As the costs to develop and commercialise medical products rapidly rise, life science companies are increasingly looking for alternative funding sources.
While the life science sector has traditionally been funded largely by equity, debt financing is becoming an attractive option for businesses as they scale and expand operations. Historically, securing such financing is difficult for the industry as banks lack the expertise to value complex assets and are deemed unsuitable for traditional cash-flow-driven underwriting metrics.
Enter Symbiotic Capital. A new life science credit firm affiliated with investment group Bellco Capital that is aiming to plug the life sciences lending gap. The Los Angeles-based firm launched in August 2024, with $600 million in commitments and is eager to carve out a leading position in life sciences private credit.
Medical Device Network met with Symbiotic Capital's co-founder and chief investment officer Himani Bhalla to find out how the new firm is partnering with industry.
This interview has been edited for length and clarity.
Catherine Longworth: Tell us about the genesis of Symbiotic Capital
Himani Bhalla: Symbiotic is a new credit platform that brings together experts from the life science industry and the finance field. What we've done is create a first of its kind credit offering which is designed to provide non-dilutive capital solutions to exciting growth stage innovative companies in the life science space across all sub sectors.
Why are we doing this? Well, the cost of advancing innovative science from the laboratory all the way into a commercial product has continued to rise, and with that backdrop, what we are trying to do is make credit an important tool that helps these companies continue to fuel their innovation and growth. We do this so they can better manage their capital costs and equity dilution needs. And if you think about how complex and how diverse the life sciences sector is, there is clearly a missing gap in specialists who understand the sector and can bring a patient first approach.
We have many great healthcare minds in Symbiotic. Our chairman is Dr. Arie Belldegrun, who is a well-known biotech entrepreneur and investor who founded our parent company and investment firm Bellco capital, which has been around for more than 30 years.
Symbiotic is being co-chaired by Russell Goldsmith, who used to run City National Bank and our science committee has Dr. Fran Schumer and Dr. Toby Cosgrove, along with academicians, Nobel Laureates from UCLA and seasonal VCs who are part of the science platform.
CL: What is Symbiotic’s investment thesis?
HB: We look for late stage, more mature companies. They are in one of two buckets - either they're already commercialising a product or a suite of products, or they're in late stages of development for either their drug, therapeutic, diagnostic or device.
In terms of our sub sector focus, we have a pretty broad mandate. We cast a wide net, and invest across all sub sectors, ranging from drug discovery, drug development, to medical devices, healthcare technology, life science tools, healthcare IT, and synthetic biology. Pretty much anything and everything that comes under the life science umbrella is part of our mandate.
On the drug side, when we're looking at pre revenue companies, our focus is very squarely on late-stage development, which means, for practical purposes, companies that are conducting Phase III trials and beyond. From a risk perspective, Phase III has its own associated risk so when we cast our net to look at the right credit opportunities on the development stage, it's usually multiple attributes that we look for, such as the core science. For example - is there a platform technology? Is there a discovery engine? Are there multiple shots on goals? And equally important, who are the management teams running these development pipelines?
We also want to know who the investors are and what is the financial standing of the company. Our investments are structured in a manner that protects us against binary, more risky Phase III outcomes. But in looking at a credit investment, it's a holistic evaluation that we do rather than just looking at a sole clinical program that we are underwriting.
When we are looking at medical device companies, or I should say, non-biopharma, our focus is going to be more on commercial stage - companies that already have a product that's approved and on the market. Our credit can then help on their journey to expand their commercial infrastructure and go from one orbit of growth into the next.
CL: What are the challenges of lending to healthcare?
HB: Underwriting life science companies is a complex endeavor. It is imperative that the lender comes from within the industry and understands the fundamentals, as well as bringing a patient centric approach. That's what really differentiates us - the combination of the capital and the value of the Bellco Capital ecosystem.
In medical development, the science and innovation never take a straight-line approach and the regulatory environment is also rather complex. The markets that we are selling into, whether it's direct to consumer or hospital systems are super complex and highly regulated. The equity markets have seen quite a bit of volatility, especially more recently, in the last two to three years. So if you think about it from a lending perspective there is quite a bit of sector expertise that you need to bring to be able to prudently underwrite companies in this sector. That’s where we think Symbiotic is poised to do well, given what we bring to the table in terms of our domain expertise, as well as our financial expertise on the credit and more generally, on the finance side.
CL: What are the terms of your investments?
HB: Our investments are typically on a four-to-five-year time horizon. How they're structured is in the form of a loan but not every loan is the same. The terms of the loan, the size of the loan, features of the loan, how the capital becomes available is dependent on each company's unique situation. The first filter that we apply is finding credit worthy companies.
Not every company in the life science sector can support debt so the first identification is identifying more mature companies who are able to support a credit structure, which may not be true for earlier stage companies. It's a four-to-five-year investment horizon that we underwrite, and the idea is that even though we are a credit investor, we like to walk into situations very clearly, understanding what the business situation could be.
As I mentioned, in the life science industry there is never a straight line from point A to point B, and the benefit for companies partnering with Symbiotic is that we understand this as we have built our own companies and been in these situations ourselves. We've gone through these challenges, and we tend to conduct ourselves in a manner that we don't end up in a precarious position because we are aligned with the companies. Everyone makes sure that it is a good outcome for the company, and for all the stakeholders involved.
Furthermore, what we bring to the table is not just pure capital around individual capital with a set of terms, but also the expertise of Bellco’s ecosystem. I mentioned the illustrious industry leaders that we have on our science committee. So, when we make a loan what we also offer to a potential borrower is not just the capital, but all the insights and the connections and the perspectives that the members of the life science committee, and more broadly, the Bellco ecosystem has collected over a three-decade period. All these resources and options are available to our borrowers as and when they need to use it to enhance the value of their enterprise and ultimately benefit all stakeholders, including the company, and equity investors.
CL: What are some of the risks associated with this capital?
HB: We’re very cognizant of what's going on in the macro-economic environment with respect to inflation and where the interest rates are headed. Political uncertainty can exist in the near term, and all this factors into our analysis, as we think about coming up with these credit structures. But all of this to say that the companies that we are lending to, are facing these exact same uncertainties. So, the idea is we all have a good grasp and a good view of what's to come in the next four to five years. We come up with a structure that makes sense, and more importantly, conduct ourselves in a way that reflects our understanding, Our experience comes from having gone through these cycles and ups and downs - not just from the way of industry fundamentals, but also from overall capital markets perspective. We’ve been around the industry long enough to have seen multiple changes, and that's exactly what we factor in when we think about credit investments to these potential companies.
CL: Tell us about some of Symbiotic’s current investments
HB: One of the first investments that comes to mind is a credit partnership that we did with digital surgery company Caresyntax. We were very excited to partner with Caresyntax, given our own deep roots in surgery. Dr. Belldegrun is a physician surgeon himself by training, and a lot of our science committee and Bellco members have long experience and history in the space. Caresyntax is notable as it is operating in the fast growing surgical robotics market and implementing cutting edge technology.
We were impressed with the company's growth across hospitals, medtechs and insurers and our capital provides them a means to expand their commercial footprint and continue to advance their product offering. It will enable them to enhance their enterprise value and attract additional capital to continue funding growth. And this is a classic example of the role that we want to play when we partner with a company. The total commitment we provided for that partnership is $100 million. The way these facilities are structured is some of this capital is in advance, and additional capital gets unlocked over the course of time.
The way we approach the financing opportunities is we can go from first introductions to closing investments in a period of four to six weeks. As part of our due diligence, we look at the scientific diligence and financial diligence of the company. In terms of scientific diligence, we are looking for companies that have exciting products or programs with compelling science, meaningful market opportunities and a competitive differentiation. And on the financing side, we are looking for situations where there is some proof of commercial traction already in place, and our capital will help them advance on their commercial journey. It is vital that these companies are led by strong experienced management teams and supportive investors.
CL: What excites you most about where the industry is headed?
HB: At Symbiotic, we are very excited about the prospects of lending to and partnering with exciting, cutting-edge companies that are looking for growth capital in the life science space. Credit is a very powerful tool needed in a capital-intensive sector like life sciences. It takes a lot of capital to advance innovative science, from labs into products that get approved and into commercial. So, we are excited and looking forward to partnering with multiple companies that are on this journey and be their long-term partners, in terms of not just bringing capital to the table, but ultimately unlocking their key strengths for patients.
