Discover why investment funds are increasingly interested in investing in the healthcare sector.
Private equity and venture capital funds have shown increasing interest in investing in the healthcare sector. These funds seek out promising and innovative business opportunities in the sector, with the aim of obtaining significant financial returns.
Healthcare is a strategic and constantly growing sector, especially in Brazil, where the demand for healthcare services and solutions is high. Private equity and venture capital funds are aware of this trend and seek to identify companies and projects with potential for growth and innovation in this market.
Health Thesis: Private Equity
In 2021, when XP announced that it had raised R$1.67 billion in its second private equity fund , Chu Kong, partner and manager of XP Asset's private equity funds, stated that he already had some companies in his sights and part of the money already had an address.
In the same year, XP's private equity acquired, for R$200 million, majority stakes in five assisted reproduction clinics . In 2023, the fund also acquired A Vida Bem Vinda, the sixth brand to make up the Fertgroup platform , a holding company created by the manager and which has the founding doctors of the networks as minority shareholders.
In addition to assisted reproduction, the same fund acquired a minority but significant stake in the dermatological aesthetics holding company JL Health for R$225 million . “JL Health caught our attention because it is a holding company with several technologies and major avenues for growth that it can provide,” says Kong.
Founded in 2002 by engineer José Luiz Pinto, JL Health operates under 18 brands, the most important of which is Medsystems. The company sells equipment to dermatologists and plastic surgeons, as well as to beauty clinics. “We have more than forty technologies, such as laser hair removal, rejuvenation, radiofrequency and many others,” says the founder.
This is a B2B market, but with a very peculiar characteristic. After all, the buyer is usually the doctor. And the equipment ranges from R$200,000 to R$1.3 million. In 2023, the company had a turnover of R$520 million and, this year, it should reach a revenue of R$700 million.
XP's money, say the founder and CEO, will help accelerate operations, especially with the entry into new segments. Today, JL Health operates discreetly in the gynecology and ophthalmology segments , and will enter orthopedics this year.
“In gynecology, for example, there is a growing demand for intimate rejuvenation treatments and we have technologies for this,” says Regis. He continues. “In ophthalmology, we will advance with new technologies for cataract surgery equipment and the supply of lenses.”
In the case of ophthalmology, there is an advantage within XP's own private equity. The first fund is an investor in Vision One, which received an investment of R$293 million . In two years, in addition to organic growth, the company acquired 12 hospitals and the company's operating revenue multiplied tenfold. It went from R$65 million to R$650 million in gross revenue . "We will connect the two companies so they can talk," says Kong.
In orthopedics, the segment in which the company will begin operating, JL Health should work with equipment aimed at treating pain, with technologies such as shock waves, electromagnetic fields, and the use of hyaluronic acid to fill cartilage.
“If they do the work they did in dermatology in these other segments, it will be phenomenal,” says Kong. The XP private equity chief is so optimistic that he is already giving a timeframe for the IPO. “We will get there in two or three years.”
Health Thesis: Venture Capital
In 2023, Headline XP also decided to move into healthcare. The investment fund announced an investment of R$7.8 million in the startup Fin-X , which works to improve the operational efficiency of clinics, medical offices, and hospitals. The transaction was advised by Cornerstone Partners . As explained by Romero Rodrigues, manager of Headline XP, the startup was chosen after a thorough analysis of 1,500 other possibilities in the market. The fund acquired a 20% stake in the startup, which is now valued at around R$40 million.
Founded in 2017, the healthtech's main business is to help healthcare professionals organize appointments and authorize procedures. One of its solutions offers integration of surgery protocols between doctors, hospitals and health insurance companies. According to the founders, this promotes up to five times more efficiency compared to the manual operating model.
Also in 2023, Headline XP makes its second foray into the healthcare sector in just a few months . The fund led a R$17.5 million round in Fiibo, a platform focused on healthcare benefits.
The investment suggests a market valuation of R$77.5 million for the healthtech . Headline's investment was made in partnership with VOX Capital , responsible for the corporate venture capital (CVC) fund Arava, of Hospital Albert Einstein.
“We are looking very closely at the sector. It is the largest consumer market that is not yet fully digitalized,” says Rodrigues. The opportunity seen by the executive also coincides with the size of the addressable market for companies in the segment. In 2022, private spending on healthcare in Brazil was R$520 billion, an increase of 19.3% compared to the previous year.
XP's private equity and venture capital funds recognize the potential of the healthcare sector and have made strategic investments in this area. These investments aim to drive innovation, the development of solutions and the growth of companies. With access to the capital markets, these companies have the opportunity to expand their operations, develop advanced technologies and promote significant advances in the healthcare sector.
Cornerstone Partners can help you get on the radar of investment funds with a healthcare thesis.
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