Operating challenges lead to opportunities for WCAS; Nordic Capital nets 19x return on The Binding Site

Grant Avenue Capital launches Helios Clinical Research.

Howdy dealmakers, Aaron here coming at you on this Thursday morning. As MK noted earlier this week, I will be writing to you on both Thursdays and Fridays the rest of this year, with the exception of next week as we take a break for turkey day.

Healthcare spotlight. “Value-based care doesn’t necessarily mean full capitation – it could mean bundles for certain episodes of care or payment for certain quality or cost outcomes,” said Brian Regan, head of the healthcare group and general partner at Welsh, Carson, Anderson & Stowe. “That’s a substantial opportunity, as the market is evolving to provide more incentives for physicians to take care of patients more effectively and more efficiently. This combination of input cost pressures and the opportunity to operate more efficiently and capture more revenue, including through these VBC arrangements, is driving increased investment in technology.”

That is an excerpt from the latest edition of PE Hub’s healthcare spotlight series, where we profile PE firms that invest in healthcare. I had a wide-ranging conversation with Regan, where he discussed the types of investments the firm likes to make, how the firm goes about positioning healthcare assets and dealmaking with the current market dynamics.

“The science driving biotech innovation is really exciting, with new monoclonal antibodies, antibody drug conjugates and cell and gene therapies all holding significant promise,” he said. “That trend is going to be transformative for healthcare over the next 10 or 15 years, and there’s a whole set of enabling capabilities that drug sponsors need to bring these new therapies to market.”

He also gave his thoughts on multiple compression.

“In the private equity market, we’re seeing more of an effect on dealflow right now,” he said. “If many private healthcare companies had to trade today, they almost inevitably would see multiple compression.”

Regan noted that, historically speaking, multiples tend not to compress as much as deal activity declines, at least initially. “Then as market conditions normalize and support valuations that are consistent with the precedents, broader dealflow will resume closer to where it left off in terms of valuation multiples,” he said. “That is why multiples in the private markets have tended to be more stable with an upward trend over time.”

You can read the whole story here.

New integrated clinical site. Earlier this morning, middle market healthcare-focused private equity firm Grant Avenue Capital announced the launch of Helios Clinical Research, an integrated clinical site organization that partners with patients, physicians, and biopharma sponsors to optimize clinical research.

Helios operates 20 integrated clinical research sites that specialize in vaccines, metabolic, urology, orthopedics, gastroenterology, dermatology, oncology and broader general medicine across four states, and expects to strategically expand its footprint throughout the US over time.

The firm said its sites support patients by engaging, educating, and providing them with a quality setting to participate in clinical research as a care option. It also said it helps physicians by simplifying the clinical research process to enable them to focus on optimal patient care and data collection.

“We are launching Helios at a time when the need for a centralized solution to accelerate clinical research has never been greater,” said Preston Brice, partner at Grant Avenue. “By building Helios with best-in-class companies and bringing together individuals we view as the most talented and accomplished in the industry, we believe we are well positioned to deliver a highly optimized solution to patients, physicians, and sponsors.”

To learn more about Grant Ave’s investment strategy, read PE Hub’s profile of the firm’s healthcare investment approach here.

Nordic Capital cashes in. Continuing with the healthcare theme, Nina Lindholm reported for PE Hub Europe on Nordic Capital’s exit of The Binding Site, a company that provides diagnostic products to clinicians and laboratory professionals for the detection, diagnosis and management of blood cancers – which fetched a 19x return.

Nordic Capital and Five Arrows announced that they had entered into a definitive agreement to sell The Binding Site to Thermo Fisher Scientific in a deal valued at £2.25 billion ($2.6 billion; €2.6 billion) at the end of October. The exit yielded 19x Nordic Capital’s initial investment in The Binding Site, according to sources close to the matter, who added that it made it the firm’s best investment to date, wrote Nina.

She spoke with Jonas Agnblad, partner and co-head of healthcare at Nordic, about the exit.

“Of course, we thought Nordic Capital bought a fantastic business with great potential, but the fact that it would be owned for more than 11 years and have such a fantastic development and return on our investment – that exceeded our initial expectations,” Agnblad said.

Nordic Capital opted to extend the holding period of The Binding Site in 2018 with the use of a continuation fund, as the firm saw further opportunities to drive sales earnings and value. “Continuation vehicles are a great way for active owners like Nordic Capital to continue to drive value for a longer period,” Agnblad said. “It’s really a win-win.”

Growth for The Binding Site was “not driven by M&A in any way, shape or form”, according to Agnblad. Nordic Capital invested “significantly” in the business during the ownership. Areas such as organizational and operational footprint were especially targeted and The Binding Site more than doubled its number of employees.

You can read the whole story here.

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That is going to do it for today, I will be back tomorrow – happy dealmaking until then!