Healthtech M&A investment transactions: 2018 in review

Market overview Despite continuing macroeconomic uncertainty due to a combination of factors, including strained trade relations between the USA and China and the UK’s turbulent… Read more

Market overview

Despite continuing macroeconomic uncertainty due to a combination of factors, including strained trade relations between the USA and China and the UK’s turbulent exit (or not) from the EU, M&A and investment activity in the Healthtech sector looked strong throughout 2018, with a number of high-value, transformative deals. Whilst deal activity has been strong across the Pharma, Medical and Biotech space as a whole, the digitisation of the healthcare sector means that Healthtech constitutes an increasing proportion of this activity. The longer-term socioeconomic drivers of activity in the sector and the general shift towards digital health are likely to continue, meaning that this strong trajectory and digital health’s growing share of the healthcare market as a whole are trends which will subsist throughout 2019 and beyond.

M&A activity in the Healthtech space was strong throughout 2018. Results International, in their “HealthTech Heartbeat: 2018 Market Review”, reported 229 Healthtech deals globally with an aggregate value of almost $50 billion (with private equity buyers involved in some of the biggest deals – see below). On the investment side, Rock Health reported that investors injected a record-breaking $8.1 billion into the Healthtech sector in the US (surpassing the 2017 total by 42%). Silicon Valley Bank also reported record investment figures in both the US and Europe across the healthcare sector as a whole (including within the BioPharma, Medical Devices and Data Analytics/Tools verticals).

Key deals

Key notable Healthtech deals in 2018 include:

• Veritas Capital and Evergreen’s acquisition of AthenaHealth, a US-based company providing network-enabled services for healthcare and point-of-care mobile apps, for $5.7billion. A portfolio company of Veritas, Verscend Technologies, Inc, also completed the acquisition of Cotiviti Holdings, Inc, a provider of payment accuracy and analytics software for the healthcare industry, for $4.9 billion;
• Amazon’s acquisition of PillPack, an online pharmacy, for almost $1billion. In late 2018, Amazon shifted its focus from the consumer space to the provider space, announcing a range of services that meet US’s health legislation requirements (HIPAA), including a machine learning tool for healthcare developers. At the beginning of the year, Amazon also announced a non-profit collaboration with Berkshire Hathaway and JPMorgan Chase to build innovative technology solutions to optimise the delivery of healthcare solutions to US employees and their families;
• 3M’s acquisition of M*Modal, a provider of cloud-based conversational AI systems that ease the burden of physician documentation, for $1billion;
• BenevolentAI, a provider of AI technology used to analyse data for drug discovery, raised $115 million from existing and new investors;
• a multi-million-dollar collaboration agreement between Japanese pharmaceuticals business Otsuka and Proteus, a developer of digital smart pills. As part of the deal, Otsuka also invested $88 million in Proteus in equity and other payments;
• Pear Therapeutics, the first company to receive FDA clearance for a digital therapeutic (an app, reSET-O, used to treat substance use disorder), raised $50 million in a Series B round led by Temasek Holdings. In January 2019 Pear closed a further Series C round of $64 million, again led by Temasek. Temasek joined a group of existing investors, including Novartis; and
• Kry, a Swedish start-up which has created a telemedicine app that facilitates video consultations with clinicians, raised $66 million in a round led by Index Ventures. Doctolib, a Paris based start-up in this space, announced a $170 million last month which valued the business at over $1billion. Babylon, a UK-based telemedicine start-up, also recently announced that it is seeking $400million of fresh funding.

Long term trends

Various long-term trends, including growing/ageing populations, record levels of chronic lifestyle diseases, pressure on government healthcare budgets and a shift towards putting the patient at the centre of healthcare delivery will continue to drive digitisation in the sector.

Technology is evolving quickly to meet demand, with artificial intelligence, machine learning, big data, IoT, wearables, genomics, AR and VR, blockchain and natural language processing leading the way in the continuing tech disruption of the healthcare sector.

While privacy and patient data, regulatory hurdles, regulator approval processes and archaic government systems and institutions remain key concerns, the digital health revolution looks certain to continue at an increasingly fast-pace, making Healthtech one of the most exciting sectors in the months and years to come.

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