Funding life sciences
Health looks for global acquisition and partnership opportunities that occupy a critical and strategic role in the healthcare value chain. As healthcare costs continue to balloon globally, L1 Health is looking to invest in companies that increase access, reduce cost from the system, or improve the quality of care.
L1 Health plans to invest up to $3bn to buy and build leading assets in the healthcare sector. In order to build these leading platforms, we focus on a long-term vision and have the ability to underwrite hold periods longer than a typical private equity fund. In addition, we have the flexibility to own majority control positions, acquire minority stakes, invest in public equities or structured products, and start companies by backing operators as we did last year with the launch of K2 HealthVentures (K2HV). This flexibility and long-term focus – combined with our deep sector expertise – allow us to support partnerships that create lasting shareholder value. We are focused on building leading assets that occupy a critical and strategic role in the healthcare value chain by developing or supporting new technologies, increasing access to care, improving care quality, or reducing care costs.
First-class investment team in place
The L1 Health team has extensive experience in healthcare private equity, banking, operations, policy, strategy, and M&A, as well as first-hand experience of healthcare delivery. The L1 Health investment team is supported by an Advisory Board consisting of internationally respected senior healthcare executives, including Dr Franz Humer, former CEO and Chairman of Roche Holding Ltd, and Rolf Classon, former CEO and President of Bayer Healthcare LLC.
US healthcare trends
L1 Health continues to see three trends. Firstly, technological breakthroughs, such as gene therapy for treating diseases like cancer, have altered the landscape. The funding requirements of this science are intense for developers. Once approved, how governments and insurers will pay for these investments remain hotly debated. Secondly, policy uncertainty continues to hamper the system for those providing care. In the next election cycle, many politicians will fiercely debate a “Medicare for all” option pointing to Europe, who have universal healthcare systems. Finally, digital opportunities to enhance patient engagement means players are now deploying new strategies, and partnering with new entrants, to compete.
EU health trends
The European Healthcare space is attractive for investors, owing to strong fundamentals and the fragmented state of many of the sub-sectors. L1 Health sees five major trends. First, demand is growing for care due to ageing population. Secondly, prevalence of chronic diseases is increasing. Thirdly, there are supply challenges due to funding and labour challenges. Fourthly, there is market consolidation and growth in outsourcing. Lastly, there is clinical, digital, and business model innovation.
L1 Health’s strategy is to invest in companies that benefit from these trends. It is looking at attractive strategic options in specialised retail health including animal health, dental care, dermatology, specialty patient care services, specialised pharma/med-tech outsourced services with specialist and emerging capabilities (e.g. Biologics CDMO), emerging surgical technology, and elderly and chronic care.
As mentioned, recent clinical breakthroughs mean that L1 Health believes the market is growing for innovative financing to accelerate innovation in life sciences.
To meet this growing demand for financing, K2HV, which is backed by L1 Health, has been launched. K2HV is a new specialty finance company, which will provide long-term debt, equity, and intellectual capital to venture and growth stage life sciences companies.
K2HV’s primary focus will be on customised debt financing, enabling innovative companies to minimise equity dilution as they reach key lifecycle milestones, and build enterprise value. In addition, the firm also has the ability to invest equity capital, thereby aligning its interests with those of its venture and public equity investment partners. A key principle of the firm’s charter is its commitment to devoting a portion of investment profits to fund underserved and underinvested areas in the healthcare space, both in the US and globally.
L1 Health portfolio
K2 HealthVentures (K2HV) is a flexible, long-term provider of debt and equity capital.