Take a look at the above chart which shows the average EV/NTM Revenue multiple for the peer group. Rachel Lewis June 21, 2021. Drivers toward this cycles crest in mid-2021 have been well documented. Why does this matter? Adoption of B2B models doesnt necessarily change a D2C companys customer-centricity. What does this mean for startups? In part because of hospital-at-home excitement, on-demand healthcare landed the top-funded digital health value proposition spot of 2022 ($2.4B), led by urgent-care-at-home service DispatchHealth ($330M) and startups like Homeward Health, which raised twice in 2022. By clicking on "Accept", you confirm that you agree to the legal provisions. Lyra hit unicorn status in 2020 in a pandemic-fueled funding round, and Modern Health, BetterUp and Ginger . Financial or Operating Metric ( EBITDA, EBIT, Revenue, etc.) By accessing this website you state that you agree with the data protection statement. For the digital health sector, 2022 was a downhill rideone that we think signals the tail end of a macro funding cycle centered around the COVID-19-era investment boom. While twelve months ago there was a relatively stronger emphasis on top-line growth or 'growth at all costs,' we now see a stronger focus on profitability. Only one company, Amwell, has analysts who believe that their revenue will be lower in one year than it is now. The company . Strategic healthcare M&A rebounded in 2021 from a down year in pandemic-ravaged 2020, with volume up 16% and total deal value rising by 44%, to $440 billion. More than private market valuations, this trend will pressure the amount of capital available, and even more so if the public markets continue to contract and investors can find yield in less-risky public securities. We use a current run-rate (based off of the most recent quarterly revenue figures) in our valuation calculation because it's readily available, simple to compare across . Although HealthTech companies posted their best-ever multiples in 2021, they are still significantly lower than the SaaS industry median. I also believe that this valuation trend is just now beginning to pressure private market valuations. Prospectus, the key investor information document ("KID"), the management regulations and the semi-annual and annual reports. We believe changes in consumer demand and reimbursement patterns will drive the adoption of this same business model across other medical specialties where companies can aggregate demand for services to negotiate better rates with insurers. Not to mention, conservative VC activity shortened cash runways. : Two quarters ago, we noted a shift in investors attention from growth-stage players to early-stage digital health companies perceived as less likely to carry inflated valuations from 2020-2021. The Digital Health 150 is CB Insights' annual ranking of the 150 most promising digital health startups in the world. HealthTech the use of technology to deliver or improve clinical health services to patients was one of the most active and growing industries of 2020. Nothing in this website is intended to be or should be construed or taken as accountancy, investment, tax or any other kind of advice. This is reflected in the significantly better performance of large-cap healthcare companies as tracked by the Russell 1000 Healthcare Index (+23.3%) compared to the performance of the Russell 2000 Healthcare Index (-17.6%), which focuses on small and mid-cap companies. As access gaps are filled, quality will become the new focus, said CEO Colleen Nicewicz of Groups Recover Together. As an investor, Im starting to anticipate that great deals will once again be available, at better prices. We expect this to result in more consolidation and opportunities for M&A. The pandemic has led to an increase in workloads and burnout among clinicians. Finally, stay up to date with the latest headlines in healthcare technology and Rock Health news by subscribing to the Rock Weekly. The information contained on this site does not constitute a financial, legal, fiscal or any other recommendation. Finerva is a trading name of Lydford Advisory Limited, a company registered in England and Wales, number 08655612. But downhill paths carry both positive and negative connotations, and the following lessons from 2022 can help to make the most of the current market: Read on for our analysis of 2022s biggest digital health moments and trends, plus takeaways to make for a smoother slide into 2023. Surgery Partners' revenue was $707.1 million in the fourth quarter of 2022 and $2.5 billion in the full year 2022, respective increases of 15.9 percent and 14.1 percent year over year. We also share information about your use of our website with our social media, advertising and analytics partners. Decreasing EBITDA multiples paired with growing Revenue multiples are not necessarily bad news: in fact they could be a sign of companies within the sectors widening their profit margins. The global digital health market reached a value of US$ 289 Billion in 2021. While we may see some of the valuation gaps between public and private markets narrow in 2022, we continue to be optimistic that the IPO market will remain open and create more opportunities for M&A in our industry. Lifestance Health Group is the only pure mental health comp that I can find. Whats 2022s takeaways for MAMAA, other Big Tech players (e.g., Netflix, Nvidia, Samsung), and middle children? Inflationary pressures burned consumers discretionary dollars. Though a source of some internal controversy, it is nonetheless Rock Healths official position that both unicorns and horses share the genus. With that in mind, we looked to our community of founders and aggregated their predictions for 2022. Strong growth momentum and non-cyclical demand put Digital Health stocks in an excellent position to deliver a pleasing performance in 2022. Healthcare workers can search for more flexibility, better pay, and motivation to change the legacy system. Besides investments, health systems pursued long-term partnerships with software providers to make efficiency inroads, such as Cleveland Clinics 10-year deal with Palantir to roll out AI solutions that better forecast and manage patient flows. Something went wrong while submitting the form. You can reach the Healthcare team via Steve Kraus (steve@bvp.com), Sofia Guerra (sguerra@bvp.com), Andrew Hedin (ahedin@bvp.com), and Morgan Cheatham (morgan@bvp.com). We expect healthcare companies that provide an omnichannel patient experience, integrating online and offline care, will more likely succeed longer term compared to one-modality options. I suspect that as long as investors are seeking yield, then moving further down that risk spectrum into the private markets, valuations in the startup world will not come in. The year 2021 brought with it a return to pre-pandemic trends across all five sectors: pharmaceuticals, medtech, payers, providers, and . The COVID-19 pandemic catalyzed digital health innovation, investment, and regulatory reform throughout 2020 and 2021. After an astonishing $45 billion poured into new digital health companies in 2020 and 2021, and an early 2021 peak in market valuations of publicly-traded digital health providers, valuations and multiples have collapsed. The front-and-center focus on efficiency gains boosted investment for nonclinical workflow solutions. These may be subject to change and the use of the site may be restricted or terminated at any time without prior notice. The McKinsey Global Institute estimates the costs saved could lie anywhere between $1.5 trillion and $3 trillion a year by 2030, thanks to a range of interventions such as remote monitoring, artificial intelligence, and . This exodus from traditional healthcare settings can be an opportunity for digital health. Digital health companies must rethink incentives to recruit and retain the best clinician talent. There are some companies we can point to that are similar in how they generate revenue, who their customers are, as well as their growth rates and margins, but it is almost always impossible to find the perfect pure-play comp. Valuation Multiples Over Last 12 Months The single biggest question facing my business today is what valuation multiple is the right one to use when pricing private financing rounds in this space. Provider venture capital funds remained the top corporate investors by deal volume, and provider organizations increased their acquisitions by 5x, from three deals in 2021 to 15 in 2022 (acquisition targets included specialty care coordinators and telemedicine startups). We expect future M&A activity in the data center industry to be largely driven by the shrinking supply of available, high-quality data center real estate, which will continue to push valuation multiples higher. It is incumbent upon these solutions to demonstrate value on investment or risk losing market share to higher-impact offerings., Mudit Garg, Co-founder and CEO, Qventus: Over the last two years, hospitals struggled with capacity and staffing shortages. 2 to 2.9 times: 8 percent. According to the Digital Health Funding and M&A 2021 First Half Report released by Mercom Capital, the first half of 2021 closed with $14.7 billion invested across 372 US digital health deals with a $39.6 million average deal size. Use the PitchBook Platform to explore the full profile. With recession concerns looming, H2 2022s quarterly average of $2.4B may be a bellwether for the next several quarterswhich means that 2023 could be digital healths first $10B or lower year in venture funding since 2019. The indications for the new year are good. Further information on investor rights can be found on the Management Company's website (https://www.ipconcept.com). Check out who is attending exhibiting speaking schedule & agenda reviews timing entry ticket fees. This percentage includes digital health companies that sell exclusively to consumers, as well as those that sell to consumers in addition to other customer types (e.g., employers, providers, payers). 3. At one point, the group traded at 15.4x NTM revenue and most recently traded at 4.6x NTM revenue. In fact, the group is down 50% versus the S&P 500, which is up 10% during that period. In 2021, we saw a tidal wave of resignations across employment categories, sending shockwaves throughout healthcare. The share of HCIT deals held steady at around 15% of overall . Changes in foreign-exchange rates may also cause the value of investments to go up or down. When we broadly examine what we call the Disruptive Healthcare peer group to get a sense of what is happening in public markets, this may translate into insights about our market, which is at the intersection of digital health and mental health. The management company may decide to cancel the arrangements it has made for the distribution of the units of its collective investment undertakings in accordance with Article 93a of Directive 2009/65/EC and Article 32a of Directive 2011/61/EU. Revenue valuations have come in. Due to the historically low rating, 2022 presents itself with enormous growth potential. If I were the CFO of a startup today, I would be preparing to extend my fume date as long as possible and survive what feels like a pending capital access contraction. Google returned to its roots and unveiled several medical search initiatives for clinicians and consumers. After initial successes in automating back-office operations, leaders are now extending automation to the area of care operations all operations involved in the delivery of acute care, including management of discharge planning, or access, system-wide patient flow, and more, as well as processes that connect patient care beyond the hospital., Jonathan Wang, Co-founder and CEO, and Mark Kalinich, Cofounder and CSO, Watershed Informatics: The progression of life sciences digital transformation will drive large investments in computational infrastructure., Joy Liu, Co-founder and CEO, and Joy Patel, Co-founder and CTO, Plenful: Automation and AI will play a growing role in specialty pharmacy operations in 2022, spurred by increases in limited distribution drugs, growing staffing challenges, pressure to differentiate on better patient experience, and novel purpose-built technology for pharmacy operations workflows. Prospectus, Key Investor Information Document (KID), the articles of association as well as the annual and semi - annual reports of the Bellevue Funds under Luxembourg law are available free of charge from the above mentioned representative, paying, facilities and information agents as well as from Bellevue Asset Management AG, Seestrasse 16 , CH - 8700 Kusnacht. An overview of Bellevue Healthcare Strategies. For example, in mental health, the massive uptick in need has driven a huge amount of activity and access, however clinical and financial outcomes remain opaque. 2021 was generally a very challenging year for small and mid-sized growth stocks. Specifically, Teladoc Health(NYSE: TDOC) and Lifestance Health Group (NASDAQ: LFST) have underperformed the broader underperforming peer group. I was slightly curious regarding whether or not equity research analysts believed that the operating environment would deteriorate over the coming 12 months. The multiple has been sliced over the last year. Between Q3 2019 and Q2 2021, investors continuously increased investments into digital health quarter-over-quarter for seven straight quarters, with one dip in Q2 2020. In 2022, many more infrastructure companies will blossom to support the virtual care ecosystem. In Q4 2022, FinTech companies in the SEG Index recorded a median EV/Revenue multiple of 5.4x, less than half compared to pre-pandemic levels. The financial products mentioned on this site are not suitable for all investors. The performance data are calculated without taking account of commissions and costs that result from subscriptions and redemptions and commissions and costs have a negative impact on performance. Paying and information agent: atl Capital, Calle de Montalbn 9, ES-28014 Madrid. All but one company have rising revenue expectations on the whole across all analysts. This represents a 46% increase on 2021 numbers, and a whopping 70% increase on pre-pandemic (2019 . Nothing on this page is intended to be or should be construed or taken as accountancy, investment, tax or any other kind of advice. 1. We support this omnichannel delivery of care through our care coordinators that navigate members to high performing in-network gastroenterology providers, labs and pharmacies, as needed, said Founder and CEO Sam Holliday of Oshi Health. To be clear, we dont believe only hybrid-care companies will succeed, rather we believe digital-only companies will bridge the pre existing healthcare system to support a hybrid care delivery model. Healthcare Software (relating to hospital management, patient analytics and pharmaceuticals) was the most active sector, accounting for 65% of transactions. Teladoc Health is a pure-play tech-enabled disruptive healthcare peer that was recently trading north of 20x forward revenue. Many Digital Health companies are now at a much more advanced stage of business maturity, their business models have been firmly established, and their path to profitability has gained visibility. Notably, 2022's year's Q4 $2.7B total was less than half of last . Bottoms-up sales strategies may become the norm as companies evangelize clinicians as their customers and focus on use cases spanning clinician-focused fintech products, retail, healthcare, and online community-building ecosystems. We need better integration of clinical models to enable the treatment of comorbid conditions, such as Diabetes and Major Depressive Disorder. In 2022, HR Benefits leaders will feel heightened pressure from their finance departments to demonstrate the value of these point solutions. Information on valuation, funding, cap tables, investors, and executives for UCM Digital Health. By Peter Micca, partner, National Health Tech Practice leader, and Neal Batra, principal, Deloitte & Touche LLP. Equity Multiples. Reinforcing our experience, from pre- . What is occurring in the public markets, and how do these developments impact startups and VCs in the digital health and mental health markets? Forty-five percent of provider organizations reported accelerating their software investments in 2022 to streamline operations. FinTech M&A Market: Trends, Deals & Valuation Multiples. Health systems werent the only ones facing uphill battles in 2022. More on the Digital Health funding landscape can be found from Rock Health and Startup Health. HealthTech has the potential to make healthcare more accessible and convenient far beyond the worldwide pandemic. Larger deals and more of them characterized the healthcare IT (HCIT) market in 2021. Hampleton Partners, an M&A advisory firm specialised in technology companies, has recently published their 2022 Report on the state of HealthTech. 2021 was huge for health tech2022 may be bigger. As investors competed to back early-stage prospects, Series A deals got bigger than ever before. Adopting a more conservative mindset, Q4 2022 saw Big Tech players recenter digital health strategies within their tried-and-true operational fields. Digital health startups offering mental healthcare secured the top clinical funding spot in H1 2022, according to the research. Pharma and biotech M&A will continue to focus on oncology and immunology, but other areas such as central nervous system and cardiovascular diseases as well as vaccines will see interest. In turn, doctors can perform electronic consultations as well as monitor their patients remotely for less threatening situations and illnesses. A few months ago, it was detrimental for a digital health startup to say it was profitableit implied the company wasnt growing fast enough. As weve shared before, some of 2022s missing mega deals stemmed from growth-stage digital health companies reluctance to raise in this market environment for fear of the dreaded down round. Equity capital investors have already invested about USD 84 bn in 3800 privately held digital health firms since 2011, so we expect a steady stream of attractive IPOs in the coming years. WASHINGTON, Oct. 09, 2022 (GLOBE NEWSWIRE) -- Global Digital Health Market was valued at USD 145.57 Billion in 2021 and is projected to surpass the valuation of USD 430.52 Billion by 2028 at a . Its worth calling out that competition is a powerful motivator for health system innovation, especially as retail giants battle their way into care delivery. Ultimately, the wheat will be separated from the chaff in digital health in 2022; clinical outcomes will support patient adoption. We expect to see activity in areas of high expected future growth in 2023. Health systems also took steps to shift toward care models that decrease operational burden. Not only did 2022's annual funding total come in at just over half of 2021's $29.3B 2, but it also just squeaked past 2020's $14.7B sum. Restrains on movements forced most businesses to move their day-to-day operations online, including many health clinics and GPs. Healthcare IT surged as the digital transformation accelerated across sectors. Intertwined with the public health emergency, government stimulus measures contributed to an artificially depressed cost of capital in 2020-2021, encouraging investors to make bigger and riskier bets in emerging areas like digital health. The last 18 months have increased valuation complexity in the media sector. Of course, I am not hoping this happens, but when it does, I will not be surprised. Fund documents StarCapital Premium Bonds plus. Ultimately, virtual care companies will be early adopters of these new tools and as they scale, help transition the pre-existing ecosystem away from legacy platforms. These can be dependent on: Customer profile and purchasing patterns. Excluding COVID-19 and behavioral care visits, patient encounters were 6.2% lower compared to early 2019, suggesting that some patients permanently forwent pandemic-delayed care. Health tech grabbed a serious share of the attention. Registered address: Spaces, Mappin House, 4 Winsley Street, London W1W 8HF. This website uses cookies, which are necessary for the technical operation of the website and which are always set. Privacy policy. Ulili Onovakpuri, Managing Partner, Kapor Capital, Investors interested in strong horses spent 2022 scoping out earlier-stage opportunities. The information contained on this site does not constitute a financial, legal, fiscal or any other recommendation. And while these companies did not perform as well in the public markets in 2021 as in prior years, we are confident that the overall basket of digital health assets is more mature and valuable than ever before. Its too early to say whether weve reached the end of this macro funding cycle, or if more low funding quarters are on the horizon. Digital-health startups banked $10.3 billion in the first half of 2022, trailing the $14.7 billion the industry raised in the first half of 2021. In the second half of 2021, the trailing 12-month median EV/S multiple was 5.6x up from from a 3.6x the previous half-year and around 3x the year prior. 2 FinSA, Professional/Institutional investors: according to Art. As of November 15, the average multiple across health services sub-sectors was 14.4x, down from 15.9x as of December 31, 2021 and 14.9x as of December 31, 2020. If I were the CFO of a startup today, I would be preparing to extend my fume date as long as possible and survive what feels like a pending capital access contraction. As Chief Clinical Officer of Healthspace Health Dana Udall said, The system has mounting costs associated with untreated or poorly managed conditions, and ongoing siloed nature of care. Report In short, we do not have the answers. Rated 4.3 by 3 people. You can read more about his story here. Update your browser to view this website correctly. Representative agent in Switzerland Waystone Fund Services (Switzerland) SA, Avenue Villamont 17, CH-1005 Lausanne and paying agent in Switzerland: DZ PRIVATBANK (Schweiz) AG Mnsterhof 12, PO Box, CH-8022 Zrich. Rock Health Capital continues to invest in early-stage entrepreneurs bringing unique and innovative technology to healthcare. We hope 2022 is a turning point for the digital health industry when it comes to clinical outcomes and would encourage all companies to make these necessary investments even from their earliest days. The great resignation poses a breaking point for the supply of clinicians, 5. Lets dig in. In January: The sectors that experienced the highest growth were Consumer Directed Health/Wellness (up 8.5%), Assisted/Independent Living (up 2.6%) and Distribution (up 1.0%). EBITDA multiples valuation is a go-to technique for most investors and financial analysts dealing with high-profit mergers and acquisitions. Health systems strategizing for the years ahead are coming to realize that their beyond-the-hospital care offerings must stand up to a growing pool of competitors. Get news, advice, and valuation multiples reports like this one straight into your inbox. We believe that companies with deep clinical services alongside therapeutic regimes will become enduring care models for patients and establish market leadership in the long term. 1. May 9, 2022 2. [15] VALUATION The three most common valuation approaches - the Income, Market and Cost Approaches - can all be applied when valuing a physical therapy practice. Bellevue SICAV: The Bellevue Funds (Lux) SICAV is admitted for public offering and distribution in Switzerland . To deliver its potential, national or regional Digital Health initiatives must be guided by a robust Strategy that integrates financial, organizational, human and . 2022 marks the 13th anniversary of the passage of the HITECH Act which ushered in the digital era in healthcare. In a market where late-stage transaction volume has plummeted, we anticipate that 2022s cohort of larger Series A deals may experience above average value attrition, risking down rounds at their Series B raises or later. Last year we predicted that the commoditization of telemedicine would unlock holistic virtual care. Denominator: Value Driver - i.e. It is explicitly stated, that alternative fund products are not allowed for public distribution in any country and that they may only and exclusively be solicited to institutional and qualified private investors according to the applicable local laws of each country. Ambitious hospitalathome initiatives were launched to free up hospital beds, allow top of license practice, and reimagine care pathways. These conversations inspired the seven themes and trends thatll guide our investment perspectives for healthcare in 2022. Even companies where investors generally want to see more proof that their strategies work, show very good return potential, and levels of risk that are tolerable in view of their significant corrections and the investment communitys modest expectations. : They are beginning to place a premium on benefits that support diversity, equity and inclusion, as well as employee satisfaction and productivity. In August 2021, the median public B2B SaaS company hit a record high value at 16.9x its current run-rate annual recurring revenue (ARR). Big H2 2022 splashes from retail giants Walmart and Walgreens have raised the stakes for primary care, at-home, and omnichannel care delivery expansion. 4 paragraph 3-5 and Art. Furthermore, we recommend that you consult an independent tax adviser in order to obtain information on the tax regulations relating to a specific investment in your legal jurisdiction and with regard to your personal circumstances. Interest in media companies is growing. . 80 people interested. Health systems are looking for digital solutions that are easy to understand, can be deployed relatively quickly, and deliver tangible cost savings and efficiencies. Interestingly, the average round size in 3Q20 was $41.2 million, greater than the year-to-date . On the way down from the Q2 2021 peak to present day, investors steadily decreased the flow of capital every quarter, excluding two quarterly upticks: one in Q4 2021 and a smaller notch in Q4 2022. However, we are certainly preparing for any outcome. The management company may decide to cancel the arrangements it has made for the distribution of the units of its collective investment undertakings in accordance with Article 93a of Directive 2009/65/EC and Article 32a of Directive 2011/61/EU. For digital health insights targeted to your needs, drop us a note. registered) but not authorised in the UK, the UK Financial Services Authority's financial services compensation scheme does not apply to investments in the fund but the Financial Services Authority regulated firm approving this document for the purposes of UK regulation has taken reasonable steps to satisfy itself that Bellevue will deal in an honest and reliable way and is so satisfied. Stephen Hays, Founder of What If Ventures www.whatif.vc a mental health focused venture capital fund and host of the Stigma Podcast. For health systems, a top 2022 priority was identifying immediate steps to stop the bleeding (healthcare pun intended). Company List. Stephen Hays. MedCity News - Healthcare technology news, life science current events As a cherry on top, 2021 saw the Fed underestimate percolating inflationary concerns and extend monetary easing measures, inflating asset prices and valuations. Multiples dropped in four of the seven sub-sectors whose multiples we track, led by outsourcing (down from 19.2x to 15.0x) and managed care (down from 17.3 to 14.2). The first half of 2020 has seen unprecedented digital health activity: record levels of venture funding of $5.4 billion 1 ; megadeals, such as Teladoc Health's $18.5 billion acquisition of Livongo; and accelerated virtual care delivery, such as telehealth and remote monitoring. However, we believe that a highly selective portfolio of fast-growing, transformative and disruptive companies offering digital technologies that improve healthcare services and systems while lowering costs can quickly bounce back from short-term stock market trends. The unprecedented number of M&A deals, as well as consistently goodand growingrevenue multiples shows that the HealthTech sector is approaching its maturity, and its keeping its momentum in the crucial stages of the post-pandemic era. Enterprise value = Market value of equity + Market value of debt - Cash . Currently, the Digital Health sector is valued significantly lower than at the beginning of 2021. By JEFF GOLDSMITH and ERIC LARSEN. Whenever investment starts to pick up again, digital healths next growth trajectory will look more like 2011-2019 than 2019-2021a slower and more sustained path that better reflects startup risk and prioritizes companies taking measured paths to success. Hampleton Partners' latest Healthtech M&A Market Report highlights how the Covid-19 pandemic revealed the inadequacies and opportunities in the world's healthcare systems and how venture and growth capital poured into digital health companies, raising a total of $57.2 billion in funding in 2021, an increase of 79 per cent from 2020.