What is going to digital well being M&A seem like in 2022?


When Teladoc first struck an $18.5 billion deal to accumulate Livongo final yr, consultants predicted that it could herald an period of digital well being mergers hitherto unseen. To date, that prediction has held up.

For the primary three quarters of 2021, Rock Well being tracked 216 digital well being mergers and acquisitions, outpacing the whole thing of final yr’s deal rely of 146. By comparability, in 2019, there have been 113 M&A offers, in response to Rock Well being.

“We’re blowing our stats out of the water and I’ve excessive expectations that that’s going to proceed,” Alyssa Jaffee, a companion at 7wireVentures, stated in a telephone interview.

And the massive headline for 2022 is to anticipate extra mergers and consolidation to happen, particularly in areas which have a number of, main gamers like care navigation or digital bodily remedy.

Michael Greeley, basic companion at Flare Capital, stated that there are many good choices for firms proper now.

“The M&A market this yr, it’s fairly strong,” he stated. “Individuals are placing actual worth on these firms, their prospects are actual, they’ve vital books of enterprise and the know-how’s compelling.”

Though a few of these markets are nonetheless comparatively nascent, firms are beginning to emerge as class leaders. People who raised giant funding rounds not too long ago, however haven’t gotten the identical traction, would possibly develop into targets for mergers with one other non-public firm.

Level options consolidate
Like with the Livongo-Teladoc tie-up, consultants interviewed by MedCity Information stated they anticipate to see extra level options mix to win over extra markets and stand out to profit managers. Yet another latest instance of that’s Physician on Demand’s merger with Grand Rounds, a well being navigation firm, and later with Included Well being, which connects LGBTQ staff to affirming care.

As digital well being startups proliferate, firm advantages executives should display screen a rising variety of options, whether or not that be for advantages navigation, telehealth, or administration for particular situations. It’s gotten to the purpose the place it’s tough to vet all of them, as illustrated by a latest Wall Avenue Journal article. 

“Shifting away from this fragmented uncoordinated care throughout all of those level options, into one thing extra built-in and extra holistic care… that’s a development that I see, that’s not dying,” stated Joe Murad, CEO of pharmacy advantages startup WithMe Well being, in a Zoom interview. “There’s acquired to be consolidation amongst a handful of these as a result of additionally employers are saying, I solely want one navigator, I don’t want 4, and I’d slightly have one telephone quantity on the again of that card.”

Chrissy Farr, a principal at Omers Ventures, is watching patterns between rivals to see what they may purchase subsequent. As an example, each Livongo and Omada have constructed or acquired options for diabetes prevention and administration, in addition to psychological well being help. Since Omada acquired a distant bodily remedy firm final yr, it could additionally make sense for Teladoc and Livongo to make a musculoskeletal care acquisition, she predicted.

“I believe you’ll begin to see plenty of these firms mirroring one another’s strikes, and the broader purpose can be to have a full suite of choices and never simply do one factor,” she stated in a Zoom interview.

It’s nonetheless but to be decided how these mixtures will match collectively.  For instance with a maternal well being startup, Greeley stated he would need to combine behavioral well being providers as a part of that core providing slightly than refer sufferers to a different firm.

In different circumstances, he may see totally different specialty platforms working as “storefronts” on a broader platform, like Teladoc or Amwell.

Masking a broader vary of acuity
One other development in tie-ups has been to increase into increased acuity situations by mergers. As an example, Headspace, a widely known meditation app, not too long ago mixed with Ginger Well being, which gives behavioral well being teaching, remedy and psychiatry classes.

Whereas Headspace would cater to a broader group of customers, Ginger can present extra in-depth providers, bringing in income from well being plans and insurers.

“These sorts of mergers find yourself being actually profitable and engaging,” Jaffee stated. “It’s a bit of pie you’re capable of seize at a reimbursement degree.”

She and different buyers anticipate to see extra consolidation amongst behavioral well being firms, with the breadth of options that exist and the funding that these firms have raised.

Farr additionally predicted that musculoskeletal care firms will consolidate as they appear to succeed in new markets, resembling well being plans, employees’ compensation applications, and on to customers. A number of which have raised funds not too long ago embrace Kaia Well being, Hinge Well being and Sword Well being, which supply digital bodily remedy and self-guided workout routines. 

“All of these items require totally different groups,” Farr stated. “It might be sooner to purchase one thing versus attempt to construct it your self.”

She additionally expects to see digital bodily remedy applications begin to increase extra into in-person providers and rehab earlier than or after surgical procedures, an space that MSK startup Kaia Well being has began to get into by partnerships.

“A variety of the MSK gamers are targeted on digital bodily remedy,” she stated. “There’s a world during which they’re going to want to open up bodily clinics in some unspecified time in the future, as a result of not everyone needs to be seen nearly, which goes to be the story of 2022.”

Their predictions
MedCity Information requested 4 consultants for his or her M&A predictions in digital well being. Right here’s what they stated:

  • Farr expects to see extra consolidation in girls’s well being as extra funding begins to stream into the sector and employers take inventory of their advantages for fogeys. As an example, Maven Clinic is now valued at $1 billion after a latest funding spherical, and has some cash to spend. She additionally questioned if Amazon will purchase one other healthcare firm, and if Peloton may discover an acquirer in Apple.
  • Murad stated among the many numerous navigation firms, resembling Accolade, Castlight, and Included Well being, “one thing’s acquired to provide there.”  He identified that Quantum Well being could possibly be complementary to Accolade, as Warburg Pincus not too long ago led a non-public fairness spherical within the firm.
  • Jaffee expects to see continued M&A exercise in behavioral well being and girls’s well being. She famous the big quantity of funding in care round fertility, being pregnant and postpartum care, in addition to a rising variety of firms targeted on menopause and particular situations, resembling PCOS and endometriosis.
    “In 2022, we could have further M&A exercise in these two markets actually to serve broader populations with the purpose of extending attain and the spectrum of care,” she stated.
  • Greeley didn’t title particular firms that he thought would get acquired, however famous that one place to look can be for firms that had raised sequence B or C rounds a couple of yr in the past, and aren’t actively elevating now. As an example, these firms won’t have scaled quick sufficient or raised capital at very excessive valuations that they didn’t develop into.
    “My prediction is that we’ll see a lot of firms elevate even bigger rounds (‘anoint the winner’ financings) and in addition numerous different firms discover private-to-private mixtures (or just promote to giant public firms within the sector),” he stated.

Photograph: Dmitrii_Guzhanin, Getty Photos

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