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Meet the nurse who's also a private equity investor
Meghan Fitzgerald's investment thesis is grounded in her experiences across pharmacy, pharma and health systems - as well as countless hours spent in the ICU.
Meghan Fitzgerald is a bit of a unicorn in health care circles.
She’s a nurse who treats patients a day or two a week, taking on shifts when she can. When she’s not in the ICU, she’s a public company board-member, public health educator, as well as an active private equity investor. This makes her part of a small group of women deploying capital at scale. If you think venture isn’t diverse, try taking a look at the upper echelons of private equity firms.
Meghan, who goes by Meg to her friends, and I have kept up a regular dialog since my CNBC days. I’ve long viewed her as a sounding board for investment themes and trends. So I sent her a note a few weeks back to ask about where she’s placing bets these days. Who better to talk to about navigating these uncertain times? When she responded with a bunch of thoughts, I asked her if I could share her expertise with all of you. She quickly agreed - so here goes.
As she reminded me off the bat, we still have a lot of work to do. Despite all the investments we’ve made in the sector, Americans aren’t living longer or getting any healthier. In fact, it’s the opposite. Innovating in health care is hard in the best of times, but even harder now. Hospitals aren’t buying much new technology, including digital apps, unless it’s mission critical; employers aren’t looking to add to their roster of digital health vendors; and biotech funding options remain challenging.
So good luck out there. But Meg remains bullish on a few core themes, many of which are rooted in her personal experiences. To understand why that is and why she’s continuing to invest in this down market, let’s delve into her background.
Life and career
Meg started out in health care several decades ago while working on a Native American Reservation in Arizona providing dialysis to patients. This was arguably the ideal place to start to kick off a career in the sector. The U.S. spends tens of billions every year on chronic kidney disease, making it a driver of a huge chunk of annual spend. And yet, the space is dominated by just a few companies, including Davita and Fresenius. Many a health care VC and PE type, no doubt attracted by the enormous Total Addressable Market (TAM), have tried to dislodge these players. But it hasn’t been easy. (Meg is among them - based on this formative experience, she’s an investor in Quanta, maker of a portable dialysis machine).
Meg then made her way to Merck, the life sciences juggernaut, starting out in a junior business role. From there, she got a taste of health care from all corners of the market via jobs in pharmacy and health services, including the pharmacy benefits manager Medco. She ultimately worked her way up to a senior exec at Cardinal Health, one of the biggest medical supply distributors, to run strategy and health policy.
After a six year run at Cardinal that ended in 2016, it was time to strike out as an investor. Despite her operating cred, she was told repeatedly in interviews with what she calls “the fraternity” that she lacked the requisite investment banking experience. So instead she took some time off to go surfing and hit up some music festivals — before focusing her search on family offices.
That effort paid off. She landed a role at LetterOne to run an international health care fund with $5 billion AUM. While there, she said she worked on a number of deals, including the sale of Parexel, global clinical research organization (CRO) and K2 Health Ventures, a specialty finance firm that provides debt, equity and intellectual property to life sciences companies. The initial capital commitment in K2 Health Ventures was $400 million, but it’s tripled now to $1.2 billion.
Those who know her say she’s got a nuanced view of the sector because of her experiences in the business world, as well as her time spent in the hospital with patients. “Meg brings compassion and empathy, garnered from years of direct patient care,” said General Nadja West, the former Surgeon General of the U.S. Army. Peter Neupert, a former Microsoft exec who sits on the Lapcorp board, describes her as a “little ADD in the sense that she has a million ideas.” He takes these ideas seriously, however, in large part due to her breadth of experiences and her ongoing clinical work.
As her star has risen as an investor, she’s also now a board-member with a bunch of companies including Roivant, a company that applies tech to drug development, as well as Tenet Health, which runs a network of hospitals, surgical centers and other outpatient facilities. She also has a fund called Grey Ghost, which primarily invests in growth-stage health-tech companies (the name is a nod to her beloved rescue dogs, which are Weimaraners). Some of her investments have exited. They include Seniorlink, which provides support services to older adults; and Hims & Hers, a direct-to-consumer health care company. Other investments include DestinationVet; an online pet care network; and Mindbloom, which is providing ketamine therapy for patients struggling with anxiety and depression.
Not all her investments have worked out. Pear Therapeutics, a company that made software that could be used alongside a drug intervention, just filed for bankruptcy. Many current and former employees have told me that Pear was ahead of its time. In Meg’s view, it’ll take a while before payors really get it and reimburse at the level they should. And Pear didn’t have that time.
So what’s her big thesis now?
It all essentially boils down to a few areas, which I’ll do my best to distill:
Removing waste: Most of us are wired to look for moonshots. The stuff that could really change healthcare overnight, like a new drug or vaccine. And that’s important work, but a lot of what Meg is focused on these days involves the unsexy tech that improves efficiency by removing waste. That might involve bureaucracy, too much admin or literal waste - because all of it amounts to what she refers to as “low value spending.” One of her investments, for instance, is a company called TemperPack, which makes recyclable cold packaging for food and life sciences products. The company’s mission statement is to help the world waste less. Another, called Chronicled, helps drug wholesalers ensure that medicines that are returned to them (likely because they didn’t sell at the pharmacy) aren’t counterfeit. As an aside, she’s not avoiding businesses that sell into hospitals, as many investors are. She recognizes that it’s tough. But she thinks that there will still be opportunities that do “mission critical” things that save health systems money right away. “If it adds cost, forget it,” she told me.
Another area she’s exploring is prevention. “There is a huge amount that can be done if people begin healthy habits from an early age regarding diet and exercise,” she said. “This can create a health dividend that will pay off in future years by reducing the costs of obesity, heart disease, stroke, dementia…”. One way to do that is by investing in affordable and accessible primary care. As an example, this past weekend, she saw a patient in the ICU who was septic and on a vent. After asking around about him, she learned that it was because he couldn’t afford to remove an abscessed tooth. In order to really bring down the cost of care, it’s going to be vitally important that we reach these patients before a highly treatable problem spirals out of control.
A third big area is addressing labor and burnout. Meg sent me a report this week about 100,000 nurses leaving the workforce related to burnout and stress, much of that made worse by the pandemic. In her view, Covid should have made clear to all of us how important our medical providers really are. So many of them risked their lives for patients, including those who refused to get vaccinated or wear a mask. But instead, she feels that society isn’t doing nearly enough - and that’ll lead to more departures and more burnout. It is the very definition of a vicious cycle. She hasn’t found an investment there yet, but is continuing to look. One major area of interest is to figure out how to attract more young people into the clinical field. She’s also planning to do more clinical work herself and is training to become an Adult-Gerontology Acute Care Nurse Practitioner (AGACNP), in order to provide advanced care to the chronically ill. She sits for those boards in August.
And a fourth is public health tech. This hasn’t historically been an area that has attracted much attention from VCs. Funding tends to peak in the aftermath of major crises, and then peter out. She and I have talked often about how incredible it was during the pandemic that we developed life-saving vaccines and other treatments so quickly. And yet, patients couldn’t access these therapies because of obstacles like logistics, such as not being able to find a ride to a hospital. Our system is great at R&D; but terrible at access to the R&D that we create.
Predicting the future
In her view, the market will still be slow for a while and she isn’t expecting an immediate rebound to the record-setting highs of 2021 and 2022. This is an ongoing topic of discussion between her and her husband, Michael Darda, the chief economist at the trading firm Roth-MKM Partners and a frequent guest on CNBC. But one bright spot is that investors will often invest in health care during downturns because of its perceived resiliency. She also expects that acquirers with extra dry powder will remain active. “Assets that generate margin while solving a big problem, like clinical labor and R&D efficiency, will continue to be valuable,” she said.
So health care companies will continue to generate investment. But what about digital health? Will it continue to attract the same attention in the coming years? Well, Meg has some mixed feelings about it. She believes that there is a strong case to be made for the sector, but that it will require some long-term thinking and patience. “There is a saying that no strategy survives first contact with the enemy,” she pointed out. “The aspiration that an emerging sector was going to dominate a highly regulated sector, that still uses fax machines and is run at scale by legacy incumbents, was unrealistic.” And yet, the $4.3 trillion health care sector still needs to modernize, no matter how long it takes. It will happen eventually.
Just for fun, I asked her about the company she wished she’d invested in. She didn’t hesitate. For her, it’s Maven Clinic, which just raised a $90 million round led by General Catalyst. “I want women’s health to win,” she said.
And a rapid fire round!
Most interesting health care CEO you've met? George Barrett, the former Cardinal Health CEO
Three under-rated women you most admire in your network? Unsure they are under-rated but certainly have a rare humility and accessibility despite their enormous success and contribution to healthcare: Nancy-Ann DeParle, General Nadja West and Kathy Gallo
Most misunderstood health-tech company? Optum
Telemedicine: Under-rated or overrated? Well-rated
Your comfort food? Frozen Reeces
Public company you'd most like to be on the board of that you're not currently & why? UFC (Endeavor). I'm a fanatic and they could use some medical and policy advice!
With that, I’ll see you all at Fortune Brainstorm Health in Los Angeles. I’m co-chairing this year with Lux Capital’s Deena Shakir and I’m super excited for the lineup of speakers. If you’re not planning to attend this year but want to follow along, I’ll share insights and quotes from the main stage on my Twitter account.