New York-based Healthpointcapital reported the first closing at $100 million of its fourth fund, with an eye toward investing in technology in the orthopedics, spine, dental, maxillofacial, rehabilitation and digital health sectors. The Musculoskeletal Fund IV's target size is $500 million, with the aim of investing in eight to 10 innovative growth-stage companies that can benefit from Healthpointcapital's sector focus.
"Health care is rapidly evolving, and we will continue to focus on innovation that addresses both patient outcomes and care costs," said John Foster, CEO and founder of Healthpointcapital. "We are grateful for our investors' support and are actively sourcing new investments for the fund."
Launched in 2002, private equity firm Healthpointcapital is led by Foster and Mike Mogul, who formerly served as the group president, orthopedics, at Stryker Corp. as well as CEO of DJO Global. "The first closing for Fund IV represents a milestone and a validation of our strategy. Musculoskeletal health care offers attractive opportunities that require not only capital, but also operational expertise and strong health care professional and commercial relationships," noted Mogul.
According to the firm, the musculoskeletal market is the largest sector within the medical device industry, with a market capitalization of about $115 billion, and worldwide revenues of $44 billion. The reasons for the market's success include an aging population and the rise of obesity. Despite the high demand, Healthpointcapital noted that orthopedic technologies remain underdeveloped, as many surgical implants retain simplistic mechanical and material characteristics. However, companies in this space are looking to make advancements.
Healthpointcapital has seen success with its companies in the past. For example, in January 2016 the group reported the completion of the sale to Smith & Nephew plc of Blue Belt Holdings Inc., of Plymouth, Minn., for a cash purchase price of about $275 million. Blue Belt's Navio surgical system allows for robotic assistance in unicondylar or partial knee replacement surgery through CT-free navigation software and a hand-held, robotic bone-shaping device. Separately, the company saw Henry Schein Inc. buy Biohorizon Inc, of Birmingham, Ala. In 2013, Henry Schein completed a 60 percent equity investment in Biohorizons, which manufactures advanced dental implant technology and tissue regeneration products sold globally. This transaction was first reported Nov. 26, 2013.
Healthpointcapital also has founded its own company to advance the space. In 2004 it unveiled Nexa Orthopedics Inc. to boost extremities surgery. The following year, Nexa Orthopedics scooped up Futura Biomedical LLC, which manufactured a complete line of forefoot arthroplasty products. Healthpointcapital ultimately sold Nexa Orthopedics to Tornier in February 2007.
The company does not concentrate solely on the U.S. Among its portfolio companies is Orthospace Ltd., a privately held company located in Caesarea, Israel, that offers technology for the treatment of severe rotator cuff tears. It offers simple-to-implant, biodegradable balloon systems for the orthopedic market. In addition, it has backed Sinorehab of Beijing. That company provides postoperative, outpatient rehabilitation services to private pay patients who have recently undergone orthopedic surgical interventions.
Another company in the Healthpointcapital portfolio is Prosomnus Sleep Technologies Inc., a subsidiary of Prosomnus Holdings located in Dublin, Calif., that invents and manufactures custom intraoral devices for the treatment of obstructive sleep apnea.
Healthpointcapital also has backed Alphatec Spine Inc., which develops products for the treatment of spine disorders, specifically looking at the entire spinal fusion procedure. The product design focus is on simplifying procedures for the surgeon with the ultimate objective of improving patient outcomes. Parent Alphatec Holdings Inc. recently reported financial results for the second quarter, noting that total net revenue was $22 million.