But as the year unfolded and cash grew costly, several of these health experiments were scrutinized, discontinued, or divested. HealthTech 2022 Valuation Multiples. Within digital health and in capital markets more broadly, well likely look back on the past several quarters as a macro funding cycle. No recommendation and/or offer for subscription (or for purchase) and/or redemption (or for sale). 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. We believe that digital health solutions that can address and service these ESG or social aspects in the employer-psyche will stand out from the noise in the employer channel. Hampleton Partners, an M&A advisory firm specialised in technology companies, has recently published their 2022 Report on the state of HealthTech. Drivers toward this cycles crest in mid-2021 have been well documented. 4 Abs. According to research firm CB Insights ' latest annual report on the State of Fintech in 2022: " funding reached $75.2bn in 2022 marking a 46% drop from 2021, but up 52% compared to 2020. If you do not agree with this statement you should refrain from accessing any further pages of this website. Supply chain challenges, inflation, interest rate hikes,3 and investor pullback reversed investment momentum. While diminishing margins have forced big healthcare organizations (especially health systems) to focus on near-term needs, successful players will continue to plant seeds for better seasons. 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 period and 3x the year prior. Since that time, our industry has quickly matured from the infant stages of technology adoption (think: EMRs, HIE, PHM) to its current teenage digital health self. In December, Oracle, a sector outsider, issued a USD 29 bn takeover bid for Cerner, one of the two major providers of hospital software in the US. Others expanded their revenue potential by diversifying into B2B. Funding for Digital Health Companies has continued to grow year on year. Venture fundraising is predicted to decline to about $15B in 2023, as most firms recently raised new funds. Hampleton Partners, an M&A advisory firm specialised in technology companies, has recently published their 2022 Report on the state of HealthTech. But overall, the average revenue multiple of 2.3x to 2.6x is 50% to 60% lower than the revenue multiples of tech companies in 2022. In particular, you should not enter into any investment before you have read the corresponding fund agreement or legal prospectus, the annual and semi-annual reports, the articles of association (as far as they are applicable), as well as all other documents, as required in accordance with local legislation or the regulations applied in the legal jurisdictions or countries in which the corresponding investment fund has been licensed or approved for public offer or sale to the public.rlich sind. McDermott Will & Emery - Amanda Enyeart , Grayson I. DImick , Marshall E. Jackson, Jr. , Lisa Mazur , Dale C. Van . To deliver its potential, national or regional Digital Health initiatives must be guided by a robust Strategy that integrates financial, organizational, human and . 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. 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). We assume that large healthcare companies are eyeing deals with disruptive, fast-growing digital health companies. Depending on your domicile and the investor type that you select, you will have full or restricted access to the information due to legal reasons. 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. Fifty-nine percent of that funding came from 48 "mega deals" that involved over $100 million each, including . Further information on investor rights can be found on the Management Company's website (https://www.universal-investment.com). 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 . Rarely do we find a pure-play public comp that we can compare to a startup. Financial or Operating Metric ( EBITDA, EBIT, Revenue, etc.) The multiple has been sliced over the last year. As an investor, Im starting to anticipate that great deals will once again be available, at better prices. What is the right multiple? It is a 2 day event organised by Riverstone Training and will conclude on 14-Oct-2022. Despite CMS announcing their intent to maintain reimbursement for select video-and-audio-only services through 2023, we saw a drop in the number of visits and declining satisfaction across consumers with telemedicine in 2021. These can be dependent on: Customer profile and purchasing patterns. : 3.5 to 3.9 times: 15 percent. The large-scale enterprise category led the global SaaS industry in 2022 and is projected to continue throughout the forecast period. . Employers have begun to acknowledge that increasing access to care requires both a refactoring of existing insurance policies, coupled with investments that quantify and deepen LGBTQ+ specialization in provider networks. We first saw this shift from a business case to a wellness case in mental health, caregiving, and maternal health. 2021 was an unprecedented year for digital 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. Prospectus, the key investor information document ("KID"), the management regulations and the semi-annual and annual reports. Report. 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. 2022 edition of Corporate Valuation: Techniques & Applications will be held at Jakarta starting on 13th October. The EBITDA multiple will depend on the size of the subject company . It has been a rough year so far for digital health. The multiple has been sliced over the last year. cerebral.com; Hinge Health: The digital musculoskeletal clinic, which partners with employers and health plans, is valued at $6.2 billion and announced a $400 million Series E funding round in October. 3. USA February 28 2023. Growth stage of the business. Valuation Multiple = Value Measure Value Driver. In the last year alone, over 200 mental and behavioral health startups received over $4 billion in new capital to scale. A tech-enabled renaissance for the independent clinician, 6. 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. For example, our portfolio company US Health Partners is assisting cardiologists in breaking free from the traditional hospital structure to run independent practices as they transition to digital and value-based care. 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. This is what we finance types call a re-rating. By Steve Kraus, Sofia Guerra, Andrew Hedin, Morgan Cheatham, $14.6 billion across 464 companies in 2020, we saw a drop in the number of visits and declining satisfaction across consumers with telemedicine in 2021, has increased wages for per-diem and travel nursing and Allied Health 3x in 12 months, Roadmap: Enabling entrepreneurship in the creator economy. Please join the conversation and dont forget to introduce yourself when you join. Stephen Hays, Founder of What If Ventures www.whatif.vc a mental health focused venture capital fund and host of the Stigma Podcast. The EV/Sales multiple of the Bellevue Digital Health fund portfolio is currently under the long-term range of 6-10x, and about 40% lower than it was 12 month ago. Exit, Investment, Tech and Valuation. Not only did 2022s annual funding total come in at just over half of 2021s $29.3B2, but it also just squeaked past 2020s $14.7B sum. Report 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. 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. An overview of Bellevue Healthcare Strategies. 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. 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. In addition to dealing with frontline priorities, 2022 saw key health systems continue to carve out brainspace to expand and explore new businesses that would diversify revenue streams in years to comean important balance even as tough times bias toward short-term solutions. Average EV/EBITDA multiples in the health and pharmaceuticals sector in the United States from 2019 to 2022, by industry [Graph], Leonard N. Stern School of Business, January 5, 2022. 23 M&A activity for cell towers is higher than data . An example was seen in early 2022 when Stryker issued a takeover bid for Vocera, a leading provider of communication software and hardware for hospitals. In all other countries, the funds may, if any, via "Private Placement" according to the local applicable laws. Austria: Paying and information agent: Zeidler Legal Process Outsourcing Ltd., SouthPoint, Herbert House, Harmony Row, Grand Canal Dock, Dublin 2, Ireland. Paying agent in Switzerland is DZ PRIVATBANK (Schweiz) AG, Mnsterhof 12, PO Box, CH-8022 Zurich. Disrupting healthcare isnt as effective as targeting transformation opportunities in tried-and-true operational fieldsa lesson Big Tech learned all too well. 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. Nothing in this website is intended to be or should be construed or taken as accountancy, investment, tax or any other kind of advice. December 7, 2022. The table below lists the current & historical Enterprise Multiples (EV/EBITDA) by Sector.The multiples are calculated using the 500 largest public U.S. companies.Comparing the current enterprise multiple of a sector/industry to its historical average value can be used to evaluate if the sector is currently undervalued or overvalued.Note: The ratio is not available for the Financials sector as . As investors competed to back early-stage prospects, Series A deals got bigger than ever before. This has resulted in an increase in valuation multiples for platform acquisitions from 7.6x EBITDA in late 2000s up to 14x EBITDA in 2021 (see Figure 9). We recommend individuals and companies seek professional advice on their circumstances and matters. Inflationary pressures burned consumers discretionary dollars. 2022s total funding among US-based digital health startups amounted to $15.3B across 572 deals, with an average deal size of $27M. 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. By JEFF GOLDSMITH and ERIC LARSEN. The median valuation multiple for sellers increased for the fourth straight . Despite . And clinical workflow software, which earned eighth place in 2022 ($1.5B), moved up from eleventh in 2021. What does this mean for 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. Given that deal size generally tracks to valuations, its fair to infer that the median Series A deal valuation is likely at or near all-time highs. Published on 15 November 2022, 09:32 America/New_York. Notably, 2022's year's Q4 $2.7B total was less than half of last . Last year, we talked about the critical role that Advanced Practice and Ancillary Providers (APAPs) would play in clinical teams. About the Author: Stephen Hays After decades of addiction and struggling with bipolar disorder, Stephen was fortunate to receive help and has focused his attention on funding solutions to the problems he lived with. Investment decisions make use of equity multiples especially when investors look to acquire minor positions in companies. Some studies even estimate that 30% of the remaining healthcare workforce are considering leaving their full-time hospital jobs in the next two years. As you can see from our index of disruptive healthcare peers, the group has been drastically underperforming the broader S&P 500 over the last 12 months leading into January 2022. Based on M&A transactions over the last 5 years, Hampleton Partners found that the median Revenue multiple for PropTech companies was 3.7x. Finerva is a trading name of Lydford Advisory Limited, a company registered in England and Wales, number 08655612. In 2022, there is an opportunity for a new crop of companies to successfully build the connective tissue between the physical and digital worlds. As the digital health field becomes more crowded, clinical outcomes will become a key competitive differentiator, 4. Investors and . Several companies in this category have grown during 2021, including Truepill, which has become a best-of-breed API for pharmacy fulfillment and Wheel, which is a leading clinician matching marketplace. This button displays the currently selected search type. Launched two years ago, the startup netted $300 million in a Series C round in December, increasing its valuation to $4.8 billion. Revenue multiples for eCommerce businesses tend to be in the range of 0.7-3x. For information on opportunities and risks as well as tax information, please refer to the current detailed sales prospectus. Let us know what you think of our 2022 predictions by emailing us. Something went wrong while submitting the form. H2 2021 averaged $7.1B in quarterly funding, a small decline from the first half of that year. Last year we predicted that the commoditization of telemedicine would unlock holistic virtual care. Bellevue Asset Management (Deutschland) GmbH: You can obtain the sales prospectus, the annual reports and the german key investor information documents free of charge from Bellevue Asset Management (Deutschland) GmbH, and also from banks and financial advisers. 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. performing companies, the valuation premium is much higher. 3 to 3.4 times: 23 percent. Today, we are seeing a crop of new platforms that are viable partners for us.. End-to-end automation with human-in-the-loop AI will decrease the amount of manual administrative work, decrease staff burnout rates, and increase patient access to medication in healthcare., Ogi Kavazovic, Cofounder and CEO, and Tesh Khullar, Cofounder and President, HouseRx: Further consolidation in specialty pharmacy space, likely led by PBMs acquiring specialty pharmacy competition, which once again will result in fewer patient options and a suboptimal patient experience.. Fund documents Bellevue Option Premium fund. Through the largest virtual network of LGBTQ+-specialized clinicians, FOLX offers end-to-end virtual primary care, gender-affirming services (e.g., hormone therapy, counseling), sexual and reproductive health (e.g, PrEP), community (e.g. [Online]. COVID-19 continues to put a strain on our healthcare system and cause burnout to the heroes who have been on the frontlines fighting this pandemic. What does this mean for startups? 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. By accessing this website you state that you agree with the data protection statement. The digital health market is on fire. MedCity News - Healthcare technology news, life science current events The S&P Healthcare Services Index decreased by 13.4% in January compared to the S&P 500 Index, which decreased 5.3%. 2022 Public SaaS Valuation Multiples. 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 the absence of cheap cash to purchase consumers or a captive audience of pandemic-time buyers, D2C companies were forced to look hard at operational efficiency and customer lifetime value. Growth and crossover funds that are new to digital health have been particularly active in digital health (e.g., Tiger Global made 25 digital health investments in 2021) On the other hand, 55% of digital health investors in 2021 were repeat investorssimilar to the average 58% repeat investors across the prior three years 2018-2020 Bellevue SICAV: The Bellevue Funds (Lux) SICAV is admitted for public offering and distribution in Switzerland . Where will the market settle? Moreover, pure-play telehealth and mental health companies have underperformed not just the market, but also the peer group (see the chart below). For example, the short supply for full-time clinicians has increased wages for per-diem and travel nursing and Allied Health 3x in 12 months, furthering a negative spiral of nurses quitting full-time jobs to access more flexible hours and higher wages. David Kopp, Executive Chair, Oar Health. This is what we finance types call a re-rating. HealthTech has the potential to make healthcare more accessible and convenient far beyond the worldwide pandemic. Stephen Hays, Founder of What If Ventures www.whatif.vc a mental health focused venture capital fund and host of the Stigma Podcast. The indications for the new year are good. The pandemic has led to an increase in workloads and burnout among clinicians. The financial products mentioned on this site are not suitable for all investors. EBITDA multiples are one of the most commonly used business valuation indicators that is often used by investors or potential buyers to assess a company's financial performance. This tells me that analysts believe the operating environment for companies in our space will continue to be at least good, if not improving. In a downtrodden market climate, things dont need to feel doom and gloom. In day-to-day SaaS company operations, questions like the above are common. Notably, 2022s years Q4 $2.7B total was less than half of last years Q4 raise ($7.4B). 10 paragraph 3 and 3ter CISA in conjunction with Art. Spain: The Bellevue Funds (Lux) SICAV is registered with the CNMV under the number 938. Moreover, pure-play telehealth and mental health companies have underperformed not just the market, but also the peer group (see the chart below). Lets dig in. Lyra hit unicorn status in 2020 in a pandemic-fueled funding round, and Modern Health, BetterUp and Ginger . 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. Changes in foreign-exchange rates may also cause the value of investments to go up or down. According toRock Health, a US-based venture fund dedicated to digital health, the number of HealthTech unicorns is growing, and share prices for digital health companies have broadly increased since the COVID-19 pandemic took hold. Ambitious hospitalathome initiatives were launched to free up hospital beds, allow top of license practice, and reimagine care pathways. That reflects a 70% decrease in the value of revenue within our peer group in an environment in which revenue estimates are rising. The information and services provided on the sites are not intended for offer to or use by legal entities or natural persons in legal jurisdictions or countries in which the offer or use thereof would violate local legislation or legal provisions, or in which business units forming part of Bellevue Group would be subject to registration requirements in such jurisdictions or countries. The average revenue multiple for small tech companies increase slightly as their market cap increases, from 2.2x to 2.6x. We need to find ways to help health systems reduce admin burden and free up clinician time. In 1H 2022, US-based health IT companies raised $9.4B, which is 40% below 1H 2021, but still 46% higher than the amount of investment seen in 1H 2019 (see the chart . The biggest M&A deal of the year was Data to Decision AG acquisition of MEDIQON GmbHa software company providing data analysis solutions to generate insights capable of driving healthcare sector decisionsfor $30bn. 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. Strong growth momentum and non-cyclical demand put Digital Health stocks in an excellent position to deliver a pleasing performance in 2022. However, we are certainly preparing for any outcome. Many startups were benchmarking to that valuation when they raised money in our space at 20x and even 40x ARR (or higher). Healthcare stakeholders are increasingly joining efforts with HealthTech companies to improve and increase access to remote care. 80 people interested. May 9, 2022 2. At one point, the group traded at 15.4x NTM revenue and most recently traded at 4.6x NTM revenue. More than $26 billion dollars were invested across almost 700 US health tech companies at soaring valuations (up from $14.6 billion across 464 companies in 2020). Why does this matter? Providers like nurse practitioners, physician assistants, health coaches, nutritionists, counselors, and pharmacists have served as critical providers in the healthcare system given the physician shortage and the high cost of hiring a large physician team. Investors aggressively fundraise into the downturn. The share of HCIT deals held steady at around 15% of overall . Rarely do we find a pure-play public comp that we can compare to a startup. In particular, you should not enter into any investment before you have read the corresponding fund agreement or legal prospectus, the annual and semi-annual reports, the articles of association (as far as they are applicable), as well as all other documents, as required in accordance with local legislation or the regulations applied in the legal jurisdictions or countries in which the corresponding investment fund has been licensed or approved for public offer or sale to the public. The information contained on this site does not constitute a financial, legal, fiscal or any other recommendation. Our most recent investment, HouseRx, is helping independent physicians in a different way by enabling doctors to run medically integrated dispensing of specialty drugs and helping them connect therapeutics with care journeys, which will ultimately be better for patient adherence and outcomes. Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. As you can see from our index of disruptive healthcare peers, the group has been drastically underperforming the broader S&P 500 over the last 12 months leading into January 2022. peer support groups, events), and care navigation, said Dana Clayton, COO of Folx. As Avi Dorfman, founder and CEO of Clearing told us: As telemedicine becomes increasingly mainstream, digital infrastructure companies with turnkey offerings will emerge, enabling entrepreneurs to focus product & engineering resources on the creation of personalized patient experiences. This represents a 46% increase on 2021 numbers, and a whopping 70% increase on pre-pandemic (2019 .