Interview with John McCormick, founder and Managing Director of InnovaHealth Partners, LP.
InnovaHealth Partners identifies and acquires control investment positions in established medical device businesses that have differentiated technologies, substantial growth potential and are sold to industry strategic acquirers.
The firm’s partners have worked together for more than 14 years and have a research-based investment sourcing process which enables the team to identify and add value to select opportunities in the medical device sector.
Tell us more about InnovaHealth investment thesis and your leading portfolio companies.
Our investment thesis is to identify and invest in the best-in-class growth private equity opportunities in the medical device and technology space. As we are not a venture capital firm, we are investing only in established medical innovations that have regulatory approvals and commercialization.
Our new fund, which is still open, will invest in 8-12 companies over the next 2-3 years. We already have made the first two investments which we believe are excellent.
The first company, Koelis, is the leading innovator in prostate cancer diagnostics and treatment. The company has a more accurate, less invasive image-guided system that allows for better identification and earlier treatment of prostate cancer which can mean less radical treatment than the current standard of care. Koelis is based in Grenoble, France and has an established global presence. For example, Koelis is the system of choice at the Memorial Sloan Kettering hospital in New York City.
The second company, Radiaction, is a remarkable radiation shielding technology that enables full body protection to all medical team members anywhere in the interventional suite. The system shifts the shielding from the personnel to the fluoroscopy system itself and encapsulates the scattered radiation at its origin. Radiation is based in Tel Aviv, Israel.
Are there any leading geographic locations in medical innovation? What is unique about them?
We have observed through the years that there is no “Silicon Valley” in our industry so to speak. We find that innovations emerge globally at hospitals, research and university settings. Sometimes innovations can even come from surgeon entrepreneurs and lone engineers. Most of these innovation pockets we find are in the USA, Europe and Israel.
What are some of your biggest exists / success stories?
Most recently, we exited an exceptional company called OrthoSpace, which is a Caesarea-Israel based company, that offers a disruptive one-of-a-kind shoulder surgery technology to the marketplace. It was acquired by Stkyer, one of the many big acquirors in our industry, and our investors made a substantial return.
What are the current medical devices related trends?
The US$400bn global medical device/technology industry is distinct from pharma, services and information technology. The big trend we see in our space is innovation which is systemic and happening routinely across the 20 or so segments within the industry. There is a vast amount of unmet clinical needs which only surgical implants and enabling technologies can solve for. Innovation is what we invest in and innovation is what the big strategics systematically acquire.
What do you believe will be the long lasting impact of Covid-19 on the health system? How is this affecting your portfolio companies?
Given the dislocation in the health care sector from COVID-19, we are seeing a surge of interesting opportunities that we are pursuing at this time. Luckily we have dry powder and do not use financial leverage so we are in a pretty unique position compared to most other private equity firms out there.
We are working closely with our current two portfolio company management teams to ensure that their plans reflect the impact of the deep economic slowdown and that they can capitalize on opportunities that will come from a return to a stable environment.
Both companies are seeing an increase in collaboration with the surgeon community which will strengthen their core relationships in both the US and Europe. This will accelerate their commercial traction and technology advancements which should keep them on or ahead of plan as the effects of the Covid-19 pandemic are increasingly addressed later this year.
What advice / guidance would you give private investors who are looking to make their first investments in this space?
We think that making investments in the medical device and technology space requires expertise at multiple levels. Private equity generalists and individual investors would need to get their heads around gauging clinical efficacy, differentiation, intellectual property, market sizing and growth, etc. while developing close relationships with the big strategic firms in the space. This kind of expertise takes years of work to develop. In fact, we have a fully dedicated research group, two medical doctor partners and 100 years of collective experience in the space. Our advice is that an investor is better suited to partner with an expert guide in order to successfully take advantage of this big opportunity.
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