2021 saw a record-breaking number of new companies and newly minted unicorns leveraging telemedicine as a tool to deliver care virtually. We also expect M&A activity to pick up significantly. 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. The digital health market is on fire. Something went wrong while submitting the form. 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. 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. Understanding a company's role in the ever more digitised market and how well positioned it is to take advantage of the recent changes can help both shareholders and investors gain a deeper understanding of valuation drivers. It is incumbent upon these solutions to demonstrate value on investment or risk losing market share to higher-impact offerings., Mudit Garg, Co-founder and CEO, Qventus: Over the last two years, hospitals struggled with capacity and staffing shortages. The pandemic has led to an increase in workloads and burnout among clinicians. Companies like Headway and Alma have proven successful in helping providers, who historically only took cash pay, access insurance coverage and therefore increase their patient census. | The more restrained digital health . Company List. Report 2022 Public SaaS Valuation Multiples. To be clear, we dont believe only hybrid-care companies will succeed, rather we believe digital-only companies will bridge the pre existing healthcare system to support a hybrid care delivery model. 3. [15] VALUATION The three most common valuation approaches - the Income, Market and Cost Approaches - can all be applied when valuing a physical therapy practice. 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. EBITDA multiples valuation is a go-to technique for most investors and financial analysts dealing with high-profit mergers and acquisitions. 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. Finally, stay up to date with the latest headlines in healthcare technology and Rock Health news by subscribing to the Rock Weekly. These companies will focus on different steps in the value chain of virtual care: For example, (1) communication and remote patient monitoring with companies like Memora Health and Avon Health, (2) EHR, data storage and analysis with companies like Zus Health, Healthie, and Canvas Medical, (3) provider workforce management and productivity with companies like our portfolio company AspenRx, and (4) billing and payment pipes with companies like Candid Health. This may involve platforms for career development, benefits, and inspiring company culture and values. peer support groups, events), and care navigation, said Dana Clayton, COO of Folx. Average EV/EBITDA multiples in the health and pharmaceuticals sector in the United States from 2019 to 2022, by industry [Graph], Leonard N. Stern School of Business, January 5, 2022. To deliver its potential, national or regional Digital Health initiatives must be guided by a robust Strategy that integrates financial, organizational, human and . Reinforcing our experience, from pre- . To illustrate the slope of change, Q4 2022s $2.7B in funding sits 68% lower than Q2 2021s summit. Some macro factors such as rising input costs, supply chain challenges and labor shortages might even have a positive impact on the course of business at digital health companies in view of their efficiency-enhancing solutions. For example, our portfolio company Folx began selling to employers as LGBTQ+ employees requested these services. This tells me that analysts believe the operating environment for companies in our space will continue to be at least good, if not improving. Ulili Onovakpuri, Managing Partner, Kapor Capital, Investors interested in strong horses spent 2022 scoping out earlier-stage opportunities. Instead, the developer teams at virtual care companies should rely on a series of API platforms and tools to build their technology stack. 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 . 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. 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. Mental Health Startup Community Slack Channel We have created a slack channel for founders, investors, and supporters of the mental health startup ecosystem. Global healthcare funding grew 45% YOY in 2020, and then added a further 79% in 2021, reaching a record $57.2bn invested. 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 continue to be bullish on clinical models that can integrate and treat comorbidities enabling holistic and longitudinal care. 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). 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. EBITDA is an acronym that stands for earnings before interest, tax, depreciation, and amortization. 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. Drivers toward this cycles crest in mid-2021 have been well documented. Rated 4.3 by 3 people. Big H2 2022 splashes from retail giants Walmart and Walgreens have raised the stakes for primary care, at-home, and omnichannel care delivery expansion. 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. 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. 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. Where will the market settle? In day-to-day SaaS company operations, questions like the above are common. Here are 16 statistics on the valuation multiples most typically observed for various interests in predominantly in-network centers: Minority interest, single-specialty. Despite . : 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. 1.91K Followers. Multiples expected to hold strong in 2022. In addition to dealing with frontline priorities, 2022 saw key health systems continue to carve out brainspace to expand and explore new businesses that would diversify revenue streams in years to comean important balance even as tough times bias toward short-term solutions. 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. By Peter Micca, partner, National Health Tech Practice leader, and Neal Batra, principal, Deloitte & Touche LLP. Overall, U.S. digital health funding scraped by with $15.3B, underperforming 2021s pot and just beating out 2020s total. What is the right multiple? Healthcare workers can search for more flexibility, better pay, and motivation to change the legacy system. Jennifer Bellin, VP of Marketing, Artemis Health: The market has seen an influx of healthcare point solutions over the past few years. 6a CISO. Google returned to its roots and unveiled several medical search initiatives for clinicians and consumers. 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. In 2021, we saw a tidal wave of resignations across employment categories, sending shockwaves throughout healthcare. 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. For example, in mental health, the massive uptick in need has driven a huge amount of activity and access, however clinical and financial outcomes remain opaque. Clinical outcomes will support patient adoption.. The large-scale enterprise category led the global SaaS industry in 2022 and is projected to continue throughout the forecast period. Deeper clinical services translate into lower margins and more extensive and expensive clinical apparatus. In fact, the group is down 50% versus the S&P 500, which is up 10% during that period. Hampleton Partners, an M&A advisory firm specialised in technology companies, has recently published their 2022 Report on the state of HealthTech. 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. Ultimately, the wheat will be separated from the chaff in digital health in 2022; clinical outcomes will support patient adoption. For others, 2023s continued pressures might be a final nail in the coffin, with shuttered doors or acquisitions on the horizon. 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 . This has resulted in an increase in valuation multiples for platform acquisitions from 7.6x EBITDA in late 2000s up to 14x EBITDA in 2021 (see Figure 9). We believe the continued spotlight that COVID has shed on the challenges facing our healthcare system alongside the many opportunities for innovation outlined in this article will make 2022 another banner year for healthcare investing. However, these new virtual care clinicians now have multiple options. As of 2022, the global SaaS market was valued at $186.6 billion. 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. 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. Some players differentiated through new features, product category expansions, and forged partnerships to enhance consumer value. We hope 2022 is a turning point for the digital health industry when it comes to clinical outcomes and would encourage all companies to make these necessary investments even from their earliest days. Denominator: Value Driver - i.e. performing companies, the valuation premium is much higher. I also believe that this valuation trend is just now beginning to pressure private market valuations. Supply chain challenges, inflation, interest rate hikes,3 and investor pullback reversed investment momentum. 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 strained supply of clinicians in healthcare is likely to be exacerbated. Pharmaceutical & life sciences deals outlook. Revenue multiples for eCommerce businesses tend to be in the range of 0.7-3x. higher than Pre-COVID levels. 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. Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. Please join the conversation and dont forget to introduce yourself when you join. The multiple has been sliced over the last year. Valuation Multiples Over Last 12 Months The single biggest question facing my business today is what valuation multiple is the right one to use when pricing private financing rounds in this space. Digital health cant cut its way to impact, and the smart decisions of today will fertilize the next investment upswing. Last year, we talked about the critical role that Advanced Practice and Ancillary Providers (APAPs) would play in clinical teams. 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. Healthcare Software (relating to hospital management, patient analytics and pharmaceuticals) was the most active sector, accounting for 65% of transactions. For that reason, I created a Next Twelve Months (NTM) revenue forecast index for each of the companies in our peer group. Due to the historically low rating, 2022 presents itself with enormous growth potential. 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. Prospectus, Key Investor Information Document (KID), the articles of association as well as the annual and semi - annual reports of the Bellevue Funds under Luxembourg law are available free of charge from the above mentioned representative, paying, facilities and information agents as well as from Bellevue Asset Management AG, Seestrasse 16 , CH - 8700 Kusnacht. Deal count rose from 48 in 2020 to 75 in 2021, a record. The movement of bidding wars from growth-stage deals to Series A rounds doesnt eliminate valuation inflation overallinstead, it shifts inflated prices upstream. In 2022, 35 digital health startups raised rounds of $100M or more. 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. 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. Between Q3 2019 and Q2 2021, investors continuously increased investments into digital health quarter-over-quarter for seven straight quarters, with one dip in Q2 2020. For example, Zaya Care uses this model in the maternal health space. Report Get news, advice, and valuation multiples reports like this one straight into your inbox. Rather than aiming to disrupt the entire healthcare system, focus is best placed on applying practiced skill sets to top healthcare and research problems. Join our community of 3,000 + Founders, Entrepreneurs & Advisors. For example, our portfolio company US Health Partners is assisting cardiologists in breaking free from the traditional hospital structure to run independent practices as they transition to digital and value-based care. 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. 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. 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. 2 to 2.9 times: 8 percent. 2. Austria: Paying and information agent: Zeidler Legal Process Outsourcing Ltd., SouthPoint, Herbert House, Harmony Row, Grand Canal Dock, Dublin 2, Ireland. In this article, we provide an overview of the digital health . Enterprise value = Market value of equity + Market value of debt - Cash . 23 M&A activity for cell towers is higher than data . Growth stage of the business. This holds true within the mental health space and largely within the digital health startup landscape.