This fundie invested in Neuren at a $70m valuation. It's now $2.4 billion.

The newly minted KP Rx Healthcare Opportunities Fund, managed by Hashan De Silva, comes from a strong pedigree. 

De Silva previously worked for Karst Peak, a spinoff from Tiger Management, run by the late legendary hedge fund manager Julian Robertson.

Karst Peak founder Adam Leitzes is providing seed capital for KP Rx, following the playbook of Robertson, who seeded and mentored numerous ex-employees to run their own investment houses - affectionately known as "Tiger cubs".

In addition to the seed capital from Karst Peak, KP Rx’s investors include some of Australia’s most successful healthcare entrepreneurs including Dr Chris Behrenbruch (CEO of TLX), Patrick Davies (Chairman of Neuren), Lou Panaccio (Chair/NED of various healthcare companies) to name a few.

Whilst the lineage is important, what's more important is De Silva's track record of investing in what he refers to as "companies that generate value through innovation".

The fund is not focused on GP clinics, hospitals, or healthcare services. Rather, it focuses on later-stage businesses, with De Silva describing KP Rx as a "series A, B, or C investor, where we are coming in once a lot of the initial preclinical stuff has been done." 

"In practice, what that looks like is for a drug company, we're in the phase two stage. For a medical device company, we're usually at or after approval rather than being super early stage.

Previous successful investments include now ASX-listed companies Avita Medical (ASX: AVH), Telix Pharmarceuticals (ASX: TLX), and Neuren Pharmaceuticals (ASX: NEU) - the latter of which De Silva invested in when the valuation was around $70 million. The market cap of Neuren is now $2.4 billion. 

Risk versus reward

Whilst investing in healthcare businesses at any point in their innovation cycle carries risk, investing in those with new innovations can be even riskier.

So, how does De Silva navigate the opportunity set? He and his team are deeply entrenched in healthcare. 

"You have to really live and breathe this to understand what is the innovation happening in Europe, the US, China and Japan, to know how the company you're looking at today is being impacted by the research happening in other parts of the world. Our research is very, very deep", says De Silva. 

De Silva adds that he spends significant time abroad, attends conferences, and speaks to opinion leaders on various disease states every week. By the time he sees a company, he already has a very good understanding of the treatment outlook for the diseases they're targeting, and what else is in development.

Fund profile

• Name of the fund: KP Rx Healthcare Opportunities Fund
• Asset Class: Venture Capital
• Year started and size: 2024
• Description of strategy: A closed-ended VC fund designed to strategically invest in the most promising healthcare and health-tech companies across ANZ, targeting both private and early-stage public companies at the inflection point of valuation creation
• Investment objective: Target net IRR of 20% over the life of the fund. Aim to return the majority of the capital 4-6 years into the fund's life, with a formal 10-year cap providing flexibility to unlock greater value by investing in companies that benefit from staying private longer.
• Link to fund page

Watch the video

In the interview above, De Silva further explains the process KP Rx employs to find the best innovative healthcare opportunities, why now is potentially an ideal time to consider this space, and the return he is targeting for investors.   

This interview was filmed 23 April 2024.

Time codes

• 0:00 - Intro
• 0:25 - What is the KP Rx Healthcare Opportunities fund
• 1:40 - What makes ANZ healthcare unique?
  
• 2:25 - Hunting for innovative companies
• 3:38 - More than just capital
  
• 4:38 - A case study: Neuren
• 6:27 - Typical investment size
• 8:09 - Portfolio size and make-up
• 8:55 - Why now?
• 10:17 - The Fund's backers
• 11:35 - Target return

Your access to some of Australia's best healthcare opportunities

Karst Peak Rx (KP Rx) is a healthcare investor, backed by Karst Peak Capital, specialising in healthcare and health tech investments in Australia and New Zealand (ANZ). Hashan and the team focus on investments in private and early-stage public companies, with an emphasis on biotech, medical devices, diagnostics and healthtech. Find out more.

Managed Fund

KP Rx Healthcare Opportunities Fund

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