GTCR looks to replicate Resonetics’ success with new investment Biocoat

GTCR managing director Luke Marker discusses the Chicago PE firm's recent investment in the maker of coatings for medical devices.

GTCR is turning to a familiar playbook with Biocoat, a specialty manufacturer of hydrophilic biomaterial coatings, services and dip-coating equipment for medical devices. The Chicago private equity firm announced its majority investment in the Horsham, Pennsylvania-based company earlier in November. With Biocoat, GTCR is once again tapping Chip Hance, a seasoned executive in the medical device business.

Back in 2017, GTCR and Hance formed Regatta Medical to pursue opportunities in medical devices. In 2018, Regatta acquired Resonetics, a leading medical device contract manufacturer. Resonetics subsequently completed 10 add-on acquisitions, and, in 2021, Regatta sold a minority equity stake in Resonetics, to the Carlyle Group in a transaction that valued the company at $2.25 billion.

Now, GTCR and Hance aim to take a similar path with Biocoat.

“He is someone who we’re really excited to have an additional investment behind,” managing director Luke Marker told PE Hub. “He led our Regatta Medical investment, which we still own today.”

Hance will serve as executive chairman of Biocoat, helping support the existing Biocoat management team, including CEO Jim Moran.

“Chip has a unique background, as he built a very large, multibillion dollar segment within Abbott called Abbott Vascular,” Marker explained. “This was the interventional cardiology company that he helped build. Since then, he’s run several successful interventional medtech contract manufacturing businesses.”

“Biocoat is a company that we’ve tracked for several years now,” he said. “One of the things that we love about the company is they’re serving novel ways to safely and less invasively serve patients and solve life threatening issues like stroke or other adverse cardiovascular events.”

Marker continued: “For us it’s exciting because you’re on what seems like the right side of healthcare and helping solve life threatening patient issues in a less invasive way.”

GTCR has a long track record in medical devices. Back in 2010, the firm had a branded med device company called Devicor Medical Products, which the firm built up.

Luke Marker, GTCR

“This was a medical device company that focused on interventional breast biopsy procedures – using a minimally invasive way, extracting tissue in a breast biopsy to then see if it’s cancerous or not,” he said. “The device was used to help facilitate the detection of breast cancer, leading to diagnosis earlier and in a way that was less invasive to the patient. That was a business we built up over five years, executing four add-on transactions and two product licensing deals, before eventually selling it to Danaher in 2014.”

Marker said there are parallels between Regatta Medical and Biocoat.

“GTCR has a good track record of expanding upon core capabilities, with Regatta Medical as an example,” he said. “With Resonetics, we’ve expanded around the core Resonetics, laser micro-manufacturing capabilities and we’ve done ten add-ons since acquiring that business in 2018. We significantly scaled the operations. There’s an expansion geographically, but then there’s also the addition of novel capabilities. Resonetics is a very large franchise in the interventional medtech contract manufacturing space. We recapitalized it around this time last year with Carlyle, as they took a minority stake at a $2.25 billion valuation of the company. That validated the strategy we had here with Regatta Medical, and what we think we can do with Biocoat.”

He added that the firm loves business that feature hard-to-replicate technical know-how.

“The company has a strong reputation in the industry where the customers can go to Biocoat for these tough to solve biocompatible coatings,” Marker said. “Today, most of the business and business model for Biocoat is around the selling of the physical coatings’ product itself. As these medical devices go to commercialization, customers will need to purchase liters of these coatings, and then it will be applied to the device itself by the customer or maybe another outsource provider.”

As far as the strategic growth plan for this asset, the firm has some ideas that Biocoat can continue to grow and leverage some additional capital.

“One area is that the company can expand into coating services, and they’ve started to do that,” Marker explained. “That’s an interesting and relevant adjacency. Not only will they be able to manufacture these complex chemistries themselves, but then have the manufacturing onsite to physically coat the devices. Typically, these coatings are either thermal-cured or UV-cured. Those are capabilities that the company can continue to build out.”

GTCR also wants to expand into other biomaterials that serve the medical device space.

“From an M&A perspective, there’s a lot of interesting adjacencies in other types of biocompatible polymers or fabrics,” he said. “There’s a number of companies that serve a similar customer base with other kinds of unique biomaterials that could be part of this broader platform.”

Although the overall economy poses challenges, Marker noted that the firm continues to be optimistic.

“It is definitely a difficult environment, but we have confidence that in the first three to six months, we’ll be able to find some interesting add-ons and are currently working the M&A pipeline in a detailed manner,” he said.

Marker added that one of the things that the firm can do is help bridge the gap with a tougher M&A backdrop.

“A lot of the companies that we’re looking at have a long heritage of their family or founder ownership – those folks not only looking for liquidity, but also a great partner in terms of succession with the enterprise and vision for where the next partner can take it,” he said. “We get good buy-in from the founder/sellers that are counterparties in these transactions. Oftentimes, they’re rolling over meaningful equity or ownership into the broader entity. It’s not a singular transaction. They participate in the future growth as part of a larger enterprise that has led to great outcomes for those selling founder-owners. What we’ve done is meet the needs of what those founder-owners are looking to do next.”

To learn more about GTCR’s Leaders Strategy and investment theses, read PE Hub’s profile of the firm’s healthcare investment approach here.