Nordic Capital: Inovalon and the future of healthtech

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Frederik Näslund, Nordic Capital

European private equity firm Nordic Capital signed its largest deal to date last week, in a USD7.3 billion all-cash transaction that will take Inovalon, a publicly traded American tech company that provides cloud-based tools to support data-driven healthcare, private. Private Equity Wire sat down with Fredrik Näslund (pictured), Stockholm-based partner at private equity firm Nordic Capital, for an exclusive interview on the back of the deal.

Nordic Capital focuses mainly on three core sectors: healthcare, technology & payments, and financial services - and has done a number of deals in recent decades where these areas overlap.

A number of them have been in the healthtech space lately, including Philadelphia-based life science company ERT and Boston-based Cytel, which provides statistical models for clinical trials globally.

This deal is the latest of Nordic Capital’s health-tech investments. Inovalon is an outcome-based company that is “the spider in the web” or can be said to be the complex backbone across the US healthcare ecosystem, as it caters to 24 out of the 25 largest health plans in the US, providing software that caters to risk assessment and quality assurance for the payers.

The investment was led by Nordic Capital, with equity participation from lead co-investor Insight Partners and 22C Capital, a private equity firm based in New York City.

Following Nordic Capital’s strategic playbook, investing into product management and commercial excellence will be focus areas following the deal, according to Fredrik Näslund, who led the deal.

Naslund heads up Nordic Capital’s technology & payments team and is also chief investment process officer. He says the firm is planning to add a few new key areas to Inovalon, in order to accelerate growth in the US market.

One of the most interesting aspects following this transaction will be to follow up on the opportunities and synergies generated by aggregated data, in his view. “If you de-identify the data you can then sell it to life science companies and pharma companies, and you could do that on an international scale,” he explained.

And we’ve only just started to see the beginning of the possibilities when it comes to handling patient information data, in Naslund’s view, as the healthcare sector is moving in that direction. “It's going to be important for life sciences companies to prove that their products are working. A clear trend is that payers will demand proof of efficacy of the drug, to prove that it's more efficient than the competition.”

Another area of concern in today’s healthcare industry is that many patients forget to take the drugs they’ve been prescribed. “With data-driven healthcare you can easily spot where you have issues with these types of follow ups; make sure that the patient care quality is sufficient, and reach out to the provider,” said Naslund.

When it comes to defining key trends that healthcare is heading towards in the future, refining data based on real-world evidence -the vast amount of data which is already available- is the holy grail, according to Naslund.

“If you can use the existing data, you can also save a lot of time. One of the biggest [R&D] problems in drug development, save for Covid for example, is to get people to attend clinical trials. With the use of increased aggregated data from the real world, it would speed up that process and save costs. The US market, the largest and most developed health-care market in the world, sits on enormous amounts of information and that’s exciting,” said Naslund.

He continued: “It would serve society well if we continue refining the information, both from a patient quality perspective but also from a cost-perspective. Inovalon is in a good position to do that.”

Since its inception in 1989, Nordic Capital has invested more than EUR 17 billion in over 120 companies, primarily in Northern Europe and the US. Its portfolio includes BOARD, ERT, Cytel, Aris Global, Cint and Trustly.