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. The next mental health startup to reach a billion dollar valuation was Calm in 2019. Larger deals and more of them characterized the healthcare IT (HCIT) market in 2021. Inflationary pressures burned consumers discretionary dollars. . An overview of Bellevue Healthcare Strategies. The best healthcare entry points exist where teams already hold expertise (fertile ground remains in these familiar pastures). 2022s total funding among US-based digital health startups amounted to $15.3B across 572 deals, with an average deal size of $27M. Representative agent in Switzerland Waystone Fund Services (Switzerland) SA, Avenue Villamont 17, CH-1005 Lausanne and paying agent in Switzerland: DZ PRIVATBANK (Schweiz) AG Mnsterhof 12, PO Box, CH-8022 Zrich. 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. 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. In our 10 laws of healthcare, we talked about the importance for healthcare companies to demonstrate strong clinical and financial ROI. More on the Digital Health funding landscape can be found from Rock Health and Startup Health. Now we must discount the exit value to obtain the post-money valuation as shown below: Post-money valuation = Exit value / (1 + IRR)^5. Disclosed value also surged from $15.1 billion to $38.1 billion. The image above is an example of Comparable Company Valuation Multiples from CFI's Business Valuation Course. The European market in particular saw investment levels skyrocket by a whopping 131% from $2.9bn in 2020 to $6.7bn in 2021. You transform that PE ratio into a "multiple" you can use in valuation analyses by multiplying both sides of that simple equation by the business metric to get this new equation: Business Value = Business Metric x the Multiple. In the last year alone, over 200 mental and behavioral health startups received over $4 billion in new capital to scale. Others expanded their revenue potential by diversifying into B2B. Deal Type Date Amount Raised to Date Post-Val Status Stage; 5. For others, 2023s continued pressures might be a final nail in the coffin, with shuttered doors or acquisitions on the horizon. U.S.-based digital health startups brought in almost $30 billion in 2021, almost doubling the total investment the year prior. Take a look at the above chart which shows the average EV/NTM Revenue multiple for the peer group. Investors are wary of unicorns spells, but theyre on the lookout for strong horses: startups that dont rely on the promise of magical growth but are instead grounded in demonstrated cost savings, clinical workflow improvements, and interest from market buyers. As the digital health field becomes more crowded, clinical outcomes will become a key competitive differentiator, 4. I also believe that this valuation trend is just now beginning to pressure private market valuations. But downhill paths carry both positive and negative connotations, and the following lessons from 2022 can help to make the most of the current market: Read on for our analysis of 2022s biggest digital health moments and trends, plus takeaways to make for a smoother slide into 2023. Navid Farzad, Partner, Frist Cressey Ventures. In part because of hospital-at-home excitement, on-demand healthcare landed the top-funded digital health value proposition spot of 2022 ($2.4B), led by urgent-care-at-home service DispatchHealth ($330M) and startups like Homeward Health, which raised twice in 2022. At one point, the group traded at 15.4x NTM revenue and most recently traded at 4.6x NTM revenue. Restrains on movements forced most businesses to move their day-to-day operations online, including many health clinics and GPs. Bottoms-up sales strategies may become the norm as companies evangelize clinicians as their customers and focus on use cases spanning clinician-focused fintech products, retail, healthcare, and online community-building ecosystems. The value of investments may be subject to fluctuations and, under certain circumstances, investors may not get back the full amount invested. Of course, no one knows, but we take the Braff said that services-based businesses, like the mental health segment, would normally sell for a valuation range of 4x to 6x of EBITDA, earnings . With recession concerns looming, H2 2022s quarterly average of $2.4B may be a bellwether for the next several quarterswhich means that 2023 could be digital healths first $10B or lower year in venture funding since 2019. While mental healthcare . Use the PitchBook Platform to explore the full profile. The global digital health market reached a value of US$ 289 Billion in 2021. 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. Rock Healths databases are continuously assessed and updated as new information becomes available. 1. 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. Especially for young D2C digital health entrants that needed to invest heavily upfront to establish brand recognition and consumer leads, last years unfavorable macro conditions raised roadblocks for market penetration. ACCESS ROCK HEALTHS 2022 RECAP SLIDES HERE. 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. Get news, advice, and valuation multiples reports like this one straight into your inbox. Strong growth momentum and non-cyclical demand put Digital Health stocks in an excellent position to deliver a pleasing performance in 2022. We recommend individuals and companies seek professional advice on their circumstances and matters. Despite reaching higher levels in previous yearsup to 26.4x in the first half of 2020, HealthTech EBITDA multiples fell to 12.5x in the second half of 2021. 2. In fact, the group is down 50% versus the S&P 500, which is up 10% during that period. 80 people interested. 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. We expect the narrative in mental health to shift focus from access to quality. The movement of bidding wars from growth-stage deals to Series A rounds doesnt eliminate valuation inflation overallinstead, it shifts inflated prices upstream. 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. 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. Digital technology has the potential to capture huge value in healthcare systems around the world, with the benefit of improving care while also driving down its cost. 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 . Multiples expected to hold strong in 2022. 2021 was an unprecedented year for digital health. Privacy policy. Medly Pharmacy, which operates a full-service digital pharmacy, saw . While the broader markets look to be in the midst of a correction, we are optimistic about the myriad of opportunities for innovation in the largest market in our economy that is still in just the teenage years of its own digital revolution. Revenue valuations have come in. 2022 marks the 13th anniversary of the passage of the HITECH Act which ushered in the digital era in healthcare. :-) 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 As a16z. The funds are currently registered for public distribution offer in the following countries: Luxembourg, Switzerland, Germany, Austria, Spain and Portugal. Revenue multiples for B2B SaaS companies declined rapidly throughout 2022, with median multiples for Q4 below pre-pandemic levels, at 5.8x. We assume that large healthcare companies are eyeing deals with disruptive, fast-growing digital health companies. By using the website www.bellevue.ch, you confirm that you have read, understood and accepted the general information provided by the Bellevue Group AG as well as these legal provisions. 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. Rated 4.3 by 3 people. 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. Whats 2022s takeaways for MAMAA, other Big Tech players (e.g., Netflix, Nvidia, Samsung), and middle children? The days adjusted same-facility revenue in the fourth quarter increased 10.7 percent from that of 2021. In the digital health space, it is much more likely to be acquired than go public. 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. 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. Update your browser to view this website correctly. Furthermore, we recommend that you consult an independent tax adviser in order to obtain information on the tax regulations relating to a specific investment in your legal jurisdiction and with regard to your personal circumstances. In all other countries, the funds may, if any, via "Private Placement" according to the local applicable laws. We also expect M&A activity to pick up significantly. Specifically, Teladoc Health(NYSE: TDOC) and Lifestance Health Group (NASDAQ: LFST) have underperformed the broader underperforming peer group. The purpose for a Global Strategy on Digital Health is to promote healthy lives and wellbeing for everyone, everywhere, at all ages. To continue, please select your country of domicile and investor type. 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. However, we are certainly preparing for any outcome. 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. The numerator is going to be a measure of value, such as equity value or enterprise value, whereas the denominator will be a financial (or operating) metric. [Online]. The great resignation poses a breaking point for the supply of clinicians, 5. Digital Turbine's shares dropped by -9% from $55.61 as of February 15, 2022 to $50.39 as of February 16, 2022, and the company's last traded price as of February 23, 2022 was even lower at $42.83 . Information on valuation, funding, cap tables, investors, and executives for UCM Digital Health. Interest in media companies is growing. Health, Safety & Fire Protection Equipment: 10.52: Healthcare Facilities . Hampleton Partners, an M&A advisory firm specialised in technology companies, has recently published their 2022 Report on the state of HealthTech. Ulili Onovakpuri, Managing Partner, Kapor Capital, Investors interested in strong horses spent 2022 scoping out earlier-stage opportunities. This exodus from traditional healthcare settings can be an opportunity for digital health. In Switzerland you can obtain sales prospectus, the annual reports and the german key investor information documents free of charge from the agent and also from the paying agent. Particularly for health systems, 2022 may be remembered as the year things went upside down. Teladoc Health is a pure-play tech-enabled disruptive healthcare peer that was recently trading north of 20x forward revenue. Financial or Operating Metric ( EBITDA, EBIT, Revenue, etc.) As of November 15, the average multiple across health services sub-sectors was 14.4x, down from 15.9x as of December 31, 2021 and 14.9x as of December 31, 2020. MedCity News - Healthcare technology news, life science current events Investment decisions make use of equity multiples especially when investors look to acquire minor positions in companies. In 2022, HR Benefits leaders will feel heightened pressure from their finance departments to demonstrate the value of these point solutions. A mandatory rule is that the represented . 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. Lets dig in. Later Stage . 2022 was a necessary reminder that investment is cyclical, and that strong players build resilience in weathering funding climate changes. In particular tax treatment depends on individual circumstances and may be subject to change. Many startups were benchmarking to that valuation when they raised money in our space at 20x and even 40x ARR (or higher). 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. Fund documents StarCapital Premium Bonds plus. By JEFF GOLDSMITH and ERIC LARSEN. The answer is valuation. And while these companies did not perform as well in the public markets in 2021 as in prior years, we are confident that the overall basket of digital health assets is more mature and valuable than ever before. At the beginning of 2022 when Big Tech companies were awash in cash reserves, MAMAA players propped up internal healthcare experiments and waded into new territory with partnerships and acquisitions. Surgery Partners. The information, products, data, services, tools and documents contained or described on this site ("website content") are for information purposes only and constitute neither an advertisement or recommendation nor an offer or solicitation (to buy) or redemption (sell) investment instruments, to effect any transaction or to enter into any legal relations. A tech-enabled renaissance for the independent clinician, 6. If you can't read this PDF, you can view its text here. Investors and . 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. The last 18 months have increased valuation complexity in the media sector. EBITDA multiples valuation is a go-to technique for most investors and financial analysts dealing with high-profit mergers and acquisitions. For information on opportunities and risks as well as tax information, please refer to the current detailed sales prospectus. Looking forward, the publisher expects the market to reach US$ 881 Billion by 2027, exhibiting a CAGR of 20.14% during . Inspire Medicals sales expectation for 2021 is around USD 233 mn at a gross margin of 85-86%, impressive numbers compared to 2020. : 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. In short, we do not have the answers. 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). When expanded it provides a list of search options that will switch the search inputs to match the current selection. I believe that the right valuation multiple is above where the market is now (likely in the 7x to 10x forward revenue range broadly with some upside exceptions). The information provided is accurate at the time of publishing. 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. Health systems also established partnerships as first steps into new revenue or equity pathways, shaking hands with venture capital teams like General Catalyst and a16z to establish digital health startup pilot sites on hospital campuses. Two quarters ago, we noted a shift in investors attention from growth-stage players to early-stage digital health companies perceived as less likely to carry inflated valuations from 2020-2021. We expect this to result in more consolidation and opportunities for M&A. December 7, 2022. Revenue valuations have come in. The indications for the new year are good. 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. For growth-stage startups that didnt raise in 2022, limited cash reserves may push once-crowned digital health unicorns back to the fundraising table (possibly at lower valuations) or toward M&A territory. 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 . A notable contributor to 2022s downhill funding trajectory was investors reluctance to invest heavily in late-stage deals, leading to a dearth of mega deals relative to prior years. The unprecedented number of M&A deals, as well as consistently goodand growingrevenue multiples shows that the HealthTech sector is approaching its maturity, and its keeping its momentum in the crucial stages of the post-pandemic era. 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. In the current VC climate, strong horses will beat out unicornsthough investors run the risk of betting on the wrong equine. Paying and information agent: atl Capital, Calle de Montalbn 9, ES-28014 Madrid. 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). Seizing the opportunity, startups in the on-demand care space like TytoCare emphasized their role to play in hospital-at-home programs. Oops! registered) but not authorised in the UK, the UK Financial Services Authority's financial services compensation scheme does not apply to investments in the fund but the Financial Services Authority regulated firm approving this document for the purposes of UK regulation has taken reasonable steps to satisfy itself that Bellevue will deal in an honest and reliable way and is so satisfied. HealthTech the use of technology to deliver or improve clinical health services to patients was one of the most active and growing industries of 2020. Where will the market settle? The most impactful findings of the "2022 RIA Deal Room" report include: Eye-opening valuations and a flattening curve. If the past two years have demonstrated anything its that healthcare innovation is driven and inspired by patient needs, clinicians, and builders who strive to better the frontlines of care. Interestingly, the average round size in 3Q20 was $41.2 million, greater than the year-to-date . It has been a rough year so far for digital health. Now, startups with strong financials and balanced valuations are attracting investor and acquirer interest. 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. What does this mean for startups? Rock Health Capital continues to invest in early-stage entrepreneurs bringing unique and innovative technology to healthcare. I also believe that this valuation trend is just now beginning to pressure private market valuations. The Digital Health 150 is CB Insights' annual ranking of the 150 most promising digital health startups in the world. Funding for digital health ventures reached an all-time high in 2020 with a total of $23.3 billion and the first half of 2021 is already nearing last year'stotal, with $21.5 billion invested. HGP Releases its July 2021 Semi-Annual Digital Health Market Review July 22, 2021. In a market where late-stage transaction volume has plummeted, we anticipate that 2022s cohort of larger Series A deals may experience above average value attrition, risking down rounds at their Series B raises or later. 3. We expect to see a record number of acquisitions as large digital health companies, both public and private, recognize the need to add mental health to their offerings to deliver comprehensive care., There has been much debate about the tension between DTC companies doing good by expanding access or doing harm by scaling irresponsibly. 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. In 2023, the average EBITDA multiples for software companies also plummeted compared to 2022 . You can read more about his story here. All things equal, based on our experience we estimate digital health valuations rose at least 30% from pre- to post-pandemic. Venture fundraising is predicted to decline to about $15B in 2023, as most firms recently raised new funds. 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. This is reflected in the significantly better performance of large-cap healthcare companies as tracked by the Russell 1000 Healthcare Index (+23.3%) compared to the performance of the Russell 2000 Healthcare Index (-17.6%), which focuses on small and mid-cap companies. 3. Health systems strategizing for the years ahead are coming to realize that their beyond-the-hospital care offerings must stand up to a growing pool of competitors. 23 M&A activity for cell towers is higher than data . That reflects a 70% decrease in the value of revenue within our peer group in an environment in which revenue estimates are rising. That reflects a 70% decrease in the value of revenue within our peer group in an environment in which revenue estimates are rising. 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. 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. Valuation Multiple = Value Measure Value Driver. 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. By clicking on "Accept", you confirm that you agree to the legal provisions. Many startups were benchmarking to that valuation when they raised money in our space at 20x and even 40x ARR (or higher). Ultimately, virtual care companies will be early adopters of these new tools and as they scale, help transition the pre-existing ecosystem away from legacy platforms. Coming out of 2021's breakthrough year, digital health funding slowed in the first quarter, signaling potentially choppy waters ahead for investors in 2022. In addition to taking traditional expense reduction efforts and charging new fees, hospital systems evaluated nonclinical and clinical workflow improvements to unlock efficiency gains and reduce provider pain points at work. We need to find ways to help health systems reduce admin burden and free up clinician time. Pharmaceutical & life sciences deals outlook. eCommerce businesses are generally valued on a revenue multiple to reflect high growth potential and recurring or repeat revenue patterns. 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. As an investor, Im starting to anticipate that great deals will once again be available, at better prices. Hampleton Partners, an M&A advisory firm specialised in technology companies, has recently published their 2022 Report on the state of HealthTech. An increasing number of venture funds are entering the space. 2021 was generally a very challenging year for small and mid-sized growth stocks. In 2022, there is an opportunity for a new crop of companies to successfully build the connective tissue between the physical and digital worlds. 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.