Building European Healthcare Champions: How does SHS do it?
As a healthcare investor, SHS supports its portfolio companies not only with capital, but also with decades of experience and expertise in the healthcare sector. We wanted to know from Dr André Zimmermann, SHS partner and doctor of microbiology, what SHS specifically does for its portfolio companies.
Editor: In which areas, apart from capital, does SHS support its portfolio companies?
Dr André Zimmermann: SHS focuses its investments in the healthcare sector on two types of companies: on the one hand, we are looking for growth companies, and on the other hand, medium-sized companies (small caps). In both cases, we want to support the companies in their expansion and internationalisation so that they can optimally develop their growth potential. The goal is to ultimately have a “European Healthcare Champion” in the portfolio.
At the same time, our portfolio companies should help as many patients in the world as possible to receive the best possible treatment for their illness, or to avoid illnesses or detect them at an early stage in order to improve their health status.
In the highly regulated healthcare sector, there are numerous things to consider in order to operate successfully on the market as a healthcare company and to be able to grow accordingly. This applies not only to Europe, but also to the USA and Asian regions such as China and Japan. Topics such as marketing authorisation, reimbursement, sales & marketing, access to clinics and medical opinion leaders as well as patent issues are just a few points that management has to keep an eye on – and which can possibly determine success or failure. And then you are rarely alone in an attractive market, which means that the time factor also plays an important role. That is why SHS, with its expertise and strong network, supports the management of portfolio companies in taking two steps forward if possible, but not one step back.
Fortunately, we are able to open many doors with our network: to top hospitals in Europe and the USA, to medical experts from numerous fields, to health insurance companies, to regulatory experts or to distribution partners worldwide. And of course we also support the recruitment of experienced managers. SHS has been operating successfully in the healthcare sector for almost 30 years, so we can make recommendations as to which partner is a good choice in which field. This reduces the risk of mistakes and helps to use the time as optimally as possible for the company’s expansion.
In addition, we regularly exchange information with several hundred large international companies in the health sector. It is important for us as an investor to know which technologies and products the strategists are interested in and which goals our portfolio companies need to achieve so that they represent an attractive acquisition target for the corporations.
What does this support look like in concrete terms and what influence does SHS have on its portfolio companies?
Dr André Zimmermann: SHS holds both minority and majority stakes in its portfolio companies. From a purely legal point of view, the influence varies in terms of the size of the stake. However, what is more decisive for the interaction with the management of the portfolio companies is how good the relationship of trust is between the acting persons on both sides. At SHS, we attach great importance to this. Since we usually act as lead investor, we also see it as our duty to support the teams as best we can where it makes sense and is desired. We discuss potentially critical topics or the next important strategic steps of the company at the meetings, which are usually held monthly, and we offer our support within the framework of our shareholder function wherever we can make a contribution. At this point, however, I would like to emphasise once again that SHS, or rather the fund, is not actively involved in the management of the portfolio companies, but rather in an advisory capacity.
If, for example, one of our portfolio companies is on its way to the Chinese market and is looking for a specialist for NMPA approval (National Medical Products Administration in China), then we define with the management which expert profile is being sought and arrange a corresponding contact from the SHS network, provided this contact meets the criteria sought.
Since we have worked with the professionals from our network more often, we know about their quality. This means that we avoid the possibility of not achieving important goals and at the same time not using time and money efficiently by choosing an unsuitable consultant. As I said, we want to support our companies in the best possible way in taking two steps forward and not one step back. Such a scenario must be avoided, because the demands on technology companies in the health sector have increased and companies can hardly afford extra loops due to avoidable mistakes.
Could you give us two or three examples of the work of SHS?
Dr André Zimmermann: With pleasure. There are examples with very different characteristics. Let me take up the situation of the China approval that was described above. An approval for a medical product in China can take three to five years. The market itself is growing strongly and is interesting per se, but the hurdles for market access are high. If you consult an insufficiently qualified advisor, it can quickly happen that you don’t get the approval in the first step. You can try again as a company, but then you start all over again, which means you have another three to five years ahead of you. That must be avoided at all costs. Such a situation threatened one of our portfolio companies in the past. This was avoided after SHS arranged for an expert from our network. The expert then took the lead in the approval process and brought it to a successful conclusion. It is easy to imagine the positive influence this step had on the company’s growth.
In another case, a portfolio company needed access to the leading global medtech companies for the purpose of cooperation. Since we at SHS have been maintaining contact with the large corporations for many years and are constantly in discussion with them, we were able to give our portfolio company the opportunity for direct talks and presentations with all relevant strategists within a few weeks. Without such a network, such a project can drag on for many months, or one simply does not find access to the decisive people in the corporations. With our help, our portfolio company not only gained a lot of time, but also quickly laid the foundation for further expansion at the international level.
And how do SHS investors actually benefit from this commitment?
Dr André Zimmermann: The benefits for the investors of the SHS funds are manifold, but ultimately boil down to two key goals that our investors want to combine – increasing the investment return and, at the same time, the impact of helping millions of people to regain or maintain their health or improve it through gentle therapies. In order to achieve these two central goals, SHS continuously supports the portfolio companies, from the first investment to the exit. Our track record speaks for itself.