Others expanded their revenue potential by diversifying into B2B. Hampleton Partners, an M&A advisory firm specialised in technology companies, has recently published their 2022 Report on the state of HealthTech. Enterprise value = Market value of equity + Market value of debt - Cash . However, we are certainly preparing for any outcome. 2021 will likely go down as one of the biggest years ever for digital health-tech investments and revenue growth. The year 2021 brought with it a return to pre-pandemic trends across all five sectors: pharmaceuticals, medtech, payers, providers, and . In a tight labor market, employers are keen to attract and retain the best and most diverse workforce and many employees expect certain benefits as part of the compensation package. Investment Company/Closed Ended Equity Funds, European Equities - Entrepreneur Strategies, Bellevue Emerging Markets Healthcare (Lux), Specialized Regional & Multi Asset Strategies, Bellevue Sustainable Entrepreneur Europe (Lux), Bellevue Entrepreneur Swiss Small & Mid (Lux), Emerging Markets Healthcare sector comeback, We expect M&A activity to increase in the coming quarters., Healthcare Observer: Major breakthrough in Alzheimers treatment, Regional healthcare strategies: China in focus. Numerator / Denominator = Ratio = Business Value / Business Metric = Multiple. In a downtrodden market climate, things dont need to feel doom and gloom. Take a look at the above chart which shows the average EV/NTM Revenue multiple for the peer group. If you can't read this PDF, you can view its text here. Volatile active user numbers and declining profitability due to weakened advertising revenue deeply depressed Big Tech stock prices, and we expect that these pressures will further push the MAMAA crowd toward new revenue opportunities outside of tried-and-true social media advertising. This website uses cookies, which are necessary for the technical operation of the website and which are always set. However, that field is under some scrutiny. It has been a rough year so far for digital health. The global digital health market reached a value of US$ 289 Billion in 2021. Emerging new platforms and tools are helping clinicians become more independent and run successful businesses by enabling flexible hours, additional revenue streams, or owning their audience. 2022 marks the 13th anniversary of the passage of the HITECH Act which ushered in the digital era in healthcare. We saw a record of more than 30 IPOs and 80 mergers and acquisitions. Prospectus, the key investor information document ("KID"), the management regulations and the semi-annual and annual report are available free of charge in German from Bellevue Asset Management (Deutschland) GmbH, your advisor or intermediary, the paying agents, the relevant custodian bank or from the management company IPConcept (Luxembourg) S.A. (socit anonyme), 4, rue Thomas Edison, L-1445 Luxembourg, Luxembourg, https://www.ipconcept.com. How much do SaaS companies spend on customer support or marketing? Rarely do we find a pure-play public comp that we can compare to a startup. Take a look at the above chart which shows the average EV/NTM Revenue multiple for the peer group. Take a look at the above chart which shows the average EV/NTM Revenue multiple for the peer group. Staffing crises and wage inflation hiked up operating costs faster than CMS-influenced rate adjustments, squeezing health system margins rather than allowing hospitals to pass costs through to payers. Additionally, startups that once expected to mega-raise their way into the unicorn club were faced with investors who were less willing to take flights of fancy on $1B valuations; as a result, they may have chosen to delay big raises. 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. Germany: information agent: Zeidler Legal Process Outsourcing Ltd., SouthPoint, Herbert House, Harmony Row, Grand Canal Dock, Dublin 2, Ireland. The answer is valuation. 2021 was huge for health tech2022 may be bigger. [Online]. 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. What does this mean for startups? Investment decisions make use of equity multiples especially when investors look to acquire minor positions in companies. These can be obtained free of charge in German from Bellevue Asset Management (Deutschland) GmbH, your advisor or intermediary, the paying agents, the responsible depositary (UBS Europe SE, Bockenheimer Landstrasse 2-4, D-60306 Frankfurt am Main) or from the management company Donner & Reuschel AG, Ballindamm 27, 20095 Hamburg, https://www.donner-reuschel.de. 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. higher than Pre-COVID levels. 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. Although we continue to see red-hot valuations in the mental health space, I have to wonder, when will the re-rating of earnings in the public market impact private markets? The value of revenue is being re-rated by the markets as the macro capital environment tightens. Growth stage of the business. 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. The funds are currently registered for public distribution offer in the following countries: Luxembourg, Switzerland, Germany, Austria, Spain and Portugal. Teladoc Health is a pure-play tech-enabled disruptive healthcare peer that was recently trading north of 20x forward revenue. Although we continue to see red-hot valuations in the mental health space, I have to wonder, when will the re-rating of earnings in the public market impact private markets? Currently, the Digital Health sector is valued significantly lower than at the beginning of 2021. 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. Mass General Brigham announced plans to grow its hospital-at-home programs from 25 patients to 200 over the next two years, while 12-hospital health system Allina Health partnered with Flare Capital Partners to spin out hospital-at-home company Inbound Health ($20M), delivering extra-clinical care across 185 different diagnoses. Clinical outcomes will support patient adoption.. Disclosed value also surged from $15.1 billion to $38.1 billion. We see three prominent themes emerging: Lastly, the siloed nature of care doesnt only exist between the virtual and the physical world, it also exists among specialties. We expect to see activity in areas of high expected future growth in 2023. This exodus from traditional healthcare settings can be an opportunity for digital health. Published on 15 November 2022, 09:32 America/New_York. 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. U.S.-based digital health startups brought in almost $30 billion in 2021, almost doubling the total investment the year prior. As investors competed to back early-stage prospects, Series A deals got bigger than ever before. As the funds are recognised (ie. 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 . Disrupting healthcare isnt as effective as targeting transformation opportunities in tried-and-true operational fieldsa lesson Big Tech learned all too well. Some studies even estimate that 30% of the remaining healthcare workforce are considering leaving their full-time hospital jobs in the next two years. Currently, valuation multiples on the data center side are high at 20-25x EBITDA. What will differentiate virtual care companies is outstanding clinical outcomes for their patients built upon best-in-class clinical protocols, as well as personalized and delightful consumer-centric experiences that put the whole patient first. In 2022, many more infrastructure companies will blossom to support the virtual care ecosystem. Investment or other decisions should not be made solely on the basis of this document. 80 people interested. Despite COVID-19 becoming endemic, we will continue to see the lasting impact of this infection and how it structurally and holistically changes the industry indefinitely. Similarly, we have seen a dramatic shift in market valuation multiples for digital health companies. For D2C startups, 2022s Achilles heel was rooted in larger economic forces, rather than sector-specific factors. For some D2C players, differentiated tech and/or B2B sales will help to deflect bottom-line impact. At one point, the group traded at 15.4x NTM revenue and most recently traded at 4.6x NTM revenue. 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. 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. Mobile privacy updates gave way to rising customer acquisition costs (CAC); for some D2C digital health startups, CAC is estimated to have rocketed from $150 in 2018 to $500-$1,000 in 2022. :-) Clearly, the interest rates are now back to more Hannes Schobinger on LinkedIn: Q4 2022: How did the Swiss valuation parameters and the European M&A 2022s total funding among US-based digital health startups amounted to $15.3B across 572 deals, with an average deal size of $27M. As an example, when we set out to build Clearing 1.5 years ago, we developed an EMR in-house because legacy systems were too inflexible to meet our needs. The multiple has been sliced over the last year. While mental healthcare . Deal Type Date Amount Raised to Date Post-Val Status Stage; 5. Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. Given the rise of many pill mill businesses, we expect the FDA and other regulatory bodies will enforce increased clinical protocol scrutiny. That number is still much higher than pre-pandemic . 1. 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. 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. Restrains on movements forced most businesses to move their day-to-day operations online, including many health clinics and GPs. What does this mean for startups? 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. 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. The European market in particular saw investment levels skyrocket by a whopping 131% from $2.9bn in 2020 to $6.7bn in 2021. A tech-enabled renaissance for the independent clinician, 6. 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. Austria: Paying and information agent: Zeidler Legal Process Outsourcing Ltd., SouthPoint, Herbert House, Harmony Row, Grand Canal Dock, Dublin 2, Ireland. Despite differences in patient population, specialty focus, or go-to-market strategy, these care delivery companies are digital-first: they have multidisciplinary expertise across business, engineering, and medicine, and iterate and build consumer-centered products in a fast and agile way. Revenue valuations have come in. EBITDA multiples valuation is a go-to technique for most investors and financial analysts dealing with high-profit mergers and acquisitions. Specifically, Teladoc Health(NYSE: TDOC) and Lifestance Health Group (NASDAQ: LFST) have underperformed the broader underperforming peer group. While this may sound like a hefty cohort, it pales in comparison to the volume of mega-rounds raised in 2021 (88) and even 2020 (43). Jennifer Bellin, VP of Marketing, Artemis Health: The market has seen an influx of healthcare point solutions over the past few years. Digital health startups offering mental healthcare secured the top clinical funding spot in H1 2022, according to the research. Hampleton Partners, an M&A advisory firm specialised in technology companies, has recently published their 2022 Report on the state of HealthTech. Despite . Supply chain challenges, inflation, interest rate hikes,3 and investor pullback reversed investment momentum. Why does this matter? Stephen Hays. Widely known examples are Apollo Hospitals in India; Pulse by Prudential in Asia; Ping An in China; and the global Vitality program by Discovery in South Africa. As an investor, Im starting to anticipate that great deals will once again be available, at better prices. Please join the conversation and dont forget to introduce yourself when you join. For information on opportunities and risks as well as tax information, please refer to the current detailed sales prospectus. This tells me that analysts believe the operating environment for companies in our space will continue to be at least good, if not improving. Something went wrong while submitting the form. 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 . Strong growth momentum and non-cyclical demand put Digital Health stocks in an excellent position to deliver a pleasing performance in 2022. The large-scale enterprise category led the global SaaS industry in 2022 and is projected to continue throughout the forecast period. December 7, 2022. We dont rule out short-term market fluctuations, especially in reaction to news about the vaccination rates and the effectiveness of vaccines against coronavirus variants, or as a result of short-term tactical shifts in the flow of investment capital (sector rotation). As access gaps are filled, quality will become the new focus, said CEO Colleen Nicewicz of Groups Recover Together. However, 2022 didnt go as well for D2C digital health players, with only 37% of the digital health companies that raised in 2022 selling directly to consumers, compared to 43% in 2021.5 Not to mention, D2C stocks felt crushing pressure in the public marketsand not just in the healthcare industry. However, if capital flows begin to tighten as capital access tightens, we could be in store for a sharp pullback in startup valuations as well. Many startups were benchmarking to that valuation when they raised money in our space at 20x and even 40x ARR (or higher). Similar to the transition that ecommerce and retail industries had over the last 20 years. Ulili Onovakpuri, Managing Partner, Kapor Capital, Investors interested in strong horses spent 2022 scoping out earlier-stage opportunities. While the sector was expanding before COVID-19, the pandemic has caused a critical acceleration toward digitalising systems, with HealthTech solutions booming. When expanded it provides a list of search options that will switch the search inputs to match the current selection. David Kopp, Executive Chair, Oar Health. The digital health market is on fire. Rock Health Capital continues to invest in early-stage entrepreneurs bringing unique and innovative technology to healthcare. But the principle driving revenue multiples is that startups of a particular industry operate in similar . HGP Releases its July 2021 Semi-Annual Digital Health Market Review July 22, 2021. peer support groups, events), and care navigation, said Dana Clayton, COO of Folx. Global healthcare funding grew 45% YOY in 2020, and then added a further 79% in 2021, reaching a record $57.2bn invested. The list below shows some common equity multiples used in valuation analyses. Fund documents StarCapital Equity Value plus, StarCapital Multi Income, StarCapital Strategy 1 and StarCapital Dynamic Bonds. In fact, the group is down 50% versus the S&P 500, which is up 10% during that period. 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. This statement may be updated at any time. As Bessemer has been investing in healthcare for four decades, last year was unlike anything we have seen before. 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. Healthcare VC fundraising hit nearly $22B in 2022 second only to the record set in 2021 with an unprecedented amount raised in the first half of 2022. Multiples expected to hold strong in 2022. Deeper clinical services translate into lower margins and more extensive and expensive clinical apparatus. 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. Also, J.P. Morgan Healthcare Conference was very positive with some companies already giving pro-active guidance of their results after being challenged by investors worried over Covid-impact. A mandatory rule is that the represented . 2. Surgery Partners. 4 Abs. Global venture capital funding, including private equity and corporate VC, into digital health was the highest ever in the first quarter 2021 at $7.2 billion, according to Mercom Capital Group. A few months ago, it was detrimental for a digital health startup to say it was profitableit implied the company wasnt growing fast enough. By JEFF GOLDSMITH and ERIC LARSEN. What is occurring in the public markets, and how do these developments impact startups and VCs in the digital health and mental health markets? All things considered, we believe the outlook for the 2022 investment year is extremely attractive. Changes in foreign-exchange rates may also cause the value of investments to go up or down. No recommendation and/or offer for subscription (or for purchase) and/or redemption (or for sale). Noom and Oura targeted employers interested in modernizing health and wellness benefits, Calibrate sought out payer reimbursement, and Whoop explored applications in remote monitoring.6, D2C businesses that have established strong consumer DNA and proven unit economics could be well-positioned to add more healthcare services under their brand umbrellas. 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. Forty-five percent of provider organizations reported accelerating their software investments in 2022 to streamline operations. 2 to 2.9 times: 8 percent. The great resignation poses a breaking point for the supply of clinicians, 5. Reinforcing our experience, from pre- . 2021 was generally a very challenging year for small and mid-sized growth stocks. As a16z. The movement of bidding wars from growth-stage deals to Series A rounds doesnt eliminate valuation inflation overallinstead, it shifts inflated prices upstream. Larger deals and more of them characterized the healthcare IT (HCIT) market in 2021. This button displays the currently selected search type. About What If Ventures What If Ventures exists to invest in mental health and digital health focused startups. For example, if a startup is showing an annual revenue of $1,000,000, the estimated valuation of this company using revenue multiple valuations by industry will be: Valuation = $1,000,000 * 3.67 = $3,670,000. Specifically, Teladoc Health(NYSE: TDOC) and Lifestance Health Group (NASDAQ: LFST) have underperformed the broader underperforming peer group. Through HealthTech, and the TeleHealth sub-sector in particular, patients can connect with their doctors and access health care services via videoconferencing and wireless communications from the safety and comfort of their homes. Where will the market settle? Of course, I am not hoping this happens, but when it does, I will not be surprised. More on the Digital Health funding landscape can be found from Rock Health and Startup Health. Notably, 2022s years Q4 $2.7B total was less than half of last years Q4 raise ($7.4B). This is what we finance types call a re-rating. 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. The heaviest hitters in Europe's digital health market have valuations at an all-time high: Babylon is valued at $4.2bn, Kry at $2bn and Alan at 1.4bn. 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. interest rate hikes that cozied us up to the possibility of recession. Seizing the opportunity, startups in the on-demand care space like TytoCare emphasized their role to play in hospital-at-home programs. At-home diagnostics, digital biomarkers, and remote patient monitoring innovation continue to improve the virtual care experience, however, telemedicine isnt a complete replacement for diagnosis or treatment that requires an in-person visit. 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. At one point, the group traded at 15.4x NTM revenue and most recently traded at 4.6x NTM revenue. 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. 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. In 2022, the rate of decline accelerated: H1 2022 averaged $5.2B in quarterly funding, and in H2 2022 average quarterly funding fell to $2.4B. As the digital health field becomes more crowded, clinical outcomes will become a key competitive differentiator, 4. Further information on investor rights can be found on the Management Company's website (https://www.ipconcept.com). Where will the market settle? These entities provide outsourced management functions, including not only administrative and financial but also care management services. Legal entities or natural persons to which such prohibitions apply must not access or use these sites. [15] VALUATION The three most common valuation approaches - the Income, Market and Cost Approaches - can all be applied when valuing a physical therapy practice. Paying agent in Switzerland is DZ PRIVATBANK (Schweiz) AG, Mnsterhof 12, PO Box, CH-8022 Zurich. The S&P Healthcare Services Index decreased by 13.4% in January compared to the S&P 500 Index, which decreased 5.3%. 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. . 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. For others, 2023s continued pressures might be a final nail in the coffin, with shuttered doors or acquisitions on the horizon. They are beginning to place a premium on benefits that support diversity, equity and inclusion, as well as employee satisfaction and productivity. 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. 2021 was an unprecedented year for digital health. While global M&A has suffered in 2022, the Fintech sector saw M&A activity rise sharply this year, with 591 deals recorded in the 2022. 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. In fact, the group is down 50% versus the S&P 500, which is up 10% during that period. Of course, no one knows, but we take the 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. Health tech grabbed a serious share of the attention. Ultimately, the wheat will be separated from the chaff in digital health in 2022; clinical outcomes will support patient adoption. If I just raised a huge round at a massive valuation, I would certainly be trying to grow, but I would have one eye on pure survival as well. 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. Particularly for health systems, 2022 may be remembered as the year things went upside down. The best healthcare entry points exist where teams already hold expertise (fertile ground remains in these familiar pastures). 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.
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