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HealthTech Heartbeat – 2019 Market Review

By Henry Barnes 27 Jan 2020

Welcome to the 2019 HealthTech Heartbeat – Results International’s quarterly market review of the global healthtech sector covering both biopharma and healthcare IT.

Review of 2019 in healthtech M&A:

  • Transaction sizes in the M&A space are now larger than prior years (three deals were disclosed in excess of $2.5bn in 2019) with multiples now consistently exceeding those found in the public market. In Q2, Dassault Systemes, a product lifecycle management company, acquired US-based Medidata Solutions at 8.8x TTM revenue for $5.8bn – illustrating companies’ desires to transition into new markets, such as bioinformatics and precision medicine, while increasing their focus on data.
  • 2019 saw three meaningful and successful IPOs (all in excess of $1bn IPO EV and +15% share price increase on day one) – Change Healthcare, Health Catalyst and Livongo Health. Of note is Livongo Health, a US-based digital health management provider for chronic conditions, which currently trades at 14x CY19 revenue (higher than its healthcare IT publicly listed peers) – highlighting strong investor confidence in companies that tackle real-world healthcare problems.

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Review of 2019 predictions:

  • We predicted that AI, machine learning and natural language processing (NLP) would remain at the forefront of innovation in the healthtech market and in turn fuel further investment and buyer appetite in these capabilities. In Q1, this was illustrated by UK-based Linguamatics, a provider of NLP SaaS to the life sciences and healthcare industries, being acquired by a Tier-1 CRO. Results International acted as exclusive financial advisor to Linguamatics.
  • M&A activity in 2019 exceeded levels seen in the prior year, with the average now at 60 deals per quarter combined across healthcare and biopharma IT. This is a result of an increase in both private equity investment (as predicted) and strategic acquirers. Results International advised Arxspan, a US-based electronic lab notebook and workflow solutions provider, in its sale to Bruker in Q1; and in Q4 advised Inflexion on its acquisition of Pharmaspectra, a US-based medical affairs data analytical solution for the pharmaceutical and biotechnology industries.

2020 predictions:

  • We predict that there will be an increasing number of integrated solutions in the market, driving value-based care forwards – particularly given the breakthroughs in interoperability this year. In Q4 we saw evidence of the demand for these assets as Ardian-backed Dedalus acquired Agfa Healthcare IT, a Belgium-based hospital integrated care and enterprise imaging solutions provider, for $1.1bn at 3.8x TTM revenue.
  • There will be an increase in both fundraising and IPOs of solutions with real-world applications, particularly given Livongo Health’s success, with GPs, hospitals, and in turn patients, benefiting from this. Babylon Health, a UK-based remote consultations provider, remains a stronger contender for IPO following its Series C $550m raise in Q3.
  • Lastly, we predict that disclosed M&A transaction sizes – across both private equity and strategic M&A – will increase in 2020. In Q4 we saw three of our public companies make acquisitions (three independent transactions from NextGen Healthcare alone) and global enterprises such as Amazon and Nvidia acquiring capabilities to enhance their offerings. We may see other adjacent technology corporations entering the market (i.e. Apple or Google) in 2020, further increasing the demand for healthcare and biopharma IT capabilities.

The outlook for 2020 remains positive with M&A and fundraising activity very healthy. As a result, now is an excellent time to be contemplating fundraising, exit or growth through acquisition in the space – if you are, please do get in touch.

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Henry Barnes

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