Good morning, readers.
Hope you and your families are home and healthy.
A lot has changed over the last week. Like most of you, as I write you from my apartment in Brooklyn, the reality that I will be cooped up for the foreseeable future has set in. I’m trying to stay positive and maintain some sort of routine, although I must say when I brave the outside world for a quick run and fresh air, things feel pretty eerie.
For anyone in the healthcare system, the disruption is being felt. Hospitals and health systems are bracing for a shock as the covid-19 curve rapidly climbs. With 2,382 reported cases across New York as of Tuesday, Governor Cuomo this week warned that high-impact areas such as NYC will face a tremendous shortage of doctors, nurses, medical supplies and space.
Stemming the tide: Telehealth
As families and companies tackle unprecedented challenges, some investors like Oak HC/FT are finding that the services and technologies offered by their existing portfolio companies are precisely what the healthcare system needs right now.
“We have a portfolio of healthcare companies and fintech businesses that are part of the business solution,” said Andrew Adams, co-founder and co-managing partner of Greenwich, Connecticut-based Oak HC/FT.
VillageMD, Firefly Health, Galileo and Paladina Health , for instance, are all helping their customers on the front line, Adams said. In their own ways, each of these primary care ventures can get to patients through their relationships in a way that doesn’t compromise health and safety, he said.
Firefly, for example, is a virtual primary care provider, while Galileo provides 24/7 immediate mobile access to medical care and expertise.
Learnings through the coronavirus are sure to have a long-term impact on the healthcare industry – acting in many ways as a watershed event, he explained. If you’re a healthcare provider without virtual or telehealth tools, the question will turn into: “If you don’t have a solution like this, why not?”
“Even though there are times where hospitals are maligned, they are going to be a huge part of the solution here,” Adams said. “Once we are through this — which we will be — it’s an opportunity for hospitals to improve their efficiency and responsiveness.”
Stay tuned for more insights from Adams, who told me other areas of the healthcare system are likely to be triggered into action.
While firms like Oak HC/FT are putting money to work in growth-stage tech-enabled businesses that are in high demand, there are certainly many traditional healthcare services businesses that sources said will be under stress in the short term.
With elective surgeries or procedures ground to a halt and loads of patient cancellations, many private equity-owned services or provider businesses are going to see deteriorating earnings, sources told me.
That said, once the world returns to some level of normalcy, there will be a several-month build up on demand for these services.
“You’ll get those patients back, but [it’s] hard to navigate a sale in that environment,” one sponsor commented.
From a valuation perspective, there could also be a light at the end of the tunnel.
“You’re probably not going to close a deal next week and maybe not next month,” another healthcare-focused GP told me. “But there is some optimism that there are going to be some opportunities after the dust settles and 2020 vintage funds could perform very well. We have a lot of dry powder, and when the dust does settle, we think we can buy things at much more attractive values.”
With many healthcare investors focused on contingency plans and mitigation strategies for their portfolio companies, there’s no shortage of talk around pulled or stalled sale processes right now.
ICYMI: Curium, the CapVest Partners -backed nuclear medicine imaging company, called off its potential $3 billion sale after financial market conditions resulting from the covid-19 outbreak impacted the process. Final bids, submitted Monday, fell short of value expectations, I reported. Check out my full story to learn which Curium peer the PE community may now turn their attention to.
Vet Care: Investor appetite for veterinary care can’t be tamed. In fact, one private equity investor told me this week that millennials tend to spend more of their share of wallets when the economy dips.
This week we saw a massive outcome in the space: Morgan Stanley Capital Partners struck a $2.65 bn deal to sell Pathway Vet Alliance to TSG Consumer Partners, I reported. Elsewhere, Vetsourse, backed by Bain Capital Ventures, is evaluating its options. Read more.
That’s it for me today. As always, reach me at email@example.com with your comments, tips or just to say hello. Of course, any must watch shows, must reads or DIY projects to keep me entertained are welcome … Stay safe out there!