Investment Criteria

NewSpring Health Capital maintains a focused investment strategy that targets biopharmaceutical, medical devices, and healthcare services companies. In particular, NSH looks for:

Biopharmaceuticals: Companies developing biopharmaceutical products or technologies, emphasizing the therapeutic areas of the central nervous system (CNS), cancer and oncology, and endocrine and metabolic disorders, among others.

Medical devices: Companies developing innovative medical devices, diagnostics, or drug delivery platforms.

Health care services: Companies offering novel healthcare services that generate revenue by executing cost-effective business models, including pharmaceutical distribution, outpatient and inpatient specialty services, health administration outsourcing, benefits and insurance management and healthcare informatics, among others.

Geographically, the Fund emphasizes firms in the Mid-Atlantic region and Northeast corridor – a region rich in emerging biopharmaceutical, medical device, and healthcare service companies that present abundant investment opportunities.

Overall, NewSpring Health Capital portfolio companies have:

• Experienced management teams, with proven track records.
• Strong business plans to develop, expand and commercialize products or services.
• Regulatory, payment and reimbursement arrangements.
• Proprietary and defensible intellectual property and barriers to competition.
• Anticipated liquidity events within 36 to 48 months.
• Growing, definable markets – market size of at least $500 million.
• Meaningful benefits – tangible, predictable results.
• Foreseeable profitability and investor exits.

Strong candidates for investment also have the following sector-specific characteristics:

Health Care Services:

• Attractive markets: Drug distribution, clinical outsourcing, benefits management.
• Growing revenues, EBITDA, and customer base.
• Scalable opportunities.
• Exit timeframe within two to five years.

Medical Devices:

• Attractive markets: Orthopedics, diagnostics, and delivery systems.
• Low technology risk: pilot data, 510K underway.
• Clear regulatory, clinical and commercial development plans.
• Evidence of product market acceptance.
• Predictive operational metrics.
• Merger or acquisition option: Large companies absorb smaller ones.
• Exit timeframe within one to three years.

Biopharmaceuticals

• Attractive markets: CNS, oncology, endocrine & metabolic disorders, and women’s health.
• Multiple compounds or indications.
• Human data with quantifiable risks.
• Exit timeframe within two to five years.

When evaluating companies for investment, the NewSpring Health Capital team also considers the following factors pertaining to the firm’s market, management and business model:

Market:

• An addressable market of at least $500 million.
• A market with a growth rate that exceeds the U.S. GDP.
• A market and operating space that the NSH partners know and understand.
• A market with a low concentration ratio of businesses operating in the space.
• An identifiable exit strategy for the company in that market.

Management:

• A CEO and management team with strong industry knowledge and prior experience:
• operating in the industry, 2) addressing the target market, and 3) running a successful business together.
• A team whose financial interests are aligned with those of investors.
• A team whose commitment shows “skin in the game.”

Model:

• A business model that is capital efficient.
• A business model based on recurring revenue, high contribution margins, a proven product or service, a scalable platform, and a sustainable competitive advantage.
• A business model that addresses Porter’s five forces: rivalry, threat of substitutes, buyer power, supplier power, barriers to entry.

Initial investments in portfolio companies typically range from $2 million to $5 million. Investment instruments usually take the form of convertible preferred or participating securities, which share control with other institutional investors and management teams, and include milestone achievements as conditions for releasing additional capital. Where feasible, the Fund intends to lead investment rounds, with one of its Managers serving on the board of directors of each portfolio company.