Dr. Curt LaBelle has been investing in healthcare companies for over 18 years, and now serves as the Managing Partner of the Global Health Investment Fund (GHIF). GHIF is a social impact investment fund, which manages manages ~$108M and was initially structured and backed by the Gates Foundation and JP Morgan in 2012. As Bill Gates detailed in a talk announcing the fund with Jamie Dimon, GHIF is one of the pioneers of global health investing, focused on a ‘double bottom line’ of health outcomes and financial returns. The fund targets $5-15M investments in innovative global health companies, and alongside the Gates Foundation, is backed by the IFC, GSK, Pfizer, Grand Challenges Canada, KfW and Merck, among others. GHIF’s work in product development is used by the World Bank as a case study as to how to effectively expand access to quality and affordable health care.
Since launch, and under Dr. LaBelle’s leadership, GHIF has invested and exited numerous high-impact global health companies, saving and benefiting thousands of lives. The impact of several investments GHIF has made, at scale, are below:
GHIF Statistics
Global Health Investment Fund
Dr. LaBelle has served as a board member or global access chair for several successful healthcare and pharmaceutical companies, including KAI Pharmaceuticals (sold to Amgen), Sirion Therapeutics (sold to B&L and Alcon), Impulse Monitoring (sold to NuVasive), Eyenovia (sold to EYEN), IanTech (sold to Zeiss) and numerous others. Dr. LaBelle was previously a Managing Director at Tullis Health Investors and a Vice President at Investor Growth Capital. He holds a BS in Economics from Brigham Young University, and MD and MBA degrees from Columbia University. I had the pleasure of recently sitting down with Dr. Labelle to discuss his career, the Global Health Investment Fund, and his thoughts on impact investing.
Kevin Harris: Could you walk me through your background and experience in healthcare investing? What led you to become involved in GHIF?
Curt LaBelle, Global Health Investment Fund: Following an undergrad at BYU, I earned an MD/MBA from Columbia. Before joining GHIF as Managing Partner, I had a 15 year career in venture investing in healthcare companies. I jumped at the opportunity to join GHIF following a phone call out of the blue from an executive search firm hired by the Gates Foundation, and believe the fund is an incredibly unique opportunity combining venture and impact investing.
Bill Gates, through the Gates Foundation and with partners including the IFC, had already put GHIF together with outside capital. They were looking for someone with a traditional venture investing background to manage the fund, and generously brought me in.
Harris: Could you detail your investment methodology and process?
LaBelle: We only invest in companies developing innovative products that can be used in settings with limited resources. Much impactful and innovative medical technology is never brought to market outside of the US & Europe, because there’s generally going to be less of a financial reward for doing so. That’s where GHIF comes in. We identify high impact health outcomes, generally involving a new medical technology or drug. We then do two things:
Firstly, we screen whether the product serves a need in low-resource settings, like sub-Saharan Africa or India, where I just returned from. Secondly, we screen whether the product has compelling financial prospects. Fortunately, if a product fails this second test, but we find it sufficiently compelling in terms of the first, we can send the opportunity to our colleagues at the Gates Foundation, who can pick up low-return but high-impact projects.
Assuming we can check both of those boxes, we dive into the clinical data, benchmark its outcomes to those of existing therapies, consult experts, run financial models and get to know the management teams. Process wise, this is very similar to the work of other healthcare investors That said, some of these products are not necessarily greenfield medical technologies, but are substantially less expensive than existing solutions, enabling their availability in low-resource settings where they otherwise previously would not be deployed.
Harris: Could you walk us through a recent investment from research to exit?
LaBelle: IanTech, a company that manufactures a micro-interventional cataract surgery tool, is a good example of a recently acquired investment of ours. I had known its founder, Dr. Sean Ianchulev, for many years and had previously invested in other companies he had been involved with.
As part of our prior research into how we could maximize the impact of each dollar we invested, it had become clear that unnecessary cataract-induced blindness was a major issue in developing countries. In countries with better access to modern medicine, advanced cataracts largely do not exist in the population at large. Not only do cataracts negatively impact the lives of afflicted individuals, but socially and economically strain the families and communities of the impacted individuals. Female family members are often socially or culturally induced into the roles of caretakers for the afflicted, which has a significant knock-on economic impact on the entire community. Tens of millions of cases of cataract-induced blindness are unaddressed, because the traditional surgery based method of treatment is both expensive and requires a sophisticated medical infrastructure that simply does not exist in much of the developing world.
IanTech invented a device, the MiLoop, which is simple to use, inexpensive to make, and produces excellent clinical outcomes. Following our analysis of the product and due diligence on the company, we examined whether there was a market in the US for such a device.
We learned that there is a push for less invasive, “lower energy” cataract surgery to better preserve the tissue around the lens often disturbed by the ultrasound energy involved by more invasive phacosurgery. IanTech’s device used no energy and could be used in advanced cases that would traditionally require hazardous amounts of ultrasound energy in treatment.
We determined that IanTech serves a massive need in the developing world but would also be attractive to physicians in high-income countries. As I had worked with Sean before, IanTech was comfortable working with us and open to the Global Access Commitments we require when we invest in a portfolio company. GHIF invested in July 2017, and the company was sold in December 2018 to Zeiss at an attractive multiple of the original valuation. Sean and I continue to co-chair the Global Access Committee and have worked to train caregivers in India, Ethiopia, Tanzania, Panama and elsewhere on the technology.
We believe IanTech’s device will enable millions of people to see who would otherwise be destined to suffer a life of blindness, empower their (mostly female) caregivers, and unlock extremely limited medical resources to be more impactfully deployed elsewhere.
Harris: How do you source potential portfolio investments?
LaBelle: The global health research and technology industry is small, and as a result, many of our deals come from those with whom we have worked before. As discussed, IanTech is a good example of this, given my years of history and trust of Dr. Sean Ianchulev.
We also work closely with the Gates Foundation to evaluate projects and companies they have supported in the past. We have a continuous back and forth, that has led to numerous investments on both our parts. In addition, we receive referrals from our committee members and investors, and proactively track companies developing products in areas of interest to our fund.
Harris: What led to the loss-sharing guarantee mechanism that undergirds GHIF’s fund?
LaBelle: When the Gates Foundation was initially structuring the fund, the concept of impact investing was extremely novel and there were no existing funds involved in the healthcare space. As a result, investors were skeptical of its financial prospects.
To address this, the Gates Foundation offered loss protection, so that investors would feel that the downside risk of the fund was mitigated. Given our exits to date, we do not believe we will need the loss protection, but it was helpful in our launch of the fund.
Harris: Has your investment process significantly evolved over time? If so, how?
LaBelle: We are better at quickly determining the global need and prospects for products now and have expanded our network of experts who can help us in our diligence process.
Given my almost two decades in the space, the basics of the financial process have not changed meaningfully from what you would expect. The companies we’ve worked with have been at different stages of growth and have had different business objectives in mind, so we’ve employed a range of investment structures to meet the financing needs of the companies. However, what has stayed consistent across each GHIF investment is our focus on the double bottom line mandate.
Harris: How do you measure ROIC with regard to health outcomes?
LaBelle: The start to quantifying the impact of our health outcomes is breaking out two distinct categories, lives saved, and lives improved, and then rigorously defining as quantitatively as we can the impact our investment could have on those outcomes. Many of the investments we look at are by nature difficult to compare, so having a reasonable fluency of the base rates, disability adjusted life years, and the statistics behind the health outcomes of the wide universe of heterogeneous technologies and drugs is crucial.
Harris: How does GHIF measure the social impact of its investments? How has this methodology evolved over time?
LaBelle: In assessing impact, we are able to focus both on the lives we save and the lives we improve through our investments. In healthcare, it’s likely easier to measure impact than in other fields because we often have wide datasets relating to the efficacy of therapeutics and the course of untreated diseases. To return to the example of cataracts, we could reasonably rely on existing research to model out the negative impact of cataract-induced blindness both as an impairment of quality of life and on the loss of income of the afflicted and their caregivers.
We can use straightforward math to determine the number of lives likely saved or improved for pharmaceuticals and vaccines. For devices used to address something like cataracts, we know that each time it is used, a life is improved, making data gathering the most important part.
We also assess the expected dollars spent per life saved or improved as part of our diligence to ensure that we stay focused on affordable innovations that have the potential for widespread and meaningful impact in low resource settings.
Harris: A recent IFC report detailed your “double bottom line” of social impact and financial results? How does the fund deal with inevitable friction between the two? What is the ideal blend between the two?
LaBelle: We ultimately have to address both with every investment, so we frequently pass on financially attractive deals that have unclear impact potential due to cost, distribution or indication issues. Unfortunately, there are also companies we pass on investing in because we can’t confirm their financial viability in a way that convinces us we can make a profit from our investment. This leaves us with a pipeline of investments that solidly check both boxes, meaning that we do not have to compromise on social impact or potential financial returns.
Harris: What have been your biggest investment successes with GHIF? What have been your biggest mistakes?
LaBelle: Our investment in IanTech has been our biggest success to date financially, followed closely by our investment in EuBiologics, which is now a public company selling millions of oral cholera vaccines worldwide.
We also eagerly anticipate the sale of a priority review voucher for a drug recently approved by the FDA to treat River Blindness, which would also be a tremendous financial and impact story for GHIF.
We are fortunate to have had only one significant company write-down from our 12 investments, which reflects the careful assessments in our due diligence. That failure came not from the poor performance of the drug we supported (tribendimidine for soil-transmitted parasites called helminths), but because the control drugs in its clinical studies performed much better than they had in previous studies.
Such surprises inevitably occur in drug development, often due to tightly controlled clinical studies that often don’t reflect the reality of patient adherence to drug protocols.
Harris: How much of your capital is currently deployed? How scalable is your current investment methodology and at what scale would social impact returns diminish?
LaBelle: We have completed our portfolio construction phase and have money earmarked to further support existing companies, but not for the inclusion of new companies. Our deal flow is strong and we believe a far greater amount of capital could certainly be deployed in healthcare focused impact investing. The total addressable market in global health is enormous, particularly in therapies and diagnostics, which are extremely capital intensive. We currently fill a gap that is not addressed by government funding, charitable foundations or venture capital. The GHIF model pioneered the concept of a market-led approach to a segment of global health product development that was previously only thought to be achievable through philanthropy. We’re pleased to be a proof of concept showing that true impact investing in healthcare is achievable and sustainable through investor driven capital.
Harris: At what point did the Gates Foundation become involved with GHIF? How does GHIF’s work complement that of the Foundation?
LaBelle: The Gates Foundation initially structured the fund and provided most of the loss protection. Gates believes that the Foundation can support early, high-risk product development, while GHIF can support companies more mature in their development that need help with late-stage development and commercialization of their products. The Foundation’s hope is that the success of GHIF will inspire other funds to support investments in companies developing health products for the global market.
Harris: What are the most promising recent projects you’ve invested in?
LaBelle: Our last investment was in Alydia Health, which has a life-saving device to treat postpartum hemorrhage, a leading cause of maternal mortality and morbidity. We are currently enrolling a pivotal study and would like to see the product on the market within two years.
Harris: What books would you recommend to investors interested in learning more about impact investing?
LaBelle: I’m currently very focused on addressable blindness, and have been inspired by the Aravind Eye Hospitals in India and their work to offer free care, which is detailed in the book ‘Infinite Vision’ by Pavithra K. Mehta and Suchitra Shenoy.