ArchiMed’s founding partner explains why it is crucial that there is an alignment of values in any company in which he takes a stake
ArchiMed is one of Europe’s most successful healthcare investors. Over the past 20 years, the Lyon-based company has directly managed and invested in more than 40 small, medium and large-size healthcare companies throughout the world, with a combined value north of €5bn (US$5.8bn).
It currently has more than €1.7bn under management across three funds and has an investment capacity currently exceeding €1bn which rises to twice this amount when including its strategic investment partners.
By any stretch of the imagination, it has had a great few months, despite the challenges thrown at it by the Covid-19 pandemic.
In May it acquired a 75% stake in ActiGraph, a US developer of wearable, remote monitoring technology for academic studies and drug trials. And at the beginning of September, it took a majority stake in Namsa, the only full continuum
contract research organisation in the world focused exclusively on medical devices, again in the US.
As if that were not enough, also at the beginning of September, it closed its upsized MED Platform I at €1bn. ArchiMed currently has three funds, the mid-capfocused MED Platform I, and small-capfocused MED I and MED II.
But – and this is significant – what really drives both the company and founding partner Denis Ribon is sustainable investment.
It is easy to be cynical about companies that claim the importance of environmental, social and environmental, social and corporate governance (ESG) issues. The more so because since the coronavirus lockdowns across the world, they have become the theme of the moment. But for ArchiMed they are embedded not just in the way that the company thinks and behaves, but in the way that it invests too.
ClubHouse Lyon, a community project which is dedicated to the recovery of
men and women with mental illness, was established by ArchiMed in 2016 and is clearly close to Ribon’s heart.
While talking on the telephone from the US where he is currently setting up a US office, there is a shift in tone and passion in Ribon’s voice when he is talking about impact investing. This is when he is really engaged and passionate.
So-much-so, that as a signatory to the UN Sustainable Development Goals and the Principles for Responsible Investment (PRI) since 2018, Ribon makes it absolutely clear that ArchiMed both would and has walked away from an investment where there isn’t an alignment of values.
Here, he talks to HMi about investing during Covid-19, his priorities for next year and, of course, impact investing.
The following transcript of HMi’s interview with Denis Ribon has been edited for brevity and clarity.
HMi You have managed to close a number of deals in the crisis. How did that work?
DR Those two investments Actigraph and Namsa were our two first US-headquartered investments.
For Actigraph it was easy because it completed at the beginning of the Covid-19 shutdown, but we had been working with them and met with them a lot in the six to nine months beforehand. With Namsa, which just completed, [see story on p14] we told them that there’s no way we are going to make this investment without sitting down together, spending time and talking about many things beyond the investment. And we did that.
We travelled to the US despite the Covid restrictions. We managed to get an exception allowing us to travel there. And we spent time with the founder. Not only was it a prerequisite for us, it was a prerequisite for them too. The owners were a family that had founded the business 53 years ago. Because they remain invested, it was so important for them to check that we had the right values. An investor who could make this investment without meeting them physically, that could not work for them.
HMi Surely it is a different proposition when you close a platform, but you also closed MED DR: Platform 1 during this period. How did that work?
DR That was easy because it was almost done at the beginning of the shutdown. We just proposed a three or four-month postponement because [investors] had to close their investment committees.
To accommodate them, we postponed that by a few months, but [the work] was completed already. We had been meeting all those investors a great deal in the months and years before, so there’s nothing special there.
HMi Your current trip to the US is about setting up an office there. Does this indicate a shift in strategy?
DR We have always had the flexibility to part-invest in US-headquartered companies. It is a coincidence that we are directly investing there now. At the same time, we are opening a small representation in the US, but this was already planned. The US is always the largest market and the majority of the revenues from our European companies have always been in the US.
That’s where they are pushing their development. There is no shift in strategy. We do remain mainly focused on Europe, but we do have the flexibility to make investments directly into the US too.
HMi Would you consider expansion into other parts of the world like MENA, India or Southeast Asia?
DR Theoretically we do have the flexibility in our fund mandate. The reality is that we are really focusing on Europe – the whole of Europe which includes Eastern Europe – and Northern America, which also includes Canada.
HMi How has Covid-19 changed your approach to investment? Are valuations now more realistic?
DR Yes and no – marginally where we think the Covid crisis is changing things for the longer term. One example! We think there’s more appetite now for remote everything. For medicine, telemedicine, for remote clinical trials. That is probably a long-term trend that was already here.
That marginally adjusts our sub-sector prioritisation, but we are not going, for example, to leave medtech for elective surgeries or implantable devices.
HMi Impact investing is clearly an important part of ArchiMed’s philosophy. What does it mean to you?
DR We created ArchiMed and the Eureka Foundation at the same time. ArchiMed is an investment firm focused on small and mid-sized companies in the healthcare industry in Europe and the US, while Eureka is a foundation that is completely focused on improving the lives of fragile people. We chose a way for us to leverage our network, our time and our knowledge to have an impact on society that goes beyond investment.
We are convinced that we can have a positive impact on society by supporting, funding, expanding, and professionalising companies that operate within the healthcare sector. It’s a good way to spend your time at work, funding companies which are trying to improve health outcomes. That’s already at the core of ArchiMed. But when we started, and we had decided that we wanted to do more than just invest in a nice space like healthcare, it came down to time and network. Are you giving time? Are you using your network?
That made us think about it and we said that our only chance really to give valuable time and network is to do something with our foundation that is close to healthcare. [Via Eureka] we started to fund ClubHouse Lyon in 2016 and it became operational in 2017.
ClubHouse is a concept for patients with mental diseases when they leave psychiatric care and are left on their own at home. It provides a day house with no doctors – there are only members – patients together with a few employees. They self-manage this house up to a point where they can even start to go back to work. This is incredible because only a small percentage of those who have been in treatment go back to work through the normal patient path.
HMi How does this colour how you work with the companies in which you invest?
DR We explain [it] to the companies with which we partner. To them, an impact fund is a jargon from the finance industry. ESG is jargon too. But telling them the story about the ClubHouse Lyons and that it started in our office, with the members, the patients sitting at the same table as our executive team, that tells something about ArchiMed.
WE ARE CONVINCED THAT WE CAN HAVE A POSITIVE IMPACT ON SOCIETY BY SUPPORTING, FUNDING, EXPANDING AND PROFESSIONALISING COMPANIES THAT OPERATE WITHIN THE HEALTHCARE SECTOR
That already makes a selection, because they know who we are. They understand that if we do that with our own company, we are going to be demanding with their companies.
We need an alignment of values.
HMi Would you or have you rejected an investment because the chief executive of the company hasn’t bought into these ideals?
DR Of course! There is the theory and there is the reality. The theory is, are you doing ESG? Good, I’m now going to invest in your company.
That’s not reality.
You’ve spent time, like any other project in the world, with the CEO. You discuss with him and you decide to invest if the company looks like a value-creating machine, but also if you feel that there’s an alignment on the values.
You have to be careful. Some companies we invest in are oftentimes very small – you cannot expect too much from them, but some others are larger. They are established, so they have no excuse. It happens all the time that we stop looking at an investment because there’s no real [ESG basis] with the CEO or his team in terms of values. It happens all the time.
HMi What are your priorities for the rest of the year?
DR We’re just focusing on delivering on our promise. Investors have been trusting as well and we want to deliver on this.
Our first MED Platform 1 Fund is delivering already crystallised and outstanding performance [see story on p53]. We are very proud of that. But we do want to try to remain in the top quartile. We’re really committed to that.
We are spending a lot of time, energy and resources on working well with our companies, especially in terms of business development, innovation and professionalisation. And sophisticating even further our sub-sector strategy for the next deals.