Impact of reform on healthcare investing
Speaker comments:
$20 billion of VC and growth capital went into healthcare in 2007.
$20 million used to be enough to fund a product to commercial development, but now it takes up to $200 million.
Flight to healthcare industry is receding back to levels from around the dot-com era.
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Long-term investing must anticipate government reform and legislation, especially in unpopular areas of healthcare, such as insurance and pharma.
To analyze the value of a company, quantify how the business is effected by or exposed to government rules.
Audience comments:
Q: As comparative effectiveness reveals marginal benefits from certain products, how will investing be effected?
A: VC is currently broken – it funds many companies and 90% of them fail. Comparative effectiveness will reveal the better companies. This might pose an increased risk to some companies, so backend investing should discount for it.
Fraud – For public investing this can create great opportunities if the company truly has solid underlying value
For private investing, you should avoid companies with potential for fraud or product overuse because this can’t be anticipated in the due diligence process.
Key quotes:
“Healthcare investing will be in incremental changes and improvements.”
