LeapFrog buys USD22m majority stake in East African retail pharmacy

LeapFrog Investments has acquired a USD22 million majority stake in Kenya’s Goodlife Pharmacy, the largest direct investment in the East African retail pharmacy sector to date.

The acquisition, from private equity firm Catalyst Principal Partners, is part of LeapFrog’s plan to diversify its private equity investments into a closely linked sector – healthcare.
 
This will develop a platform that combines both payers and providers, thereby bringing consumers greater access to affordable, quality healthcare.
 
The World Health Organisation (WHO) estimates that over 150 million people fall into poverty annually due to catastrophic healthcare events and an inability to pay out-of-pocket for healthcare services.
 
LeapFrog’s approach is aimed at partnering with companies in Asia and Africa that are addressing this challenge. The Goodlife investment follows LeapFrog’s 2014 investment of USD18.7 million in Kenyan health insurer Resolution Insurance.
 
Dr Felix Olale and Michael Fernandes, partners, will serve as global co-leads for health investments. They will be supported by a team of eight specialists with healthcare investment expertise and experience of African and Asian markets. Leapfrog’s wider global network will support origination and execution.
 
“Low health insurance penetration, coupled with an increase in utilisation of services has an enormous impact on the ability of consumers to access and afford quality health care. By moving into health, we are taking a unique approach and addressing the challenge from both sides –  investing in both health insurance companies and health service providers,” says Olale.
  
Fernandes previously served as country head for India for Khazanah Nasional Berhad, leading a global healthcare team responsible for over USD7 billion of investments across the platform. He also served on the boards of the Indian-based Infrastructure Development Finance Company and Apollo Hospitals.
 
“Our focus is on investing in companies that are re-thinking traditional approaches to solving health problems by finding new ways to deliver consumer-centric models,” says Fernandes. “By focusing on bridging the gap in products and services that are most relevant within emerging markets, we can bring health services closer to the consumer and improve patient outcomes, while making top returns for our investors.”
 
The Goodlife transaction was led by Olale who adds: “The future of healthcare in emerging markets is about looking at a model that will endure for the 21st century. At the centre of this is a focus on consumer-centric and integrated healthcare. Goodlife’s business model delivers on this imperative. It is a pharmacy, a wellness outlet, a diagnostics centre, and in the future will also be a place where you can access clinicians through telemedicine. This is a model that markets like East Africa are ripe for, particularly as we see a dramatic increase in chronic lifestyle diseases.”
 
Goodlife provides pharmaceuticals and wellness products to over 600,000 customers from 19 different convenient locations across East Africa. With LeapFrog’s investment, Goodlife plans to expand its footprint to more than 100 stores over the next five years.
 
Co-founded by Dr Josh Ruxin in Nairobi in 2013, the company has quickly grown to over 200 employees under the leadership of its CEO, Tony McNally.
 
Ruxin, says: “LeapFrog is not just a provider of capital. We also appreciate their healthcare expertise, and look forward to partnering closely with them to accelerate growth. This investment will benefit the people that really matter – our customers. The partnership will help us deliver high quality products to millions of people at affordable prices. Through Goodlife, we intend to transform healthcare delivery in Africa.”

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