from Copenhagen at the end of the school year.
Investing across pharma services, medtech, life sciences tools and diagnostics, and healthcare IT, the target check size for Novo’s Principal Investments arm is $100 million to $500 million. A physical presence will support Novo’s intentions to become much more active in the US, and particularly in healthcare IT, Lele said.
“The US is so disproportionally the largest healthcare profit pool,” Lele said. “Drug development is obviously very global, devices are but I’d say to a lesser extent, and healthcare IT to a much lesser extent because of the payor-provider structure.”
The hiring of Lele and Levy “is a clear testimony to the strategic importance of the US healthcare and life sciences market,” added Christoffer Søderberg, Managing Partner and Global Head of Principal Investing. “The recently announced acquisition of Altasciences marks an important first milestone on the journey of building an increased presence in the market. We look forward to pursuing additional opportunities in well-established, growth and innovation-oriented businesses.”
New team debut
Existing investments in US-based pharma service outsourcers include WIRB-Copernicus Group, a provider of compliance-related services that improve the efficiency of clinical drug trials, and clinical trial technology company ERT, which in December merged with Bioclinica at a combined enterprise value of $5.9 billion, PE Hub reported.
The innovation cycle of the biopharma industry will continue to bode well for service providers like Altasciences while presenting new opportunities, the investor said. “So much of drug development has turned from discovery, where it felt like more of a game of chance at the early stage, to something that feels more like engineering, and I think that’s part of what has drawn so much capital into the discovery world,” Lele said. “That used to be a really tough area and it was pretty starved of capital.”
Based in Montreal, Altasciences is a contract research organization that serves smaller pharma and biopharma clients, supporting drug development during pre-clinical and clinical studies. Harris Williams, Rothschild and Edgemont Capital advised Altasciences on the transaction.
While all existing operations are in North America, Altasciences is interested in growing geographically – initially into Europe, where Novo has a big footprint, Lele said. The company could ultimately look to expand into Asia, where Novo also has a newly established team on the ground.
Novo sees significant organic opportunity ahead for Altasciences as more capital continues flowing into pharma R&D, while it also intends to remain active on the M&A front, the investor said. Altasciences was acquisitive under Boston’s Audax, adding just before the Novo investment WCCT Global, an early-stage CRO out of Southern California.
Novo’s Lele has a longstanding relationship with the Audax team. While at Patricia Industries, the investor was involved with the firm’s approximately $640 million acquisition of Canada’s Laborie Medical Technologies from Audax in 2016.
Adding to Novo’s comfort in the investment opportunity, many of its close to 130 portfolio companies are customers of Altasciences, Lele said, explaining it’s a market the team understands well.
Although Altasciences does have an interest in expansion, Lele said his team doesn’t necessarily favor investments that are more “global” in nature. This is very much a “deal by deal” analysis, he said, and for the US-based companies that his team will target, expanding domestically will often be more attractive than investing to grow internationally.
“If you look at medtech for example, and you ask this question: Am I better off investing the marginal dollar in growth in the US, or going into Europe where you’ve got a lot of fragmented geographies [and] the cost of doing business is much higher for all sorts of reasons? I often come back feeling like you get a better return in the US, frankly.”
Novo in total encompasses a roughly $10 billion healthcare portfolio that invests across four strategies: Novo Seeds; Novo Ventures, its most established; Novo Growth, its newest; and Principal Investments. The latter accounts for roughly $8 billion of the portfolio today.
The Copenhagen holding and investment company is differentiated beyond its exclusive healthcare focus on the investment side. Novo manages the wealth of the Novo Nordisk Foundation, which supports the firm’s flexible long-term investment mindset – backing both private and public companies, in majority and minority positions, in equity and debt.