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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

This week, Aaron's talking about carveout opportunity and disruption with Jeff Rhodes, partner and co-healthcare lead at TPG.

Why he matters: Strategics are pruning their portfolios, and TPG is waiting in the wings for those carveouts (recall the firm's $2.2 billion ClaimsXten acquisition, born of the UnitedHealth/Change tie-up).

Rhodes' responses were lightly edited for clarity and length.

After you have a period of market turbulence you tend to see a slowdown in dealmaking activity — the market needs to find its footing, and this will not happen overnight. 

In the near term, we expect to continue to see different deal types, moving away from sponsor-to-sponsor activity and towards take-private transactions and carveouts as a result of companies reassessing their portfolios in preparation for a more turbulent or recessionary economic environment. 

Overall, we have found these periods of disruption can create some of the most interesting investment opportunities.

What is your approach to acquiring and integrating carveouts, and how is it different from your usual playbook?

Private equity historically was not a key source of capital for corporations, but now the industry, and TPG in particular, has provided capital to help large corporations achieve their strategic goals and resource new companies from within these larger entities. 

In the prior years, together with Humana we acquired Kindred Healthcare, and we worked with Pfizer to carve out Allogene.  Most recently we carved out ClaimsXten, a payment integrity software provider, from UnitedHealth Group/Change Healthcare. 

In each of these cases, our playbook focused on providing the strategic plan, resources and operating expertise to help them grow and succeed as leaders in their markets. 

Which areas of health tech are most exciting, and why?

We have spent a lot of time in the healthcare IT market, dating back to our take-private of IMS Health (IQVIA) in 2010 through to our recent partnerships with ClaimsXten.  

We’re excited about investing behind technology that enables these providers to operate more efficiently, deliver better-quality care and start to think about new payment models around risk and outcomes-based models that are becoming more prevalent. 

We continue to see this play out in the post-acute provider space in our recent investment in Wellsky, as one example.

1 big thing: TPG's Jeff Rhodes talks carveouts

Photo illustration of Jeff Rhodes, partner and co-healthcare lead at TPG, surrounded by abstract shapes.

Photo illustration: Gabriella Turrisi/Axios. Photo: courtesy of TPG

Medication treatment quality startup MDI Health filled a $20 million Series A round, CEO Avishai Ben-Tovim tells Erin exclusively. 

Why it's the BFD: Adverse drug reactions, a leading cause of death in the U.S., happen when clinicians and prescribers lack adequate information about patient health. MDI seeks to make that information more readily available. 

Deal details: Intel Capital led the round, bringing MDI's total funding to $26 million. Intel investment director Yoni Greifman will join MDI Health’s board.

New backer Maverick Ventures Israel joined, alongside insiders Hanaco Ventures, Welltech Ventures, Arc Impact, Basad Ventures, Fresh.fund and Jumpspeed Ventures.

Funds will support hiring additional research and development staff in the U.S. and Israel.

Ben-Tovim declined to say when he expects the company to raise a Series B.

How it works: Based in Israel, MDI charges health plans a per-member-per-month fee to use its algorithm to analyze patient claims and electronic health record data. The AI then identifies the patients most at risk of experiencing an adverse drug reaction and recommends changes.

"What we’ve built essentially is a digital clinical pharmacist that’s designed not to replace pharmacists but help them," Ben-Tovim says.

MDI's core differentiator is its ability to review all of a health plan's members, rather than just its sickest, he adds.

State of play: Most companies in the prescription treatment space focus on medication adherence, or ensuring patients take their prescriptions as directed. Companies more akin to MDI, which focuses on medication treatment vetting, include:

Dosis, which offers a support platform to personalize drug dosing and last fundraised in 2019, per PitchBook.

Omnicare, which makes automated medication management systems for hospitals and medication adherence packaging for retail pharmacies, and was purchased by CVS Health in 2015 for $12.7 billion.

The intrigue: MDI is in the process of publishing a clinical study to compare MDI's algorithm-driven insights with those from human pharmacists.

What they're saying: Intel Capital managing director Roi Bar-Kat says clinicians spend a great deal of time and effort manually optimizing patient medication plans, so he views MDI's offering as empowering and scalable.

💊 2. The BFD: MDI Health fills $20M Series A

Illustration of a hand cursor pointing at a bottle of prescription pills. 

Faro Health, a clinical trials infrastructure startup, raised $20m in Series A funding led by General Catalyst. Insiders Section 32, Polaris Partners, Zetta Ventures and Northpond Ventures joined. https://axios.link/3K4ND3u 

Twentyeight Health, a Brooklyn, N.Y.-based reproductive and sexual health startup for women, raised $8.3m from backers including RH Capital, Seae Ventures, Impact Engine, Acumen America, Stardust Equity and insiders including SteelSky Ventures, Third Prime and Town Hall Ventures. https://axios.link/3YF72MA

 Prokarium, a British microbial immunotherapy company, raised $30m in new funding led by Flerie Invest. www.prokarium.com

Disc Medicine, Watertown, Mass.-based publicly traded biopharmaceutical company, raised $62.5m in financing led by Bain Capital Life Sciences, with Access Biotechnology and OrbiMed participating. www.discmedicine.com

 Cerevance, a Boston-based biotech company focused on developing new therapeutics for central nervous system diseases, raised $51m in additional Series B funding from Gates Frontier, Dementia Discovery Fund, Foresite Capital, Google Ventures, Lightstone Ventures, Takeda Ventures, UPMC Enterprises and Dolby Family Ventures. https://axios.link/3ImVLuI

Natural Cycles, a Swedish women's health company, raised $7m in funding led by Samsung Ventures, with Heartcore Capital, Headline, Bonnier Ventures and EQT Ventures participating. https://axios.link/3jWxGBD

InTandem Capital portfolio company Ivy Fertility, a San Diego-based advanced reproductive technology company, acquired Fertility Associates of Memphis, a Tennessee reproductive health care company. https://www.ivyfertility.com/

Pharos Capital sold its majority stake in Motion PT Group, a physical therapy, occupational therapy and speech therapy company, to Partners Group-backed Confluent Health. https://motionptg.com/

3. Deals o' the day

Faro Health named General Catalyst partner Elena Viboch to its board of directors. https://farohealth.com/

Traub Capital Partners brought in Michael Stanley as a managing director. https://www.traubcapitalpartners.com/ 

4. It's Personnel

Welcome (back) to Daily Dose! Early readers of this newsletter may remember this feature, in which we offer a snapshot of the health content we're consuming. 

A researcher tried to buy mental health data. It was surprisingly easy — NBC News https://axios.link/3YogWCi

"ChatGPT and Healthcare: The Key to the New Future of Medicine" —Harvey Castro https://axios.link/3RZrSDZ

Bill of the Week: Kids’ Access to Primary Care Act — Axios Pro Health Policy https://axios.link/3E9ekQO 

Health Policy Valentines 2023 — xpostfactoid Substack https://axios.link/3YFkCzy

Roses are red, Violets are blue. I got no surprise bills in 2022.

Roses are expensive, Dandelions are free. I'll get no surprise bills in 2023.

In the U.S., alas, there’s always an asterisk, so an ambulance remains a major financial risk.

New Jersey got it done — that is, built the apparatus to cover kids regardless of immigration status.

5. Your daily dose

Illustration of a weekly pill dispenser box with a newspaper called "daily dose" in each compartment.

💌 Happy Valentine's Day, Health Techies! Stick around to the end for some health care-themed V-day poems. 

💊 Situational awareness: Digital pharmacy Capsule, whose valuation ballooned to $1.2 billion on the tail of pandemic-driven growth, is in talks to raise money at a much lower value of about $500 million, The Information reports.

🖼️ Erin spent her Sunday at Heavenly trying to balance taking in gorgeous views of Lake Tahoe without falling all over the mountain.

🥳 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Brad Bonhall. Please ask your friends, colleagues and ski buddies to sign up.

February 14, 2023

1 big thing: TPG's Jeff Rhodes talks carveouts