Healthcare: growth momentum and opportunities in private market

Published date: 16/06/2025

Authored by

Claire Zarouk Senior Associate and Member of the Investment Team - GHO Capital
Elena Colucceli Guerin Partner and Co-Head of Healthcare France - Rothschild & Co Global Advisory
Pierre Moustial Chairman and Co-Founder - Lauxera Capital Partners

The global healthcare market is growing steadily, with current spending estimated at around $10,000 billion, and expected to hit nearly $15,000 billion by 2030¹. Of course, it is important to look behind these numbers to note that the sector is mainly dominated by the US, which accounts for nearly 60% of the global market.

This robust momentum is rooted in long-term structural trends. For one, the ageing of the population has increased demand for medical care and infrastructures, while the impact of chronic illnesses such as diabetes, cancer and heart disease has consistently grown due to changing lifestyles and longer life expectancies. At the same time, technological and scientific advancements are extensively transforming the industry, paving the way for the development of new treatments and revolutionising patient care.

Along with this overview, it is critical to decipher the various dynamics that are shaping this particularly vast and fragmented market. The diversity of players and segments making up the industry calls for a detailed analytical approach, given how widely investment opportunities can vary depending on medical specialities, innovations and business models. While listed companies offer direct exposure to major sector trends, investments in unlisted firms have a complementary and strategic role to play.

Critical segmentation

Instead of viewing healthcare as a monolith, it is crucial to distinguish between the various segments and adopt a rigorous approach to identifying the most attractive segments and avoiding high-risk or less profitable areas.

The Biotech and Pharma industry, for example, is based on a highly speculative, volatile model where the failure rate of clinical studies can climb as high as 95% in the preliminary phase. “Investing in these sectors means betting on very long-term developments subject to major uncertainty,” notes Pierre Moustial.

“We made the decision not to invest in certain segments, such as Biotech, which offers a completely different risk profile and is more aligned with venture capital. Similarly, we are not investing in patient services, a segment where many funds are already present and which offers less profitability than the market as a whole” adds Claire Zarouk...

It is critical to divide the market into several sub-sectors in order to adopt an effective analysis approach and optimise investment choices. GHO is a fund that focuses on five sub-sectors: BioPharma, which includes services associated with development and production for the pharmaceutical and biotech industry; Medtech, centred on medical devices and technological innovations applied to healthcare; Life Sciences and Diagnostics, including advancements in molecular biology, diagnostic tests and tools aimed at better understanding and treating pathologies;

Healthtech, encompassing digital solutions employed in healthcare, such as telemedicine, healthcare management platforms and application of AI to diagnostics; lastly, the Data and Advisory sector covers the analysis of big data in healthcare and the provision of strategic support to market players. Lauxera focuses on Healthtech, which spans multiple high-value added segments in innovation at three levels: for patients, for pharma/medtech and for hospitals. “Medtech, for example, covers everything from scanners to stents to plasters,” explains Pierre Moustial. One especially promising segment covers software and data, contributing key productivity gains to healthcare systems.

Another strategic approach involves what we refer to as a “pick and shovel strategy.” According to Pierre Moustial, “Big Pharma and Biotech are gold miners on the hunt for the medications of the future, while Lauxera would rather invest in companies supplying materials, research and equipment. By taking this approach, we are able to capture sector growth without being exposed to the risk of clinical failure or financial weaknesses of a given biotech firm.”

Verdot is a perfect example of this approach. Verdot is a French company that supplies purification technologies for use in the fast-growing field of gene therapy. “We are sure that gene therapy will expand, but cannot predict which companies will emerge as leaders. By investing in Verdot, we capture this growth while also diversifying our risk, as the company boasts a broad client base including names like Sanofi, AstraZeneca and Moderna,” explains Pierre Moustial.

This type of investment offers a twofold benefit: value creation based on production and business development, and a strong impact on healthcare systems. “By supporting companies like Verdot, we are taking part in the rise of innovative drugs while helping reduce development costs, which is critical for both patients and healthcare systems alike. Verdot is also succeeding in lowering its environmental impact by manufacturing lighter equipment and offsetting its CO2 emissions,” he adds.

Complementarity between listed and unlisted investments

While it is true that the healthcare sector offers many investment opportunities, it is important to understand the breakdown between listed and unlisted markets, as well as the areas of complementarity between them.

Elena Coluccelli notes that “Pharma and Biotech firms dominate the public exchange, seeking to raise funds on the market due to their extensive capital requirements. Their risk exposure drives them to launch IPOs to fund their development, thus creating contingencies and sometimes disillusionment for investors.”

Another prominent publicly traded segment is Patient Care², which covers patient services such as clinical networks and medical labs. “This sector, which has long enjoyed the benefits of consolidation momentum, recently took a hit on the stock market, largely due to pressures on costs and regulatory uncertainties,” stresses Elena Coluccelli.

Private markets offer opportunities that are less accessible on exchanges, particularly in Medtech, diagnostics and pharma services. “There are very few listed companies in these fields, especially in Europe,” she points out. A combined investment strategy gets you the best of both worlds. Private investment offers diversification by gaining access to less volatile, often specialised segments, whereas public markets offer more liquidity and exposure to sector trends.

“ While Europe is a genuine breeding ground for innovation, the US is the land of industrialisation and profitability ”

Predominance of the US market and Europe's major role in innovation

The US market indisputably dominants the healthcare sector, both in terms of level of expenditures and intensity of transactions. With more than 15% of its GDP dedicated to healthcare, it makes up the lion’s share of global investments and offers unrivalled trade prospects.

And yet, Europe stands out for its remarkable capacity for innovation, albeit largely under-funded relative to its potential.

In light of this reality, many European companies turn to the US to ramp up their development. Unlike Europe, where each country sets its own regulations on reimbursement, the US market relies on a more consistent framework. FDE³ approval is all it takes to market a product nationwide, as opposed to having to navigate 27 different regulatory frameworks in Europe. Furthermore, the size of the US market, with its 330 million inhabitants and advanced healthcare system, offers incomparable opportunities. The key determining factor, however, is price structure: reimbursement levels are on average ten times higher than in Europe, with gaps as wide as 1 to 30 in some cases.

Companies operating in the sector are thus faced with strategic choices. As underscored by Lauxera, a European company generating €10 million to €20 million in revenue, which has to focus its efforts where profitability is highest in order to maximise its growth, and it is often in the United States where these numbers really add up. Some companies in the Lauxera portfolio make up to 80% of their revenue in the US, if not all of their profits.

While Europe is a genuine breeding ground for innovation, the US is the land of industrialisation and profitability. This complementarity between European creativity and US financial power is currently shaping investment momentum in Healthtech.

Three key investment focuses

Investment in the healthcare sector, and particularly in unlisted companies, calls for three investment focuses: betting on technological innovation, consolidating the market via buy-outs⁴ and international expansion. Combining these three strategies can maximise corporate growth and profits while meeting the specific needs of the market :

Valuation : a market structured by growth and technology

The valuation of companies providing healthcare services and technologies depends significantly on where they sit on the technological scale and their growth potential.

Tech company valuations are mainly based on revenue growth, with high multiples sometimes exceeding 5x revenue or 15x to 20x EBITDA. Service companies are subject to more varied multiples, depending on their degree of specialisation and growth rate. Buy & Build strategies optimise valuations by including targets with lower multiples, thus generating a gradual increase in value through synergies put in place.

Composition of investment teams : a decisive factor for investment funds

The composition of investment teams plays a key role in success, given the complexity and demands specific to this sector. Companies with diversified teams and a solid network of experts are not only able to better address the market’s specifications, but also to maximise value creation and effectively drive growth.

As explained by Pierre Moustial: “Our investment teams boast a wide range of profiles: from conventional investment bankers and consultants to former CEOs of companies in the healthcare market. They offer expertise in terms of corporate management and strategic vision, which helps us tremendously in securing deals and subsequently contributes massive added value to our portfolio companies.”

Claire Zarouk had this to add: “We have a network of experts outside GHO. They possess the necessary expertise to identify risks, ask the right questions and figure out what is really important.” These diversified teams contribute substantial added value, not only when it comes to winning deals but also to executing plans.

Exit strategies and geopolitical stakes

Thus far in 2025, the healthcare sector has continued to prove its resilience and counter-cyclical properties, attracting strategic buyers ready to invest. Large groups, particularly American ones, are ready to pay high premiums for key acquisitions, thus greasing the wheels of the negotiation process. Valuations are still high, especially in the more innovative segments of the market.

On the geopolitical front, Donald Trump’s return to office may well redefine certain dynamics. His stated goal of firmly renegotiating with major pharmaceutical firms could bring pressure to bear on drug prices. However, companies positioned in differentiating technologies, which are less dependent on regulated reimbursement prices, enjoy some protection against such fluctuations. Furthermore, as vectors of productivity and efficiency, healthcare products are less sensitive to price variations and are thus able to remain competitive.

In addition, deregulation policy (notably through the Breakthrough Therapy Designation programme) fast tracks the approval of medical treatments in the United States, a key factor for Healthtech.

Finally, geopolitical tensions - especially in Asia - run the risk of intensifying competition in Europe. Under growing pressure, European Medtech firms, will be encouraged either to strengthen their presence on the US market or to improve their competitiveness in order to stand out in an increasingly contested environment.

(1) Source : World Health Organization, Global Health Expenditure Database.
(2) Patient care
(3) Food and Drug Administration
(4) Acquisition of a company primarily funded using borrowed funds
(5) Contract Research Organization: CROs assist labs with clinical research, trial management, medical documentation and project coordination
(6) Contract Development and Manufacturing Organization: CDMOs handle the entire drug life cycle, from development to clinical trials and production of raw materials to manufacturing