Investment firm Questa Capital Management has raised $348m for its second medical growth equity fund, Questa Capital Partners II, after backing successful companies such as EPIX Therapeutics with its debut fund.

Questa held a final closing on its $199m first fund in 2018 and invested that pool in companies including California-based EPIX, a designer and manufacturer of medical-device treatments for irregular heartbeats, such as atrial fibrillation. Medical device maker Medtronic PLC acquired EPIX in early 2019 for more than $300m.

Questa, which has offices in Washington and San Francisco, set out in January with a $275m target for Questa Capital Partners II and closed the fund last month, founder and managing partner Ryan Drant said.

Questa, which raised the fund from endowments, foundations, family offices and other investors, plans to make 10 to 12 deals with this new vehicle, said Drant, who previously led the healthcare practice of venture capital firm New Enterprise Associates.

While many venture firms fund early stage companies, Questa targets ones with more established technologies and services, said co-founder and managing partner Brad Sloan, who previously helped lead the healthcare practice of private equity firm Parthenon Capital. Questa’s focus, he said, is on how quickly the firm can help a company grow and how profitable the business can become with the help of the firm’s investment.

Questa typically follows companies for a couple of years before investing. Then when the firm invests it aims to become an “influential minority” shareholder, typically taking 20% to 30% ownership of a company, Drant said.

A theme Questa has pursued is moving medical services out of high-cost settings, such as hospitals, and into lower-cost ones, such as the home. With its first fund, for example, the firm invested in DispatchHealth Management, a Denver-based provider of urgent-care services in patients’ homes.

Questa recently made its first investment from Questa Capital Partners II, leading a $48m financing for Aerin Medical, which has developed treatments that have received regulatory clearance in the US for treating nasal airway obstruction and chronic rhinitis, an inflammation of the nose’s inner lining. With its investment, Questa is providing capital and expertise to help with Sunnyvale, California-based Aerin’s commercial expansion, Drant said.

Source: Wall Street Journal

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