2017 Year-End and 4Q HIT Sector Report

2017 Year-End and 4Q HIT Sector Report Excerpt

Executive Summary

  • Global M&A dollar value of announced deals for the full year of 2017 totaled $3.3T ↓8% compared to 2016. The $ volume for Global M&A in Q4 was $1.05T, ↑35% from Q3 2017 (but ↓10% vs. Q4 2016). Global M&A deal activity was ↓4% from Q3 and ↓20% QoQ vs. Q4 2016. Announced U.S. M&A dollar value was $565B, ↑66% from Q3 2017 and ↑4% YoY.
  • Global Private Placements totaled $207B in Q4 2017, ↑11% from Q3 and 9% YoY. North American Private Placements totaled $43B, ↑15% QoQ and flat YoY. Although North American Private Placements $ volume increased significantly over the last quarter, the number of deals ↓5% QoQ and ↓7% YoY.

    Example Limited Chart from Q4 HIT Report
  • In North America, the Digital Health M&A deal count on a YoY basis was flat with 239 deals announced in 2017. There were 57 Digital Health M&A deals (↓17% from Q3 2017), but an almost 8% increase compared to Q4 2016.The largest deal in Q4 was Express Scripts Holding Company’s acquisition of EviCore Healthcare for $3.6 billion.
    • The most popular sub-sectors M&A targets for Digital Health in Q4 2017 were Productivity Solutions and Provider Centric companies. For the full year (FY), Productivity Solutions was ↑70% in 2017 vs. 2016. Spending Analytics was ↓42% for FY 2017 vs. 2016
  • Private placement transactions in the North American Digital health sector transactions ↑14% in 2017 while total dollar volume remained flat. Disclosed investments in North American based HIT firms totaled roughly $ 5 Billion in 2017. The number of transactions Q4 2017 went ↑17% vs Q3 2017 and ↑25%QoQ vs. Q4 2016.
    • Patient Engagement/Monitoring and Imaging/3D/VR companies were the most active Digital Health sub-sectors for investors in Q4 2017 in terms
  • There were no digital health IPOs in 2017 compared to 4 in 2016. There are however, a growing number of digital health unicorns that may eventually come to market in 2018 including HeartFlow, Human Longevity, Flatiron, and 23andMe.
  • As of LTM Q4 2017, Novahill’s Digital Health Public Comparable Index underperformed the S&P 500 Index by approximately 5% (i.e. the HIT stocks gained 14.1% while the S&P gained 19.4%). Even with the relative underperformance the index still trades at a premium to the S&P 500 of 2x to 3x on both revenues and EBITDA.

Trends for HIT / Digital Health Sector

  • Voice and voice assistants are becoming increasingly prevalent in healthcare and startups are capitalizing on the trend. MedCityNews, Oct 2017.
  • Hospitals are predicted to spend 18% more from 2017 through 2022 on clinical analytics ($2.8 to $6.2b). Spending on financial analytics during the same timeframe will increase by 12%, ($3.0 to $5.3b). HealthcareIT News, Nov 2017.

Ten trends for 2017 identified and available in our full report.