Wellspring Capital Management has acquired Pentec Health, a chronic pain management and renal nutrition platform, in its latest wager on healthcare’s shift toward in-home and outpatient settings.
The New York-based firm’s investment concludes a Houlihan Lokey-run sale process for Pentec, which provides an exit for Norwest Equity Partners. Norwest, a Minneapolis-headquartered PE firm, invested in Pentec in 2012.
The deal’s valuation is unclear. One source said Pentec was previously approached by a strategic buyer with price talk of around $300 million.
Twin Brook Capital Partners provided financing on the transaction.
Based in Boothwyn, Pennsylvania, Pentec generates approximately $30 million in annual EBITDA, stemming 50:50 from its two segments, each of which offer patient-specific compounded sterile medications in specialty infusion markets.
Approximately half of the business provides in-home treatment through intrathecal pump therapy to people with chronic pain conditions. The other section of the company is focused on renal nutrition for patients suffering from end-stage renal disease. Proplete, its proprietary therapy, addresses issues of protein malnutrition in individuals that are undergoing dialysis in outpatient clinics.
The pain management piece is not only attractive because it provides a more cost-effective solution operating in the home, which is patients’ and payors’ preferred setting. It is also riding the growing penetration of non-opioid methodologies of treating pain. In contrast to opioids, the risk of addiction is low for patients receiving treatment via intrathecal pumps because it involves automatic, slow-release medication that cannot be controlled by the patient.
Broadly speaking, the specialty infusion market in which Pentec plays remains highly fragmented. Wellspring has an opportunity to expand into adjacent therapies, diversifying its offerings, as well as to further penetrate the markets in which it plays.
The in-home infusion market has attracted significant investor interest in recent months. In relevant activity, Waud Capital Partners recently bought PromptCare from The Halifax Group through an initiative it launched in 2021 with its healthcare executive Paul Jardina.
PromptCare, based in Clark, New Jersey, encompasses two distinct businesses under the same umbrella, each accounting for roughly half of the company: an in-home, infusion-therapy business and a complex respiratory business with a large pediatric patient population.
The company, which generates combined EBITDA of around $30 million not including capex, commanded a valuation in the low $400 million range, PE Hub wrote in August.
In other activity, Austin private equity firm Peak Rock Capital in September 2020 clinched a deal to buy Paragon Healthcare, which is based in Plano, Texas. It acquired the specialty infusion provider at a valuation between $250 million and $275 million, PE Hub wrote. Paragon’s trailing 12-month EBITDA at the time sat north of $25 million, it said.
Other relevant companies include the much larger Advanced Infusion Solutions (AIS Healthcare), which is owned by Excellere Partners and The Vistria Group.
Wellspring, which invests in healthcare companies with complexities around reimbursement, regulations or operations, has repeatedly invested behind the ongoing shift of care to outside the hospital, towards the home and outpatient settings.
Examples include its stake in RAYUS Radiology, which encompasses more than 130 freestanding outpatient imaging centers (as well as a growing number of hospital joint ventures). Another recent bet, HealthPro Heritage, provides contract therapy services to skilled nursing facilities and other post-acute settings. The firm also previously backed home health business Great Lakes Caring.
In 2020, Wellspring exited non-medical homecare company Help at Home, which commanded an approximately $1.4 billion valuation when Wellspring sold a majority stake to Centerbridge Partners and The Vistria Group, PE Hub wrote.