Sunday, 10 March 2013

GE: Can the Eight-Hundred Pound Gorilla Successfully Operate a Health Care Investment Fund?

The question is a simple one: Can one of the world's largest multinational companies successfully operate an investment fund? The company at issue is GE and the focus of the fund is innovations in the health care area (especially through GE Healthcare). As part of the Stanford Technology Ventures Program, a spirited lecture in support of the proposition was recently given by Dr Susan Siegel, who was named in 2012 as CEO of Healthymagination, a GE initiative that was launched in 2009.

Looking for more information, I found the following description of the fund:
"The healthymagination fund is an equity investment fund focused on identifying, partnering with and growing highly promising healthcare technology companies. The fund invests in companies globally that have innovative technologies aligned with the strategic objectives of GE Healthcare and GE's global healthymagination initiative. The fund also targets healthcare companies developing innovative and unique business models and services."
The company states that the $250 million fund has an investment focus in three major areas: (i) Broad-based diagnostics; (ii) healthcare information technology: and (iii) life sciences, especially in biopharmaceuticals stem cells and vaccines. Given the sorry state of investment funding in the health and medical device fields, an initiative of the size of "Healthymagination" would seem to be a welcome one. And yet, one has to wonder what one can reasonably expect from the project. Unfortunately, a search for readily available information about how the initiative is doing did not provide much user-friendly guidance. As such, it is difficult to get a sense of just how well the funding initiative has been going (except perhaps for the statement by the company that "Healthymagination has grown to more than 50 validated products").

Against that background, I have the following thoughts:
1. From a macro view, one wonders whether it is better or worse that GE seeks to invest in innovative companies technologies "aligned with the strategic objectives of GE Healthcare." Might such an alignment of interests work as a counter-weight to what one would hope is the outcome of the initiative, namely provide the company with access to technologies and ideas that are not being successfully developed at the company itself. Perhaps GE is seeking out primarily companies that are already well down the development path, thereby enabling GE to "cherry-pick" those companies best-suited to its overall goals?

2. Can a company the size of GE really provide the panoply of services to its investment companies in a manner similar to those that can be offered by the best private funds? We are not speaking only about money, but more generally about management guidance on how best to develop and grow the company. Siegel argued that, despite GE's size, it could effectively provide its investment companies with a unique set of cross-platform corporate competencies. She may be right. Still, there is a lingering sense that the nimbleness that a small company requires might be poorly served by the 800-pound GE gorilla, no matter how good and vast the resources.

3. What is the time commitment by the company for the initiative? The company states that the initiative has set a goal of 2015 to meet certain targets. Since that is only six years from the inception of the initiative, one would reasonably conclude that 2015 is not an end-point. But what is supposed to happen after that time is not made clear. Health care and health care products being what they are, it is the extended time line that has posed such a daunting challenge to anyone who has sought to invest in this area.

It would be great if "Healthymagination" will move the needle in improving health care and products. Indeed, if it does, GE might be able to claim a new paradigm for R&D and product development. At the moment, however, it is just all too vague to reasonably know.
More on healthymagination here.

1 comment:

Anonymous said...

GE Healthcare will certainly have the resources to hire in any expertise it requires to run an investment fund, and so it certainly can be done. GE has probably not be very open about all that it wishes to gain from the project. I suspect its not just about making an investment. It's also about having access to the research that's happening within the biopharma small companies sector, perhaps allowing it to carry out more informed due diligence for future acquisitions or collaborations. I imagine GE see this as a bit of an experiment too, one which they have the resources to carry out.