Medtech Buyouts by Private Equity | LSI USA ‘24

Dave Uffer  0:04  
Small room but packed in his back. It's crazy. So welcome. Thank you so much David    Uffer. I'm the managing director at Trinity Life Sciences. We are a 1200 person strategy consulting and advisory firm. I'm thrilled to see over 1200 people it LSI 24. It's the most exciting and diverse conference I think I've seen in a while we have some pennants litter standards here, every year we see them, I typically will do a panel on corporate development with that history and background. And we went a little direction, different direction this year. I think everybody gets to see what the corporates are doing for acquisitions. But I want to demystify, and get a little bit more update on what's happening in private equity fillings, such a great part of the ecosystem here in med tech. In the last five years, I think there's more buyers than targets for services companies such as cdmos, were tremendous amount of activity and advisory acquisitions, clinical practices, and in the last few years, we're getting a lot more activity in acquisitions, with product companies in strategics serve a certain role. And I want to have our panelists introduce themselves and talk about what their activity in in med tech is. And Tony want to start.

Antonio Sanchez-Cordero  1:30  
Sure. Thank you, Jeff, and thank you everybody for attending. Antonio    Sanchez-Cordero I've spent the last 1516 years doing strategy and m&a in healthcare mostly with strategics Becton, Dickinson, Thermo Fisher others, recently transitioned back to private equity or argument argument is a healthcare focused global private equity fund. We have about a billion under management. And we deploy capital or three funds. So we go as early as early profitability all the way to traditional LBOs. And look forward to the panel.

Duke Rohlen  2:04  
My name is Duke    Rohlen. And I worked for Ajax Health. We are a private equity firm growth equity firm that primarily invests in med tech, we have some services, but mostly med tech. My background is as an operator, I sort of fell into the investment side of things by getting to the point where I was a little bit fed up with a venture world. And after a series of companies that we started grew and then sold, the vision was maybe we could, instead of selling companies to a large strategic, maybe we could buy the companies that we were going to build products for and build products and basically sell them to ourselves. And that's the genesis of Ajax.

Erich Wolff  2:45  
Good. Eric, well, man are both great to meet everybody in the everybody. So I recently just made the jump over to private equity. Prior to this I ran global m&a For Becton Dickinson. Prior to that, Iran strategy and business development and corporate development for Medtronic diabetes in neurosciences portfolios. Join Partners Group now a little under a year ago. And Partners Group is $150 billion asset manager. All private markets, we invest across five verticals, so private debt, private real estate, private infrastructure, private equity, and we're now doing royalty lending and royalty financing. I sit within the private equity vertical of the 100 and 50 billion think roughly 80 ish billion is allocated to private equity. In addition to traditional buyouts, my job I got brought on to build out our med tech practice and med tech initiative. But in addition to that, and I think particularly relevant for a lot of folks here, is we do growth, equity investing as well. So we have a call to 202 100 $50 million per year mandate to deploy across all of healthcare and not venture. So this needs to be commercial stage think 20 ish of revenue and growing. We can write cheque sizes anywhere from 25 30 million on the low side to 5060. on the higher side.

Dave Uffer  4:14  
Great, great starting point, Eric and Duke told me to keep score how many get right and wrong. So if you see me keeping notes, a lot of folks come to me and ask should it should I approach this group? We're raising capital, a little bit of confusion on the different flavors? I think there's a different thesis for you have 150 private equities, there's 150 different flavors. And 10. Oh, starting tell us about any in activity that your fund does with investing whether it's growth equity or any stage or it's purely acquisition and bio.

Antonio Sanchez-Cordero  4:49  
Yeah, so I think because we are domain focus, and we'd really spend a lot of energy in that understanding really the spaces We won't invest. We don't, we don't necessarily start with the target or with the teaser. When it hits the inbox, right, we have about 400 medtech sectors within Mechtech that we have defined, that we monitor that we develop deep dive. So for us, it's about focusing on the segment, and then starting to understand sort of the opportunities there the new technologies, I think, in a more traditional fashion, we do think about platforms and add ons or tuck ins. And certainly, we tried to categorize our targets in you know, from that perspective, but certainly, again, I think what we've seen in the industry overall in can not not going to repeat the numbers for dry powder. But we've become an industry more flexible, more hands on and become a bit more going early. And I think we as a firm, we've also done that. And you know, there's situations where we can come over again, early profitability, or having a clear path to profitability being able to work with that with that investment with a team with an investment thesis continue to bring. For us a lot of times it's about having a path to inorganic growth, with with clear understanding of how we can help the company grow.

Dave Uffer  6:04  
Anything to add on that Duke from

Duke Rohlen  6:06  
we are models completely different. So what we do is we go and we find what we call it chassis. So a big commercial infrastructure company, the most relevant one that we bought was a company called Cordis, which has just under a billion dollars in sales, and we do an assessment of the portfolio gaps in that company. So we'll go in and we'll assess where does this, you know, what products are needed. And then we canvass the market for three things, products that we can license products that we can acquire, or companies, small technologies that are relevant to the portfolio gaps that we have. So if somebody came to me and said, Hey, listen, it looks like you guys need a thrombectomy catheter for Cordis, I'd be very interested because we would then fund that technology with the bespoke intention of buying it from you or buying it back from you at some point, our whole model is to try and increase the the ability for the ecosystem of innovation to materialize, not unlike what Apple did with the app store, right? So think of think of Ajax are the companies that we buy as sort of the App Store. And then we go out to an entire ecosystem of people that we know are people that we identify, that have technologies or ideas that they could actually bring into that app store. We don't require them to have any commercial capability. We don't require them to have any financing capability because we are the commercial chassis, we will buy that. And we fund it. So it's sort of an interesting model it disintermediated to a certain extent, the venture model because we don't want our our small talk or in our app developer CEOs, wasting their time on finance and trying to get money. And it causes a very strange deviation from a value vector when you're focused on the technology, and you should be focused on the technology not raising money. So that's what we do. And so we identify chasis. We have several of them. And then we go identify people that can build technologies to bring into that chassis. Segue

Dave Uffer  8:10  
that we can go in four different directions. So I want to start on that one that's corporate carve out for Cordis was flipped out of j&j. And then you acquired this out of Cardinal Health. Correct? Correct. So we've seen a lot of activity and corporate carve outs Medtronic was looking to divest of their respiratory and monitoring business. Edwards with critical care, Baxter's spilling that part with the Renal Care we can go on and on. Are these ones that you get opportunities to see in advance a pre emptive, or you look for these to go to market?

Antonio Sanchez-Cordero  8:46  
I think we see some of those. I don't know that all of those. But I think some of those, there's some conversations prior to that. I think understanding surely the lack of actionability. Right. And because because, in my experience, it's never a black or white situation, right, there's Degrees of Gray. So I think it's in some of those and some of those that are unfolding. I mean, it's interesting to be able to really think through that really understand the actionability component, and then how you think about the long term potential for that asset. So

Erich Wolff  9:15  
Eric, yeah, we, we do see those and are interested in them. So looking at corporate carve outs, make a ton of sense for us, you know, partnering with folks like Duke and the Ajax team to do some of these more creative transaction structures, where you're bringing strategics and sponsors together. I mean, this is this is Dukes, bread and butter. So Duke, and I've gotten to know each other over the years, looking at highly creative ways for sponsors to get involved in assets like this and opportunities like this. So you know, Duke and Ajax have a long term partnership with at least one or two large well known sponsors. And, you know, we're looking to do similar similar type transactions.

Dave Uffer  9:58  
So when we were cooking It didn't matter, I would have private equity come to me every month. And this doesn't look like it's core and strategic to could could you do the best of this? And we had to be very quiet about that until we made a massive corporate decision. Do you try to be preempted with companies or wait till they actually are announced? Yeah,

Erich Wolff  10:18  
that's a good question we do. So I mean, I think the punchline for folks in this room and whoever's listening, when you think through interacting with a sponsor, if you're selling a business, etc, is, is there a platform? So is there a management team? Is there a commercial organization? Is it a fully functioning business? When you are a corporate and you're looking at carving out a business, the question becomes, which private equity firms have a platform that this bundle of acids can go into. Otherwise, you know, you've got to really sell like a Edwards critical care business, or a Medtronic, respiratory and patient monitoring business, whole, holistic businesses, that will expand your that'll expand your sponsor universe of interest. So

Dave Uffer  11:03  
that's where I wanted to start with the carve outs, because you have to have a platform, you have to have a base. Most of the companies here are startup and they're seeking capital to grow to get accelerate their commercial, and I don't think they're really that core. But as far as add on, are a lot of your acquisitions, growth vehicles for bolt ons? And are you looking for roll up strategies? Or it's a company bespoke into itself that we're just going to grow this? From a different perspective? We'll get into that. Let

Erich Wolff  11:35  
me make one quick comment on that. And then I'll stop talking. But yes, if within within your platform acquisitions, it is not uncommon to make venture investments or venture stage acquisitions to drive the growth of the underlying platform. So we have a business right now that I'm on the board of it's called Wedgewood pharmacy, and we made a acquisition of a venture backed venturi technology platform called Blue rabbit. So absolutely private equity firms who are nimble, like we are at Partners Group are open to that. I

Antonio Sanchez-Cordero  12:10  
would just add that sometimes it's interesting because it's the bolt on the drives and triggers the opportunity, right? Sometimes we know platforms that could be actionable, but it's hard to get excited about that growth profile unless you find the bolt on a bolt on. Right. And so sometimes, it seems that the beginning of discussion is always the platform. And maybe that's the easier way. But I find that there's you know, certain areas where we know, there's platforms that could be actionable, and it's finding the right, you know, startup with the right exciting technology that is growing, that could be actually the catalyst for growth, that helps us get comfortable with the story for the platform. So it doesn't always work one way around.

Dave Uffer  12:47  
Do come when you're looking at just that individual asset to be your start aid to use the word distressed, but is a lot of times this these are a distressed asset, or is it something that is non strategic ly aligned with with the management or sometimes a management turnaround that okay, we're gonna come in with the our management team. We think it's got a great base, good technology that we can grow. They're just not growing in the fashion that we think it could. Yeah,

Duke Rohlen  13:17  
I mean, I think that first of all, carve outs are really hard. Took us two and a half years we had hundreds of TSA is that we had to retire. I think it cost us like $150 million to separate Cordis from Cardinal and the TSA has went all the way back to j&j. So this is an asset that's been starved of attention. I always think of it as a house that's overgrown. It's sitting on the cliff looking at that beautiful ocean, but you can't see the ocean because it's so overgrown with vines and rot. So our job is to come in and make that house pretty again, right. And when we bought Cordis, what I loved about it, it was it was anemic. It was growing like maybe 1%. It was barely profitable. It had you know, we were in 48 countries, it had 4000 employees, totally inefficient, totally unproductive. And our vision was that with new management and with a new focus of growth, we could go and transform that company. We're growing now just under 10% in three years. So it's like a remarkably fast growth project on what we've done. And this is where I think you're getting our thesis is that we can go surround that asset we can surround Cordis. With innovation, we create an entity with $300 million, called quarters X and quarters x is just pumping products. Every six months. We have a new product that's coming into Cordis, and there's just like system at CES, systematically increasing the number of products, the differentiation of those products, and therefore the revenue so we're revitalized. isn't something that's really been broken, I think it's really hard to try and make sense of a company that's in a great spin is doing really well. It's a little bit like buying a fixer upper versus buying a house, that's beautiful. But the house, that's beautiful you might want to live in, but it's not going to increase in value like the fixer upper, well, if you can figure out how to affect the inputs to change that and fix it up.

Dave Uffer  15:24  
Okay, everybody has to report results in some way. But talk about the advantages not being publican having to worry about each quarter earnings per share, and shareholders and the ability to actually invest when right now might not be the best time on the on the bottom line. But for the growth of the organization, we're not gonna be worried about shareholders and our price.

Erich Wolff  15:46  
Well, we are public. So no, I mean, it's nice to be outside of the quarterly cycle that all of us I think have been, we've all kind of worked together in some capacity up here. So it it's, it's a, it's a very different world, where you can invest for growth, you can make investments today that, you know, don't need to pan out for the next, you know, immediate quarter to get the ROI you need to justify in that period. So it is it's a it's a really, it's a strong benefit of, you know, of being focused in private equity.

Antonio Sanchez-Cordero  16:17  
Yeah, no, I think it makes sense, I think the ability to make the right decisions, because you can take a longer perspective and again, longer meaning, you know, a year and a half, two years right now, not the next two quarters make a huge difference. I think just back to the carve outs and sort of connecting both things. I think the other sort of the other opportunity here is important with with with strategic with listed companies is there might be segments that you know, are sort of could be a carve out, but they could be strategically long term relevant for the strategic right, they just might not have the priority, the bandwidth might not have the ability to deploy capital and build it up in the next 234 years. So I do think there's an avenue here for thing, areas that are strategic, but not enough to make it to the top three, where the capital gets deployed, where new acquisitions get done, or they might be diluted in getting there. And so I think I'm seeing more more interest in having those conversations. And then part of the challenge is how you structure in a way that, you know, makes the corporate comfortable that ultimately, they can take that back, you know, and you can get very complex, but I think that's an area that we're going to see private equity step up and help consolidate and help build some of those.

Dave Uffer  17:21  
With the uncertainty in the, I want to say a little bit of the the sour market for IPOs. We all understand what the apple peel market has been in the last 18 months. And I think the bankers used to be great about putting their finger rate on the time when it was going to open back up. And I think we just a little too much uncertainty now. Does that create great opportunities for private equity to fill that gap where companies have another alternative to actually capitalizing the organization?

Duke Rohlen  17:53  
So I think great companies go out in some way, shape or form, you target what we call liquidity, optionality. And you work towards an endpoint where you have multiple ways to liquidate the asset. And you then at that point, decide if you want to do it, right, do you want to raise money, you do that from a position of strength, because you have some other BATNA that you can deploy? I think that, you know, the job of a CEO, quite frankly, is to raise money, and then get a return on that money. That's it. So a lot of people think the job of the CEO is to manage the technology or the manage the people, those are side products to the value creation initiative and role of a CEO. So when we when we look at a company, and we take a four year timeline, we say, Okay, how are we going to liquidate that? How are we going to sell how are we going to monetize that asset within four years, we cannot rely on like public markets, right? They're just not there. So you have to think of different sources of liquidity. And those can be partnerships. Those can be roll ups, those can be funding from private equity, you can sell the private equity, you can get growth, you just have to figure out how within that period of time, you're going to create value. If someone came to me and said, Listen, here's my here's my plan, right? I'm a really good operator, I have got a track record of success. In the next 48 months, I'm going to do X, Y, and Z. And here are the options that I'm going to have when I complete that 48 months. What I would diligence is the the via the probability of of those exits how discerning he's been in terms of where she has been in terms of understanding and being real about the liquidity. And by the way, if I got comfortable with that, I would make that investment. Right, sort of irrespective of some of the details like managing people and, you know, building a technology, we're building a product, we start with strategy, and then we back up from there and the strategy is defined by how do you create liquidity?

Antonio Sanchez-Cordero  19:57  
Yeah, which is good, I think in our space. particularly more focused on medical diagnostics, I think the windows being closed long enough that it doesn't feel it's a sort of it's competing for as an alternative at the moment. And yes, it will open eventually. But I think that's, that's less of a concern. I think the other side of that is we've seen enough, you know, enough challenges in the in the equity market, that we're seeing opportunities there as well, which is the to b2b to public department. And I think we expect more of those opportunities where the market is not really recognizing the value in the asset, and we have an angle and we can come in, and we can help that team continue to grow the business and do to execute on their thesis that was challenging to do in the public market. So I see there's going to be more of a tune in that space as well.

Duke Rohlen  20:40  
I would add one more thing, which is, I think the the viability of having a single product med tech company that's public, those days are gone, in my opinion, because everyone, there's a flight to profitability, everybody has to show how this thing is, is going to create money, it's not just going to be a public company that has hope there's got to be a path to making to making profit, and single product companies that are in the med tech space are, are really challenged, because they don't have enough money to diversify their portfolio, they are spending a ton of money on sales and marketing in order to drive to, to drive revenue there. And they basically take away the, the the acquisition premium over time, right? Because even if you're really selling a lot of products, if you're not profitable, nobody's gonna really buy you. There are exceptions. But the day like when I ran Fox hollow, we got to 200 million in sales. And we had a really important question to ask where we going to diversify and become an, what I call a consolidator company, or where we're going to sell the company. And we ended up having to sell a company. And we were lucky, I think we were the last ones to sell, we sold it for like under a billion dollars, but there are so many mistakes there. So I don't think that the public markets are a good source of long term, like liquidity for investors or management because I think they go up and then they come down pretty fast unless they can figure out how to bolt on other products to their, to their, to their sales, infrastructure,

Erich Wolff  22:19  
I would agree, I would just add on just in the spirit of clarity having been on kind of both sides of the buyer aisle. What do contain is exactly spot on, if you're taking a look at a strategic buyer, so you're a Medtronic or Boston or whomever, you either have to have massive amounts of synergies in the middle of the p&l to drive that non profitable, single product company to be accretive to large company. Financials, right? Or on the private equity side, you know, we're an EBIT, da based, you know, acquirer, and so it doesn't cut either way. It doesn't work either way for for being an ultimate buyer. And so Duke is exactly spot on. You'll see them skyrocket and then you know, there could be something like GLP, one, right, coming out, and you just watch everybody, you know, every single product company that has any tangental impact of GLP. One, their stocks plummet, right? And so you're very much at the mercy of the markets.

Dave Uffer  23:20  
So you talked about single company, iPad, single products, company, IPOs, and so forth. I can't help but throw out the landmine a few years ago, we saw a lot of specs coming here and talking. Antonio, he is smirking, common what you think of the backup option? And we've seen a lot of different activity there.

Antonio Sanchez-Cordero  23:44  
I don't know. I mean, it. I think we have some fashions, you know, from the come from a finance perspective, that it's a different way of doing things. But I think ultimately, I think Duke was alluding to it. The value creation opportunity is what it is the challenges of scaling up particularly commercially in our space are very difficult. And I'm not sure there's a way financially to do it, that it's going to solve for that. So I think we saw that skyrocket and then sort of kind of go back to Earth is probably as fast if not faster than the way so I don't know. I

Erich Wolff  24:18  
think every large strategic dabbled in at least investing in at least one spec to see sort of how it worked out. I don't think anybody was particularly successful.

Dave Uffer  24:30  
Look, I love diversity in our market, but I'm a med tech snob. So the thing that I love about this, and that's all I've done for 35 years, what I love about LSI it is a med tech only in specific conference. And we are a very different part of the industry and maybe spec was good opportunities in different parts. But I think we're all talking what suits med tech and it's a very different area to participate in Little bit about Dookie starts talking about management teams. People are let's demystify that. We want our own team in there, we're moving everybody out. We don't think these are aligned with our vision or we love the management team to stay there. That's the stability and different flavors.

Duke Rohlen  25:21  
So we love the management teams that are in the companies to stay if they are capable, right, completely obviates disruption, it's a nice continuity from the old owner to the new owner. The challenge is, is that in order to change the direction of a huge ship like Cordis requires a different phenotype of person, right. So someone who's been at quarters for 20 years, might not have the energy or the fire in the belly to put in the really hard, hard work to align with the vision of what you're trying to create for the company. And those people sort of self amputate they, they, they it turns out that they're they're not a fit, they know they're not a fit, they want to do something different. So at Cordis, we replaced everybody unfortunately, we, the whole management team, over the course of a year was was changed out. Most of those people left on their own initiative, though they didn't they didn't like probably me or the intensity that we brought to the table. But now I have a bunch of people that have worked with me in the past, I pulled them from various companies that I've I've run and it's it's a really Rockstar team. I would say though, one of the things that we do a lot is we look for people outside of med tech to come in to med tech companies and bring fresh perspective, fresh ideas, etc. So one of the things that's really rich about about healthcare now is it really involves services and drives big technology like Apple and Google and, you know, we're talking with Microsoft about a company. And what you're getting is this, these fresh ideas coming into med tech and really disrupting a calcified industry, our med tech space has not innovated on the model in a long time. Like other companies have, biotech is way more way more creative, right? Software is totally creative. And so what we're doing is trying to bring those outside people those outside ideas into med tech, and I think there's gonna be, you know, this burgeoning of, of innovation because of that, my final comment is that, the one thing that's clear as day is that these big companies that are earnings per share focus, you know, the big incumbents absolutely have to have growth, and they're not, they're not going to always get it by paying a lot of money for it. So figuring out how you can get people and ideas to create on a business model that allows for innovation to go into those big companies with less risk for them from a financial standpoint, eliminating some of the earnings per share dilution issues that are challenging. It creates this unbelievably interesting opportunity, I think, for new new innovation in med tech.

Antonio Sanchez-Cordero  28:12  
Just to build on that, I think following Duke's use of a capable management team, for us putting carve outs aside, that's that's the key criteria in looking at a company. I think what it gets interesting is what we can bring to the table, in terms of the next phase of growth of the company, and sometimes is challenging some of the assumptions about how the business should grow, particularly when you have resources that the previous team didn't have, right? So enabled that sort of inorganic growth component of the conversation, that tends to be a conversation that hard at the beginning, because because that management, you might not necessarily have spent a lot of time on thinking when inquisitive perspective, but I think enabling that enabling it from our deal flow from our database of companies in the space that we think could be a great addition. I think that's where it becomes a very exciting conversation. I think the management team recognizes that and I think that's been a partnership that has worked very well for us.

Erich Wolff  28:58  
I think that's right. I mean, management team, doing due diligence and management teams is critically important. We look for nimble entrepreneurial leadership teams, right. At Partners Group, we have a really unique and I think, best in class operating governance model where we bring in outside advisors, and we call them operating directors and lead operating directors to really take meaningful, meaty, meaningful, meaty roles on our boards. So they are actively engaged with the management teams helping bring in industry expertise, having steady contact with the leadership teams versus just sort of quarterly board meeting reports. So it's a very, I'd say it's a very nimble and entrepreneurial approach that we take the board to make the governance of our portfolio companies

Dave Uffer  29:46  
Nice. Which ponds to fish in. Are you thematic, when you look at particular market segments or technology segments or purely agnostic a great business that we think we can and grow in profit and add on to we

Erich Wolff  30:03  
are, I know, you're going to hear the same thing from Antonio, not all private equity firms have the DNA that that our firms do. But we are highly thematic, in our, in our research, so we do deep dives in every single space, every sub sector, every category, and are far less reactive to just, you know, some random asset comes up for sale, and, you know, we're gonna go spin up, you know, our deal models and see if we can make the financials work. So it's a very pragmatic, very thoughtful approach to our our investment. Want to

Dave Uffer  30:38  
hear from from each on that. But is that because of certain segments that you think are very high growth potential? Or because your team has more expertise in that and it fits with your ability to assess and operate?

Erich Wolff  30:54  
Yeah, I mean, I would say that the filters that you apply to market start with that, right, so you're gonna look for high growth markets, you're gonna look for markets where you can, you can make an impact, there's assets that can put you in and number one or number two leadership position, you know, sort of out of the gate. I think that's, that's the most that's, you know, one of the initial filters that's applied. But then yeah, specifically, you know, where do folks in the organization have the greatest skill set, and you'd be blown away by the level of rigor and caliber and advisor networks that are brought in to help go deep in a sector or sub sector I got brought in. I mean, there's a lot of private equity firms, I think, that are becoming increasingly thoughtful about bringing, you know, experts in from industry into the private equity firms to help to help drive that that depth thematic research. So I expect that trend to continue. Yeah,

Antonio Sanchez-Cordero  31:51  
similar. Right. Thematically, I mean, we do have areas, I think back to your second question, Dave, I think it's a combination of both right, certain segments that are very attractive, and then certain areas that we, you know, our team is particularly, you know, familiar with that have a deeper network. And so it, you know, the combination of both tends to be great. Because we're sort of fully focused on healthcare, but we do everything from you know, bio processing services, you know, metic, diagnostics, healthcare IT, I think what it's interesting for us is, first, when we have those early conversations, we've already sort of declared that we want to enter that space, or that we want to continue to invest in the space. So we know this space, the conversations with, with the companies with the management teams are, are way more interesting, because we know the space versus we just learned about that company. And now we're going to start the process of getting to know the space. But the second piece is because we cover the whole spectrum, I struggle more and more to find opportunities to belong only one of those buckets, right? I mean, most diagnostics, companies, now they have a heavy Healthgrades key component. And a lot of the diagnostics companies have a big, you know, life science component. So the technology is also used for research. So I think, you know, we work across those buckets, I mean, driven by some of those areas, but at the same time working across those areas, because I think that gives us a better perspective, more conviction in a lot of these opportunities.

Dave Uffer  33:13  
Do come I mean, your history is legendary in interventional medicine. But again, thematic, beyond

Duke Rohlen  33:24  
we are thematic we we we differentiate between strategic and opportunistic. And so there are areas that are strategically interesting to us. But then we have to be opportunistic, about taking advantage of them when they come up. So you're not going to go, you know, spend a billion dollars on something that just pops in your lap, it's going to have to make sense based on what you know, or who you know, or how you can change it. And a lot of that depends on what you've done in historically. So yes, we are thematic, but we try and be as strategic as we can, knowing that opportunism, knocks, and sometimes you have to jump on it. For example, we're doing a lung cancer deal with whole logic, right, we're creating a new division for Hologic. And I've never done anything with lung cancer in my life, right? But so that's a little bit more opportunistic, but we understand and we can build the capabilities to make it strategic if that makes sense.

Dave Uffer  34:23  
Um, that creativity, Eric, back in the mid Tronic days and diabetes, you had done something with private equity, very creative as well. Talk about some different models to be very creative with equity.

Erich Wolff  34:36  
Yeah, happy to do it. So years ago now. We have been drunk I was running the strategy and business development team for diabetes business and we had multiple programs that were either underfunded or non funded. That we we viewed as being absolutely critical to the to the to the future of the enterprise. So we made a whole bunch of trade offs within our portfolio. And we decided, listen, we would like to augment the funding of these programs to accelerate them, et cetera. And partnered up with Blackstone life sciences. So Blackstone has a royalty Investment Group largely focused on pharma historically, I think we were there first med tech deal. But effectively, what happened is you bring we brought in private equity money to fund to fund these programs, keep the employees within the strategic and if the program was successful, a royalty on those products was paid out. And if the program was not successful, you know, the the private equity firm took 100% of the risk. And so when you take a look at that kind of creativity, it's p&l neutral, meaning it doesn't impact, you know, the profitability of, of the division, it shares the risk, right. So they're, you know, you're paying, you're paying a royalty, so you're paying, you know, dollars on every single unit you sell to an investor and you know, they take, they take the risk of their investment going to zero. And you of course, take the risk of not having the product that you very desperately want that they're funding. So very creative types of transaction structuring out there for private equity firms to partner with, with strategics.

Dave Uffer  36:20  
Thanks, Eric. So many people asked me Are we going to get into so many different topics on the panel, I will reserve the last few minutes, I do want to ask anybody in the audience that just raise your hand, if you want to ask any of the panelists a question. I can't We can't get to every free topic, though. The last one I want to get into is geography. Antonio, you have the most diverse geographic footprint up here. Talk about geographic considerations for you. So

Antonio Sanchez-Cordero  36:49  
we've got offices in New York, Lyon, in France, Singapore, and Tokyo. And truly we think is, you know, I think that any of these spaces in healthcare will most of them are truly global, right? Same portfolio, they're sold differently, commercialized differently, but into every geography. So we think, you know, a lot of our energy spend right now in US, Europe and Asia. And so definitely, we don't, you know, we don't have a strong priority for one, one geography over another.

Dave Uffer  37:16  
And that's where the companies are commercializing where you look for the opportunities, or basically where you source them, or whether you continue to operate

Antonio Sanchez-Cordero  37:24  
them. Yeah, but both right, they can be, you know, their source across all these geographies. And we would expect them to, you know, they can operate in any of those geographies. And, and sometimes, I mean, particularly for the European based ones, where we can also help is with internalization, particularly sort of arriving to the US mining in the US expanding their presence in the US in a more strategic way.

Dave Uffer  37:44  
Duke for for HX.

Duke Rohlen  37:47  
I wish there were a company in Dana Point because I buy it, even if it wasn't a very interesting company, I think it's a great place. Okay, I love it. That's great. No, I mean, just like the whole idea, you got to be strategic and opportunistic, you got to go wherever the company is.

We're in thinking, Okay, anybody from audience, please? Happy

Antonio Sanchez-Cordero  38:09  
to start. I mean, we have a very extensive network. I mean, because we are domain focused, we really value and, and we see as most of our teams are made up of executive scientists, investors and operators. And so that that makes is something you know, from the get go or managing partners is a, you know, diverse profile. We have different we have different sort of layers in that model from a strategic advisors who take part in an open partner. I mean, there's, there's limited differences have to do more with exclusivity and dedication. But I think the point is, we like to build long term relationships, we like to build relationships where that person can be part of the assessment of some of the deals, he or she might be sourcing some of the deals that we might be sourcing, and that relationship continues. And sometimes you'll leave it deals to executive roles, sometimes on executive roles. And so it's a fairly I mean, it's, it's well entrenched in our in our operating model to have people from the outside advisors that can join our team, and they're part of the team. From the day one,

Erich Wolff  39:07  
I would echo that. I mean, we bring advisors in at the beginning. So anytime we're taking a look at a space, you know, out of the gate, you know, we'd have we'd have interests in in this space, but then bring in advisors a to help build our thesis, right, but also challenge us, right. So we bring in sort of Red Hat or red shirt advisors as well to push back on this pressure test our assumptions. Because at the end of the day, we're focused on building businesses that have winning business models, right. And so with that, you've got to understand where all of the challenges are, you know, beyond just the opportunities and so we do we have a very strong advisor network and like Antonio, they can play various roles of increasing responsibility in our portfolio companies, you know, all the way up to two sitting on our boards. Duke

Dave Uffer  39:53  
most unique opportunity in med tech to get the last word and after Eric to get the last didn't have to Eric anything to add there

Duke Rohlen  40:01  
no thank you thank you very much

Dave Uffer  40:05  
Oh was the last word Thank you very much