With the investment fund, the private-equity company plans to acquire profitable health-care companies, bring in an executive management team and help the firms grow.
In one of the largest funds in its history, Frazier Healthcare Partners has raised $525 million from investors to pour into profitable health-care companies.
The company, a private-equity firm founded in Seattle in 1991, announced the fund would be controlled by its “growth buyout” team, the part of its business that finds health-care companies with more than $5 million in annual profit. The aim is to help speed the growth of companies it invests in.
Under its model, Frazier acquires the companies, brings in an executive management team and helps them grow until they are bought or go public, about a five-year period. The private-equity firm recently saw one of its portfolio companies, DSI Renal, merge with U.S. Renal Care to create one of the largest dialysis companies in the country.
The newest fund was raised from institutional investors, including large pension funds and endowments. Frazier plans to use the fund to invest in about eight to 10 companies, managing general partner Nader Naini said.
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The Affordable Care Act, he said, has opened up new possibilities for investment, because more people have health insurance, spurring the need for more services.
“We look for groups that can deliver care in a specific area at a much reduced cost relative to the rest,” Naini said.
Over the past 25 years, Frazier’s growth buyout fund has invested in only one Washington state company, an institutional review board called Western IRB. Naini said it is one of his “career goals” to find a portfolio company in the region.
Frazier has another fund, “Frazier Life Sciences,” that invests in early-stage health-care companies, often life-science firms or biotechs. That fund, based in Menlo Park, Calif., recently raised $262 million.
This is the first time the life-sciences and growth-buyout divisions have raised separate funds.
“Specialization and highly focused fund strategies have proven to be more productive,” Naini said.
Frazier has invested in more than 170 health-care companies and manages about $2.9 billion in capital.
Founder Alan Frazier has moved from being an active investor with the company to become chairman.