digital health valuation multiples 2022digital health valuation multiples 2022

• April 9, 2023
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Instead, the developer teams at virtual care companies should rely on a series of API platforms and tools to build their technology stack. In short, we do not have the answers. For high performing companies, the valuation premium is much higher. Investment or other decisions should not be made solely on the basis of this document. 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. Due to the historically low rating, 2022 presents itself with enormous growth potential. 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. Nothing in this website is intended to be or should be construed or taken as accountancy, investment, tax or any other kind of advice. 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. The sectors that experienced the largest decline were . Sectors ranging from telemedicine to medical devices to AI healthcare all raised record-high funding. 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. Only one company, Amwell, has analysts who believe that their revenue will be lower in one year than it is now. Multiples expected to hold strong in 2022. 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. The digital health industry is still very early in proving itself on this dimension with many of the market leading and even already public companies lacking gold standard evidence of their clinical efficacy, especially when compared to their offline competitors. Investors and . 3 to 3.4 times: 23 percent. While diminishing margins have forced big healthcare organizations (especially health systems) to focus on near-term needs, successful players will continue to plant seeds for better seasons. After initial successes in automating back-office operations, leaders are now extending automation to the area of care operations all operations involved in the delivery of acute care, including management of discharge planning, or access, system-wide patient flow, and more, as well as processes that connect patient care beyond the hospital., Jonathan Wang, Co-founder and CEO, and Mark Kalinich, Cofounder and CSO, Watershed Informatics: The progression of life sciences digital transformation will drive large investments in computational infrastructure., Joy Liu, Co-founder and CEO, and Joy Patel, Co-founder and CTO, Plenful: Automation and AI will play a growing role in specialty pharmacy operations in 2022, spurred by increases in limited distribution drugs, growing staffing challenges, pressure to differentiate on better patient experience, and novel purpose-built technology for pharmacy operations workflows. As you can see from our index of disruptive healthcare peers, the group has been drastically underperforming the broader S&P 500 over the last 12 months leading into January 2022. The McKinsey Global Institute estimates the costs saved could lie anywhere between $1.5 trillion and $3 trillion a year by 2030, thanks to a range of interventions such as remote monitoring, artificial intelligence, and . The financial products mentioned on this site are not suitable for all investors. 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. The multiple has been sliced over the last year. Notably, 2022s years Q4 $2.7B total was less than half of last years Q4 raise ($7.4B). The answer is valuation. 2022 marks the 13th anniversary of the passage of the HITECH Act which ushered in the digital era in healthcare. Now we must discount the exit value to obtain the post-money valuation as shown below: Post-money valuation = Exit value / (1 + IRR)^5. As we reflect on the previous year, we turned to our portfolio company founders and leadersthose who tirelessly work on the ground to transform our healthcare systemto get their predictions on what to expect over the coming year. More on the Digital Health funding landscape can be found from Rock Health and Startup Health. Amazon leveraged its experience creating and scaling two-sided marketplaces to launch Amazon Clinic, a virtual health storefront offering access to third-party telehealth providers. By accessing this website you state that you agree with the data protection statement. Rock Healths databases are continuously assessed and updated as new information becomes available. The share of HCIT deals held steady at around 15% of overall . Use the PitchBook Platform to explore the full profile. Revenue multiples for B2B SaaS companies declined rapidly throughout 2022, with median multiples for Q4 below pre-pandemic levels, at 5.8x. The performance data are calculated without taking account of commissions and costs that result from subscriptions and redemptions and commissions and costs have a negative impact on performance. Revenue valuations have come in. However, these investments are critical in healthcare and we believe will become long-term competitive moats for those companies that make them early in their life-cycle and prove real differentiation in terms of patient outcomes. There remains, however, a huge disparity between the M&A and the fundraising markets, with most buyers of these start-ups opting for early-stage acquisitions. Some players differentiated through new features, product category expansions, and forged partnerships to enhance consumer value. A few months ago, it was detrimental for a digital health startup to say it was profitableit implied the company wasnt growing fast enough. 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. Of course, I am not hoping this happens, but when it does, I will not be surprised. Jennifer Bellin, VP of Marketing, Artemis Health: The market has seen an influx of healthcare point solutions over the past few years. In fact, the group is down 50% versus the S&P 500, which is up 10% during that period. Take a look at the above chart which shows the average EV/NTM Revenue multiple for the peer group. In order to determine whether the investment in shares of a certain investment fund meets your specific requirements and matches your envisaged risks, we recommend that you contact an independent financial adviser. Refreshingly simple financial insights to help your business soar. 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. The swiss agent is IPConcept (Schweiz) AG, In Gassen 6, PO Box, CH-8022 Zurich. 2021 will likely go down as one of the biggest years ever for digital health-tech investments and revenue growth. 1. Funding for this value proposition earned third place in 2022 ($2.2B), jumping from seventh place in 2021. Healthcare workers can search for more flexibility, better pay, and motivation to change the legacy system. 1. The large-scale enterprise category led the global SaaS industry in 2022 and is projected to continue throughout the forecast period. 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. 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. 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? Get news, advice, and valuation multiples reports like this one straight into your inbox. 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. 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. This button displays the currently selected search type. Where will the market settle? . This may involve platforms for career development, benefits, and inspiring company culture and values. Exit, Investment, Tech and Valuation. Let's do the math with a real . Since that time, our industry has quickly matured from the infant stages of technology adoption (think: EMRs, HIE, PHM) to its current teenage digital health self. 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 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. Digital health companies must rethink incentives to recruit and retain the best clinician talent. These can be dependent on: Customer profile and purchasing patterns. An example was seen in early 2022 when Stryker issued a takeover bid for Vocera, a leading provider of communication software and hardware for hospitals. Similar to the transition that ecommerce and retail industries had over the last 20 years. Disclosed value also surged from $15.1 billion to $38.1 billion. 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. 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. H2 2021 averaged $7.1B in quarterly funding, a small decline from the first half of that year. This exodus from traditional healthcare settings can be an opportunity for digital health. Hampleton Partners' latest Healthtech M&A Market Report highlights how the Covid-19 pandemic revealed the inadequacies and opportunities in the world's healthcare systems and how venture and growth capital poured into digital health companies, raising a total of $57.2 billion in funding in 2021, an increase of 79 per cent from 2020. Notably, 2022's year's Q4 $2.7B total was less than half of last . At one point, the group traded at 15.4x NTM revenue and most recently traded at 4.6x NTM revenue. Rock Health Capital continues to invest in early-stage entrepreneurs bringing unique and innovative technology to healthcare. Moreover, pure-play telehealth and mental health companies have underperformed not just the market, but also the peer group (see the chart below). That number is still much higher than pre-pandemic . The table below lists the current & historical Enterprise Multiples (EV/EBITDA) by Sector.The multiples are calculated using the 500 largest public U.S. companies.Comparing the current enterprise multiple of a sector/industry to its historical average value can be used to evaluate if the sector is currently undervalued or overvalued.Note: The ratio is not available for the Financials sector as . Launched two years ago, the startup netted $300 million in a Series C round in December, increasing its valuation to $4.8 billion. 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. Some studies even estimate that 30% of the remaining healthcare workforce are considering leaving their full-time hospital jobs in the next two years. 4 paragraph 3-5 and Art. The indications for the new year are good. Rachel Lewis June 21, 2021. . Oops! That reflects a 70% decrease in the value of revenue within our peer group in an environment in which revenue estimates are rising. The answer is valuation. Please join the conversation and dont forget to introduce yourself when you join. higher than Pre-COVID levels. Within digital health and in capital markets more broadly, well likely look back on the past several quarters as a macro funding cycle. In 2022, 35 digital health startups raised rounds of $100M or more. 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. 80 people interested. Denominator: Value Driver - i.e. We expect the narrative in mental health to shift focus from access to quality. 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. Through the largest virtual network of LGBTQ+-specialized clinicians, FOLX offers end-to-end virtual primary care, gender-affirming services (e.g., hormone therapy, counseling), sexual and reproductive health (e.g, PrEP), community (e.g. 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. The indications for the new year are good. Others expanded their revenue potential by diversifying into B2B. You can also find us on twitter and LinkedIn. This marked a reversal in capital concentration (a funding environment where late-stage companies attract a disproportionate share of total dollars invested), a phenomenon prevalent in digital health from 2019-2021. For those that choose to pursue investment instead of M&A, grounded approaches will be the most successful. Overall, U.S. digital health funding scraped by with $15.3B, underperforming 2021s pot and just beating out 2020s total. But the principle driving revenue multiples is that startups of a particular industry operate in similar . Enterprise value = Market value of equity + Market value of debt - Cash . Besides investments, health systems pursued long-term partnerships with software providers to make efficiency inroads, such as Cleveland Clinics 10-year deal with Palantir to roll out AI solutions that better forecast and manage patient flows. As Avi Dorfman, founder and CEO of Clearing told us: As telemedicine becomes increasingly mainstream, digital infrastructure companies with turnkey offerings will emerge, enabling entrepreneurs to focus product & engineering resources on the creation of personalized patient experiences. Investors can apply to join syndicate and invest in our deals here. Prospectus, Key Investor Information Document (KID), fund contract as well as the annual and semi - annual reports of the Bellevue Fund under Swiss law are available free of charge from: Switzerland : PMG Fonds Management AG, Dammstrasse 23, 6300 Zug or Bellevue Asset Management AG, Seestrasse 16, CH - 8700 Kusnacht. Later Stage VC: 22-Dec-2022: $2M: 00.00: Completed: Generating Revenue: 4. They are beginning to place a premium on benefits that support diversity, equity and inclusion, as well as employee satisfaction and productivity. You can read more about his story here. These conversations inspired the seven themes and trends thatll guide our investment perspectives for healthcare in 2022. Q4 2022: How did the Swiss valuation parameters and the European M&A volume develop? Health tech grabbed a serious share of the attention. As an investor, Im starting to anticipate that great deals will once again be available, at better prices. Spain: The Bellevue Funds (Lux) SICAV is registered with the CNMV under the number 938. The days adjusted same-facility revenue in the fourth quarter increased 10.7 percent from that of 2021. 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. 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. We have seen first-hand how this has led to a real battle for clinical talent among companies in this subsector. In 2021, we saw a tidal wave of resignations across employment categories, sending shockwaves throughout healthcare. Germany: information agent: Zeidler Legal Process Outsourcing Ltd., SouthPoint, Herbert House, Harmony Row, Grand Canal Dock, Dublin 2, Ireland. 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. 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. Inflationary pressures burned consumers discretionary dollars. Prospectus, the key investor information document ("KID"), the management regulations and the semi-annual and annual reports. As a cherry on top, 2021 saw the Fed underestimate percolating inflationary concerns and extend monetary easing measures, inflating asset prices and valuations. Investment or other decisions should not be made solely on the basis of this document. Despite . interest rate hikes that cozied us up to the possibility of recession. 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. Moreover, pure-play telehealth and mental health companies have underperformed not just the market, but also the peer group (see the chart below). 4 Abs. The multiple has been sliced over the last year. We believe changes in consumer demand and reimbursement patterns will drive the adoption of this same business model across other medical specialties where companies can aggregate demand for services to negotiate better rates with insurers. If you can't read this PDF, you can view its text here. 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. Startups vary in profit margins. 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. For example, our portfolio company Folx began selling to employers as LGBTQ+ employees requested these services. Further information on investor rights can be found on the Management Company's website (https://www.ipconcept.com). Surgery Partners' revenue was $707.1 million in the fourth quarter of 2022 and $2.5 billion in the full year 2022, respective increases of 15.9 percent and 14.1 percent year over year. Report. The average price-to-EBITDA multiple for hospitals was 9.5x in 2011, a 4.4 percent increase from 2010. Thus, the technology that these services are built upon should not be reinvented every time. To illustrate the slope of change, Q4 2022s $2.7B in funding sits 68% lower than Q2 2021s summit. 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. This represents a 46% increase on 2021 numbers, and a whopping 70% increase on pre-pandemic (2019 . Reinforcing our experience, from pre- . 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. We recommend individuals and companies seek professional advice on their circumstances and matters. 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. Health systems are looking for digital solutions that are easy to understand, can be deployed relatively quickly, and deliver tangible cost savings and efficiencies. As detailed in Rock Health's annual year-end report, digital health funding among US-based startups soared to a record $29.1 billion across 729 deals in 2021, nearly doubling the prior year's . How much do SaaS companies spend on customer support or marketing? The front-and-center focus on efficiency gains boosted investment for nonclinical workflow solutions. The number of startups in digital health will increase even faster next year as entrepreneurs jump into the fray out of sheer frustration that our pre-existing healthcare system, despite the learnings from COVID, doubles down on old strategic plans and the traditional fee for service system which has proven time and again to neither lower cost nor improve quality, said Ming Jack Po, Founder and CEO of Ansible Health. As we redesigned GI care into a patient-centered, value-based model, we recognized that our virtual care supports many important clinical needs, but we also needed to bridge our services with in-person care like colonoscopies and diagnostic tests. This percentage includes digital health companies that sell exclusively to consumers, as well as those that sell to consumers in addition to other customer types (e.g., employers, providers, payers). More than $26 billion dollars were invested across almost 700 US health tech companies at soaring valuations (up from $14.6 billion across 464 companies in 2020). By competing in earlier rounds, investors are more likely to pay more on a risk-adjusted basis for a startup than its later-stage funders, twisting the risk-adjusted valuation upside down. Austria: Paying and information agent: Zeidler Legal Process Outsourcing Ltd., SouthPoint, Herbert House, Harmony Row, Grand Canal Dock, Dublin 2, Ireland. Revenue is increasing, so why are stock prices going down? Ahh, 2022: the year of inflation, stock drops, and a whopping seven (7!) Dear valuation folks, our new market essentials is out with data on risk free rates, beta, multiples etc. Last year, we talked about the critical role that Advanced Practice and Ancillary Providers (APAPs) would play in clinical teams. 2022 edition of Corporate Valuation: Techniques & Applications will be held at Jakarta starting on 13th October. Revenue valuations have come in. To continue, please select your country of domicile and investor type. We also expect M&A activity to pick up significantly. 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. In a downtrodden market climate, things dont need to feel doom and gloom. Deeper clinical services translate into lower margins and more extensive and expensive clinical apparatus. While we may see some of the valuation gaps between public and private markets narrow in 2022, we continue to be optimistic that the IPO market will remain open and create more opportunities for M&A in our industry.

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