Oct 17, 2024

One of Hungary's largest private healthcare service providers wins massive private funding Portfolio The transaction securing private funding of 10 million euros for Doktor24, a leading Hungarian provider of outpatient and occupational medical services, was closed in March, before the outbreak of the coronavirus pandemic. The funds were provided by Ananda Impact Ventures, a Munich / London based impact venture capital fund and Value4Capital, a Central European private equity fund. The capital will help Doktor24 become the largest private healthcare service provider in Hungary and carry out acquisitions and investment projects, company officials told a press conference in Budapest on Tuesday. The goal is to create Doktor24 a nationwide presence. Major deal in Hungarian healthcare sector Doktor24 Chief Executive Officer Róbert Lancz announced that under an agreement signed in March the company's current owners were joined by two investment funds to the tune of EUR 10 million. The investors are Ananda Impact Ventures, a Munich / London based impact venture capital fund, and Value4Capital (V4C), a Central European private equity fund, for which this is the first investment in Hungary. Plans with the fresh capital Lancz also said some of the capital will be used for an infrastructural investment: Doktor24 is to open a 3,000-square-metre private hospital in the Budapest One office complex. Additionally, fresh capital also gave Doktor24 the opportunity for two acquisitions. It has bought the Svábhegy Child Health Institute in Budapest, and its founder Ottó Skorán is now an owner in the group. The Kastélypark Clinic in Tata is now also owned by Doktor24, the CEO added. The CEO said Doktor24 is now one of the largest private healthcare service providers in Hungary. The group has 430 associates, helped by 160 assistants and skilled healthcare workers. Doktor24 conducts more than 300,000 examinations annually, most in occupational health (130,000) and adult outpatient care (120,000). Lancz said Doktor24 planned to have HUF 5 billion revenue in 2020 but because of the coronavirus pandemic, he has revised the forecast to HUF 4.5 bn. Doktor24 still expects to be profitable this year, he added. There were cost cuttings relating to the pandemic but these had no impact whatsoever on the HR team. In 2019 the group posted HUF 3.5 bn revenue and profit was above HUF 300 million. The CEO stressed the HUF 2.5 billion investment plan for this year remains in place, thanks to the group's stable and profitable operation, the fresh capital and a HUF 300 million investment support provided by the government. The 3,000-sqm private clinic in the Budapest One office building will occupy two stories (1,500 sqm each), and include four operating rooms, 35 hospital beds for in-patient care and 25 examination rooms for out-patient care and for the regeneration and rehabilitation centre. The group plans to carry out more professional developments and expand physicians' offices capacities, added Lancz. Who are the new investors? Ananda Impact Ventures manages EUR 18 million and is one of the leading impact venture capital funds with a pan-European focus. It has conducted 30 investments so far, mainly in healthcare. Ananda invests in outstanding impact entrepreneurs creating solutions to pressing social challenges. The active portfolio comprises impact pioneers such as Auticon (IT consulting by people in the autism spectrum), IESO Digital Health (online psychotherapy), Company Bike Solutions (e-bike leasing programs for corporates), Mika (an AI-powered companion for cancer patients and their caretakers), and Open Bionics (an innovative robotics company creating affordable, medically certified 3D-printed bionic arms for amputees). Ananda Impact Ventures Founder and Managing Partner Johannes Weber said he has seen a lot in Hungary's healthcare sector and Doktor24 has the right answers to how the sector could be complemented. I have fate in the expansion of the group, the purchase of new clinics and that Doktor24 will conquer new areas , he said, adding that their impact co-operation with Doktor24 is built on affordability, accessibility and transparency. "In Hungary, the healthcare market is not yet delivering the desired outcomes. A lack of resources relative to the need and a concentration of new private developments targeting mainly the better-off has resulted in patients being confronted with long waiting times and a deteriorating level of service," Ananda said in a statement in mid-April when it welcomed its first Hungarian investment to its portfolio. Dr24 is driven by the vision to generate a positive change in this challenging system by providing accessible, transparent, quality medical care for a large part of Hungary’s population, it added. “Doktor24 is committed to complimenting what the Hungarian public healthcare system can offer and making that available to a broad section of society.” says Johannes Weber, Managing Partner at Ananda Impact Ventures. “They tackle a key social challenge right where it is needed, which perfectly fits our investment focus.” V4C Managing Partner Bill Watson, joined the press conference via video, said they had previously invested in Romania's MedLife which they exited when the company went public. He said the situation in Hungary is similar to what Romania had earlier, i.e. the market of private healthcare services is growing rapidly. Drawing parallels between MedLife and Doktor24, he reminded that MedLife had been present only in Bucharest and at that time the main element of its strategic goals was to offer nationwide services. Watson thinks that Doktor24's new develoment projects will open the door for it to become a service provider at a national level and it also has the potential to become a market leader. Watson thinks one of the consequences of the coronavirus pandemic will be that people will focus more on their health which creates a favourable environment for Doktor24. The advantages of the region include its major growth potential that makes it an attractive target for investors, he added. V4C investors include the EBRD, the European Investment Bank (EIB), Poland's investment fund and several private investors. János Kóka, one of the current owners of Doktor24 and Hungary's former Economic Minister, said there are six private investors behind the group holding a small majority in it, while the two foreign funds are controlling minority owners. Long-term plans The owners said new acquisitions are among the plans, and some could be concluded before the end of this year. As for the development areas, Kóka said they are looking at strategic areas. Doktor24 looks to expand to towns with county rights, then to large cities and smaller ones, he added. The battle between complex groups on the Hungarian private healthare services market will be fought by three to four service providers, Kóka projected. The question is which of them will be able to absorb the capacities comprising doctors working in public hospitals and the staff of small medical services. He noted that demand, doctors and capital are gravitating towards the largest service providers, and stressed that these will be the hubs that will be able to attract Hungarian doctors back from abroad. As regards the model Doktor24 represents, he highlighted that the goal is to make sure patients recover in the shortest possible time after their hospital care and spend as little time in the institution as possible. The only way for private healtchare service providers to successfully compete with public institutions shored up by debt consolidation, wage supplements and gratuities (or 'gratitude money') is to invest in efficiency. The model we run and find ideal is in harmony with the government's idea to separate the public and private sectors and this is achieved here in a transparent way , said Kóka. Next stop? Going public? Asked by Portfolio, Johannes Weber said there are several options when it comes to an exit, and one of those is going public. At this point, however, emphasis is on co-operation therfore they have no specific exit strategy and the investment horizon is longer than usual. If it comes to that we will not obstruct stock exchange listing , he added. Kóka said the group will be stock exchange ready within two years. In his view, the Hungarian market and local investors would both "get this story" but the Budapest Stock Exhange (BSE) might not be a sufficient source to go international and expand in the region. Exit is not on the table, it is not even in the plans. We're thinking very long term and would like to boost our market share, he underlined. Kóka revealed that Doktor24 had already had a suitor but the private investor owners want to grow rather than sell. Cover photo: Shutterstock