From IP to IPO

Now and then, you find someone that completely changes how you think about an issue... well, that happened a few days ago, in a lecture given by Ophir Shahaf (CEO Hadasit Bio-Holdings ). Ophir manages a portfolio of innovative ideas arising in a big medical center in Israel.

To make it short, they built a company to invest in those healthcare ideas from within their hospital and in doing so, they essentially took their portfolio public (the IPO was succesful...).

So... more IPOs coming in the next years trying to raise funds for innovative hospitals?

Amazing.

Die fast!

I just had a meeting with Luis Ruiz (CEO, Advancell, a biotech company), and he shared with me a very interesting concept... Luis is an expert at adding value to early-stage biotech projects, and while discussing several opportunities ahead, he mentioned he wanted to be involved in projects where

(a) if the project is going to fail, he knows it will fail fast (die fast), meaning he wants always to concentrate all the problems ahead in the initial phase

(b) if execution cost is small (both in time and in money), exploring should be really a no brainer

(c) all biotech projects have a critical path, with several identified "killing" points. Usually solving those key points is cheap, and if you are able to do so, the risk of the project is considerably reduced.

I found these thoughts really worth sharing.

Evaluating a medical device opportunity

When evaluating an opportunity in the medical devices sector, it is always iteresting to focus on how the product fits with the fundamental economic drivers of the health care system. Investors usually assume anything you are telling them about the product is fine (subject obviously to a later thorough due dilligence), but they want to see the medical device from the business side of health care and work their way back to its science and technology.

The important questions here are:

(1) Does the product improve clinical quality—or at least deliver equivalent outcomes in a less costly and better way?

(2) Does the product more than offset its cost through reduced overall health care expense to the system, such as reducing costly side effects or replacing or eliminating other expensive procedures?

(3) Does the product offer clinical and/or financial advantages for patients, payers, and providers alike? (see my previous post on healthcare value chain)

If an investor can answer yes to these questions, they will want to learn more. But if they cannot understand how the technology will improve quality, reduce costs, and align the incentives of key players in the health care system, you are probably "dead".

Healthcare services value chain

(click to make it larger, 

adapted from Porter)

This is a useful diagram to show how value is generated in a healthcare service... This concept was created by Michael Porter, and I find it extremely useful to evaluate healthcare opportunities in the services sector.