digital health valuation multiples 2022 digital health valuation multiples 2022

This button displays the currently selected search type. 2021 was generally a very challenging year for small and mid-sized growth stocks. Equity Multiples. The value of investments may be subject to fluctuations and, under certain circumstances, investors may not get back the full amount invested. Investors can apply to join syndicate and invest in our deals here. Oops! What is the right multiple? The sites are intended exclusively for use by legal entities and natural persons having their registered office or residing in countries in which the investment funds or the related subfunds or share classes of the Bellevue Group have been properly licensed or approved for publicoffer or sale in accordance with the applicable local legislation. Several D2C digital health equities including Peloton (-78%), Owlet (-79%), and Beachbody (-78%) ended the year at fractions of their 2022 opening prices. In January: The sectors that experienced the highest growth were Consumer Directed Health/Wellness (up 8.5%), Assisted/Independent Living (up 2.6%) and Distribution (up 1.0%). 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. These can be dependent on: Customer profile and purchasing patterns. About What If Ventures What If Ventures exists to invest in mental health and digital health focused startups. [15] VALUATION The three most common valuation approaches - the Income, Market and Cost Approaches - can all be applied when valuing a physical therapy practice. 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. As the funds are recognised (ie. However, there are signals that funding could start to inch back up again: investors have dry powder stockpiled, and difficult exit climates are likely to draw late-stage digital health companies back to the fundraising table. 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. 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. However, these new virtual care clinicians now have multiple options. Inflationary pressures burned consumers discretionary dollars. Some players differentiated through new features, product category expansions, and forged partnerships to enhance consumer value. But as the year unfolded and cash grew costly, several of these health experiments were scrutinized, discontinued, or divested. 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. 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 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 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 . EBITDA multiples valuation is a go-to technique for most investors and financial analysts dealing with high-profit mergers and acquisitions. As we start the new year, we at BVP are excited to forge ahead and partner with audacious healthcare entrepreneurs who want to create revolutions of their own. As Bessemer has been investing in healthcare for four decades, last year was unlike anything we have seen before. As risk shifts from health plans to providers, we will continue to see digital managed service organizations (MSO) serve as the chassis of digital health. Startups vary in profit margins. In this article, we provide an overview of the digital health . Revenue multiples for eCommerce businesses tend to be in the range of 0.7-3x. 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. 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. The great resignation poses a breaking point for the supply of clinicians, 5. For that reason, I created a Next Twelve Months (NTM) revenue forecast index for each of the companies in our peer group. In particular, you should not enter into any investment before you have read the corresponding fund agreement or legal prospectus, the annual and semi-annual reports, the articles of association (as far as they are applicable), as well as all other documents, as required in accordance with local legislation or the regulations applied in the legal jurisdictions or countries in which the corresponding investment fund has been licensed or approved for public offer or sale to the public.rlich sind. Decreasing EBITDA multiples paired with growing Revenue multiples are not necessarily bad news: in fact they could be a sign of companies within the sectors widening their profit margins. In a year of roadblocks, big health players were pushed to implement near-term solutions while still stretching to keep eyes on the innovation horizon. 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. In short, we do not have the answers. Forty-five percent of provider organizations reported accelerating their software investments in 2022 to streamline operations. Value on investment alongside return on investment, Additional predictions from healthcare leaders. 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. Companies able to unlock non-obvious types of workers and a new supply of practitioners are well-positioned to scale in a world of limited clinician supply. 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. These conversations inspired the seven themes and trends thatll guide our investment perspectives for healthcare in 2022. Of course, I am not hoping this happens, but when it does, I will not be surprised. 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. Take a look at the above chart which shows the average EV/NTM Revenue multiple for the peer group. Health systems 2022 innovation grace under pressure is noteworthy and sets a precedent for other major healthcare companies facing less difficult, but nonetheless challenging situations. As of 2022, the global SaaS market was valued at $186.6 billion. We expect future M&A activity in the data center industry to be largely driven by the shrinking supply of available, high-quality data center real estate, which will continue to push valuation multiples higher. All but one company have rising revenue expectations on the whole across all analysts. 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. 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. | The more restrained digital health . All things considered, we believe the outlook for the 2022 investment year is extremely attractive. 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. 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. The digital health market is on fire. 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 pandemic has led to an increase in workloads and burnout among clinicians. 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 . The median check size for Series A deals reached an all-time high of $15M in 2022, while median deal sizes shrunk across all other later deal stages.4. Investing in early stage mental health and addiction solutions. : 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. Whats 2022s takeaways for MAMAA, other Big Tech players (e.g., Netflix, Nvidia, Samsung), and middle children? Investors aggressively fundraise into the downturn. As weve shared before, some of 2022s missing mega deals stemmed from growth-stage digital health companies reluctance to raise in this market environment for fear of the dreaded down round. Stephen Hays, Founder of What If Ventures www.whatif.vc a mental health focused venture capital fund and host of the Stigma Podcast. Drivers toward this cycles crest in mid-2021 have been well documented. Let's do the math with a real . 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. Aaron Snyder, founder and CEO of US Health Partners, highlighted, COVID-driven burnout and increased administrative burden will drive hospital-employed clinicians to the private sector in record numbers in the coming years.. 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. For some D2C players, differentiated tech and/or B2B sales will help to deflect bottom-line impact. The Digital Health 150 is CB Insights' annual ranking of the 150 most promising digital health startups in the world. 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. Stephen Hays. 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). May 9, 2022 2. The average price-to-EBITDA multiple for hospitals was 9.5x in 2011, a 4.4 percent increase from 2010. UCM Digital Health Valuation & Funding. 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. Something went wrong while submitting the form. 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. The historically low valuation is not only attractive for investors, but also an interesting base for takeovers. The share of HCIT deals held steady at around 15% of overall . :-) 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 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. The COVID-19 pandemic catalyzed digital health innovation, investment, and regulatory reform throughout 2020 and 2021. 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. Given the rise of many pill mill businesses, we expect the FDA and other regulatory bodies will enforce increased clinical protocol scrutiny. December 7, 2022. 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. I was slightly curious regarding whether or not equity research analysts believed that the operating environment would deteriorate over the coming 12 months. As a cherry on top, burnout pushed record numbers of clinicians to retire or work fewer hours, which kept health systems in crisis modeand paying crisis wages. 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. Meta applied its artificial intelligence chops to protein folding, and Apple invested in proving out the clinical fidelity of its wearable devices. 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. 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. The information provided is accurate at the time of publishing. 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. The image above is an example of Comparable Company Valuation Multiples from CFI's Business Valuation Course. 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. Adopting a more conservative mindset, Q4 2022 saw Big Tech players recenter digital health strategies within their tried-and-true operational fields. In 2022, the strained supply of clinicians in healthcare is likely to be exacerbated. Adoption of B2B models doesnt necessarily change a D2C companys customer-centricity. 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. In 2022, 35 digital health startups raised rounds of $100M or more. LGBTQ+ people are a large and growing part of the workforce, with 1 in 5 Gen Z identifying as LGBTQ+. 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. Denominator: Value Driver - i.e. 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. Rarely do we find a pure-play public comp that we can compare to a startup. 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. In particular, you should not enter into any investment before you have read the corresponding fund agreement or legal prospectus, the annual and semi-annual reports, the articles of association (as far as they are applicable), as well as all other documents, as required in accordance with local legislation or the regulations applied in the legal jurisdictions or countries in which the corresponding investment fund has been licensed or approved for public offer or sale to the public. We assume that large healthcare companies are eyeing deals with disruptive, fast-growing digital health companies. : 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). Revenue valuations have come in. 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.