Q2 2017 HIT / Digital Health Update
- Global M&A dollar volume ($ amount) of announced deals in Q2 2017 totaled $759 billion, ↓ 18% from Q2 2016 to Q2 2017 (“YoY”). The announced U.S. M&A volume was ↓ 33% to $345 billion YoY. The number of U.S. M&A deals for all sectorsdropped 15% YoY, but the median deal size increased by 24% to $21 million per S&P CIQ.
- Global Private Placements saw flat activity in the 2ndquarter of 2017. In Q2 2017, $95 billion of deals were closed, ↑ 1% from Q1 2017 but ↓23% Q2 2016. The number of transactions was ↓ 8% for Q2 2017 vs. Q1 2017 and ↓ 23% on a YoY basis.
- In North America, there were 56 Digital Health M&A deals, essentially flat compared to Q1 2017 but down 15% compared to Q2 2016. The largest deal in Q2 2017 was Teladoc Inc.’s acquisition of Best Doctors for $440 million.
- For Digital Health sub-sectors HIM/Workflow Management and Patient Engagement/Monitoring/Wellness Coaching/Rx companies were the most popular M&A targets in Q2 2017, followed by Clinical Data/Population Analytics-Genomics vendors. EHR/EMR/PM/PHR was tied with RCM/Billing/Coding for the next most active sectors in Q2 2017.
- Digital Health Private Placements in North America were up 80%in total dollar volume for Q2 2017 vs. Q1 2017. Private Placements in N. American Digital Health were around $1.8 billion in Q2 2017. Contextmedia Health ($500 million from Goldman Sachs) and Modernizing Medicine ($231 million from Warburg Pincus) skewed the results in Q2 2017.
- Patient Engagement/Monitoring/Wellness Coaching/Rx was by far the most active Digital Health sub-sector of interest for investors in Q2 2017 in terms of number of private placements. HIM/Workflow Management jumped ahead of Clinical Data/Population Analytics-Genomics and Telehealth/Mobile Care Coordination companies. All other sectors were relatively stable in PP activity.
- There was no Digital Health IPO activity in Q2 2017 in comparison to there being 2 issues in Q2 2016. Q1 2017 also had no Digital Health IPO issues so the 1stH of 2017 and capping off a dormant period for IPO issues, consistent with the dearth of activity in the overall IPO market.
- For Q2 2017 (latest 12 months) Novahill’s Digital Health Public Comparable Index underperformed the S&P 500 Index by approximately 3% (i.e. the HIT stocks gained 12% while the S&P saw a return of 15%).
- Even with the relative underperformance, the Digital Health index still trades at a premium to the S&P 500 on a multiple of 2x and 3x higher then the S&P index for both revenues and EBITDA, respectively.
- Accenture predicts Artificial Intelligence (AI) is expected to provide $26 billion in potential annual benefits in administrative workflow assistance by 2026. (MedCity News, Jun’17)
- PwC says AI is expected to have dramatic impact in cybersecurity, privacy, cancer research & the treatment of other diseases.(HDM, May’17)
- Since 2011, nearly $2 billion has been invested to fund companies using predictive analytics in healthcare. (Stanford Medicine Health Trends, Jun’17)
- Ponemon Institute says 67% of medical device makers believe an attack on their devices is either likely/very likely. 56% of Healthcare Providers agreed. (MedCityNews, May’17)
Ten trends for identified and available in our full report.