Q3 2017 HIT / Digital Health Update

Q3 2017 HIT / Digital Health Update

Executive Summary

  • Global M&A dollar volume of announced deals in Q3 2017 totaled $720B, ↑ 7% from 2016 YoY. The announced M&A volume was ↓ 33% to $345B YoY. The number of U.S. deals dropped 15% YoY, and the median deal size decreased to $29mm from $42.9mm.
  • U.S. M&A Dollar Volume was approximately $315B in Q3, which was essentially flat from Q2 but was ↓ 9% Y0Y.
  • Global Private Placements saw a flat Quarter in Q3 2017 with $170B of deals closed, ↓ 3% from Q2 2017 and ↓ 15% from Q3 2016
  • In North America, there were 69 digital Health M&A Deals ↑ 23% from Q2 2017 and an almost 28% increase compared to Q3 2016. the largest deal in Q3 was the KKR / Internet Brands acquisition of WebMD for a reported value of approximately $2.8B.
    • M&A activity for Digital Health targets in Q3 showed the most popular sub-sector was Patient Engagement / Monitoring / Wellness Coaching / Rx, followed by a tie between HIM / Workflow Management and HIE / Cloud Networks.

      Limited Example Chart from Q3 HIT Report
  • Digital Health Private Placements in North America were approximately $1 billion in total dollar volume for Q3 2017, ↓ 19% from Q2 volume and down by ~50% relative to YoY Q3 2016 volume.
    • Patient Engagement / Monitoring / Wellness Coaching / Rx and Telehealth / Mobile Care Coordination companies were the most active Digital Health sub-sectors for investors in Q3 2017 in terms of number of private placements, followed by HIM / Workflow management and Clinical Data / Population Analytics / Genomics.
  • There hasn’t been a Digital Health IPO since Q2 2016, but the number of highly-capitalized privately held companies (i.e. Unicorns) is increasing as companies such as 23andMe receive large rounds of funding. There are multiple digital health unicorns that may eventually come to market including Outcome Health, Human Longevity, Flatiron, and 23andMe.
  • For Q3 2017 (latest 12 months) Novahill‘s Digital Health Public Comparable Index underperformed the S&P 500 Index by approximately 11% (i.e. th eHIT stocks gained 5.3% while the S&P gained 16.2%).
    • In light of uncertainties regarding healthcare reform, trading multiples are expanding but not as strongly as the S&P 500
    • WebMD was dropped from NHP’s HIT index in Q3 because it was taken private by KKR / Internet Brands in July 2017


Trends for HIT / Digital Health Sector

  • Investments in VR are forecasted to rise by greater than 100% for each of the next 4 years; experts believe the technology will be increasingly implemented in healthcare with related apps expected to top $5B in sales by 2025. HealthDataManagement, Aug 2017.
  • In the U.S., on-demand telehealth has increased by 20% anually, with about 1.1mmpatients using services in 2016. Mercom Sept 2017
    • 2016 saw a 33% increase in the number of Medicare telehealth calims submitted and a 28% increase in total payments. This uptick in total payments is attributable to more providers using telehealth services. Mercom Sept 2017
    • The Senate has unanimously passed the CHRONIC Care Act of 2017, which expands access to and reimbursements for telehealth services. HealthDataManagement, Sep 2017

Eight trends for identified and available in our full report.