How precision medicine, AI and the Internet of Things are transforming healthcare M&A
Aspire Ventures, the private equity and venture capital group of Aspire Universal, recently partnered with the Penn Medicine Lancaster General Health network of hospitals to launch a $300 million fund to invest in personalized medical devices and practices. About one-third of the Aspire Ventures Precision Medicine Fund will be structured as private equity investments and two-thirds as venture capital. We asked Aspire Ventures founder and CEO Essam Abadir about the firm's hopes for precision medicine.
Why is precision medicine attractive to private equity investors?
Precision medicine moves toward precision care tailored to each individual, and away from one-size-fits-all care, which I call lowest-common-denominator approaches, or LCD. This is done by matching each individual with the right treatment according to their unique biochemistry, genetics and lifestyle. The results of precision-based therapies, when they work, are phenomenally better than LCD approaches. To create precision therapies, a lot of data and high-powered analytics are needed. We believe that the Internet of Things sensor technology, along with advances in artificial intelligence, are finally mature enough that precision medicine will generate the disproportionate balance of breakthrough health products over the coming decade.
What kinds of companies does Aspire Ventures invest in?
While Aspire Ventures Precision Medicine Fund is structured to provide better-than-industry returns, the general partners are also both mission-driven. Aspire Universal is an impact-oriented investor and Penn Medicine Lancaster General Health is a community mission-driven health system. We structured the fund to qualify as a Mission Related Investment fund for charitable foundation investing or for charitable-giving tax purposes. As an impact fund, we use healthy life expectancy as the core impact metric – the same metric underlying healthcare’s move to population health. Healthy life expectancy means extending the healthy years of life, not just the total years. We are doing important work in quantifying healthy life expectancy so it becomes a continually tracked key performance indicator for our investments. With healthy life expectancy in mind, we are focused on investments in AI and IoT driven devices and medical practices. An example of that is our investment in Tempo Health, which is using wearable biometrics to feed advanced meta-AI in order to manage the blood sugar levels of diabetics. Tempo is getting rid of invasive, bulky and expensive lowest-common- denominator therapies by creating thousands of algorithms per day per patient and using the algorithm that works best for you based on your own biochemistry. Importantly, we need to remember that people's bodies are dynamic systems that can change wildly from day to day for almost countless reasons, whether it’s sleep, stress, growth spurts or viruses. The fund will invest across the early to growth stages.
How does the fund fit within the firm’s investment strategy?
Aspire Universal focuses on large impact industries that are violating the economics inherent in Moore's Law - that is, we look for industries where costs are going up while technology is being introduced. We believe those are the industries most ripe for disruption through the combined trends of AI and IoT. Healthcare is at the top of the list. The strategy for all our funds is simply to help our portfolio companies save years of time and millions of dollars in capital in each stage of development. As part of its GP commitment, Aspire Universal licenses platform technology to its funds like our proprietary A2I platform and, as a result, our companies move to market faster with better results. In the new fund we teamed with Penn Medicine Lancaster General Health as a co-GP who made hard commitments of additional healthcare acceleration resources. Together in the fund we have an ecosystem that spans A2I, healthcare data licenses, access to brilliant doctors, clinical trial capabilities, and even an insurance and commericialization joint venture with Capital Blue Cross called the Smart Health Innovation Lab. The lab is really very special as it provides a path for portfolio companies to get their first big clients and insurance reimbursement in only 12 weeks. For healthcare veterans this will sound too good to be true, as the overwhelming majority of healthcare products never get to reimbursement, and when they do it usually happens after many years of being in market and the expenditure of tens of millions of dollars in investment.
What trends are affecting private equity investing in healthcare?
The obvious topic to turn to is Amazon/Berkshire/JPMorgan and CVS/Aetna deals. What is not-so-obvious is just how healthcare payments are changing radically and the role of care navigation in that change. The system that we now know as insurance is getting disrupted as fast as retail was being disrupted in the 1990s, and the ramifications will be as profound in 20 years as they are for the retail experience now. Care navigation is the notion that we will route patients to the right medical service, at a known price, with no wait. A staggering amount of capital will be deployed to enable the roll-up strategies that enable care navigation – the Amazon and CVS deals are barely the tip of the iceberg at the top end of the market. Similar to what happened in retail, private equity is going to play a big role both in consolidation and in the upgrade process of technologically-enabling traditional health services M&A. This is partially what’s behind our private equity investments in Clio Health, which is building a care-navigated health system, and in MedStatix, which is developing care navigation AI.
How does your background as an entrepreneur help you as an investor?
I’ve been on both sides of the entrepreneurship and investment line. Prior to founding Aspire in 2014, I founded and sold a leading mobile apps platform to Intel in 2013. Up until then I was a serial entrepreneur and inventor with patents in areas like crypto wallets, compression and high-performance computing. From a young age I developed an interest in business models and, before I went to college, I decided that I wanted to learn a lot about several different areas from engineering, to finance, to law. I graduated from MIT with a mathematics degree, the Sloan School with a business degree, and then the University of Iowa School of Law. Aspire is my effort to innovate the investment model to be more capital efficient and repeatable. As a former entrepreneur and inventor, I learned first-hand how difficult it was to obtain the funding, talent, and resources needed to move our innovations forward quickly. It took me a while to realize it’s hard for everyone - whether you are creating a startup or investing in one, you are extremely unlikely to have success under the current venture model. So I believe a new model is sorely needed both so that I don’t put my own money or investor money at unnecessary risk and also to speed the rate at which impactful things come into the world. So, in that sense, I still view myself as an inventor but now I’m lucky enough to be working on a new model of innovation and impact.