What’s going to digital well being M&A seem like in 2022?

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When Teladoc first struck an $18.5 billion deal to amass Livongo final yr, specialists predicted that it will herald an period of digital well being mergers hitherto unseen. Up to now, that prediction has held up.

For the primary three quarters of 2021, Rock Well being tracked 216 digital well being mergers and acquisitions, outpacing everything of final yr’s deal depend of 146. By comparability, in 2019, there have been 113 M&A offers, in accordance with Rock Well being.

“We’re blowing our stats out of the water and I’ve excessive expectations that that’s going to proceed,” Alyssa Jaffee, a accomplice at 7wireVentures, mentioned in a cellphone interview.

And the large headline for 2022 is to count on extra mergers and consolidation to happen, particularly in areas which have a number of, main gamers like care navigation or digital bodily remedy.

Michael Greeley, normal accomplice at Flare Capital, mentioned that there are many good choices for firms proper now.

“The M&A market this yr, it’s fairly strong,” he mentioned. “Persons are placing actual worth on these firms, their prospects are actual, they’ve vital books of enterprise and the know-how’s compelling.”

Though a few of these markets are nonetheless comparatively nascent, firms are beginning to emerge as class leaders. Those who raised massive funding rounds just lately, however haven’t gotten the identical traction, would possibly develop into targets for mergers with one other non-public firm.

Level options consolidate
Like with the Livongo-Teladoc tie-up, specialists interviewed by MedCity Information mentioned they count on to see extra level options mix to win over extra markets and stand out to profit managers. Yet one more current instance of that’s Physician on Demand’s merger with Grand Rounds, a well being navigation firm, and later with Included Well being, which connects LGBTQ staff to affirming care.

As digital well being startups proliferate, firm advantages executives need to display a rising variety of options, whether or not that be for advantages navigation, telehealth, or administration for particular circumstances. It’s gotten to the purpose the place it’s troublesome to vet all of them, as illustrated by a current Wall Avenue Journal article. 

“Shifting away from this fragmented uncoordinated care throughout all of those level options, into one thing extra built-in and extra holistic care… that’s a development that I see, that’s not dying,” mentioned Joe Murad, CEO of pharmacy advantages startup WithMe Well being, in a Zoom interview. “There’s obtained to be consolidation amongst a handful of these as a result of additionally employers are saying, I solely want one navigator, I don’t want 4, and I’d somewhat have one cellphone quantity on the again of that card.”

Chrissy Farr, a principal at Omers Ventures, is watching patterns between opponents to see what they could purchase subsequent. For example, each Livongo and Omada have constructed or acquired options for diabetes prevention and administration, in addition to psychological well being assist. Since Omada acquired a distant bodily remedy firm final yr, it will additionally make sense for Teladoc and Livongo to make a musculoskeletal care acquisition, she predicted.

“I believe you’ll begin to see loads of these firms mirroring one another’s strikes, and the broader aim could be to have a full suite of choices and never simply do one factor,” she mentioned in a Zoom interview.

It’s nonetheless but to be decided how these combos will match collectively.  For instance with a maternal well being startup, Greeley mentioned he would need to combine behavioral well being providers as a part of that core providing somewhat than refer sufferers to a different firm.

In different circumstances, he may see completely different specialty platforms working as “storefronts” on a broader platform, like Teladoc or Amwell.

Masking a broader vary of acuity
One other development in tie-ups has been to develop into greater acuity circumstances by mergers. For example, Headspace, a well known meditation app, just lately mixed with Ginger Well being, which gives behavioral well being teaching, remedy and psychiatry periods.

Whereas Headspace would cater to a broader group of customers, Ginger can present extra in-depth providers, bringing in income from well being plans and insurers.

“These sorts of mergers find yourself being actually profitable and enticing,” Jaffee mentioned. “It’s a bit of pie you’re capable of seize at a reimbursement stage.”

She and different traders count on to see extra consolidation amongst behavioral well being firms, with the breadth of options that exist and the funding that these firms have raised.

Farr additionally predicted that musculoskeletal care firms will consolidate as they appear to achieve new markets, corresponding to well being plans, employees’ compensation applications, and on to customers. A number of which have raised funds just lately embody Kaia Well being, Hinge Well being and Sword Well being, which supply digital bodily remedy and self-guided workouts. 

“All of this stuff require completely different groups,” Farr mentioned. “It might be quicker to purchase one thing versus attempt to construct it your self.”

She additionally expects to see digital bodily remedy applications begin to develop extra into in-person providers and rehab earlier than or after surgical procedures, an space that MSK startup Kaia Well being has began to get into by partnerships.

“Loads of the MSK gamers are centered on digital bodily remedy,” she mentioned. “There’s a world through which they’re going to wish to open up bodily clinics in some unspecified time in the future, as a result of not all people desires to be seen just about, which goes to be the story of 2022.”

Their predictions
MedCity Information requested 4 specialists for his or her M&A predictions in digital well being. Right here’s what they mentioned:

  • Farr expects to see extra consolidation in girls’s well being as extra funding begins to move into the sector and employers take inventory of their advantages for folks. For example, Maven Clinic is now valued at $1 billion after a current funding spherical, and has some cash to spend. She additionally puzzled if Amazon will purchase one other healthcare firm, and if Peloton may discover an acquirer in Apple.
  • Murad mentioned among the many numerous navigation firms, corresponding to Accolade, Castlight, and Included Well being, “one thing’s obtained to provide there.”  He identified that Quantum Well being might be complementary to Accolade, as Warburg Pincus just lately led a non-public fairness spherical within the firm.
  • Jaffee expects to see continued M&A exercise in behavioral well being and girls’s well being. She famous the big quantity of funding in care round fertility, being pregnant and postpartum care, in addition to a rising variety of firms centered on menopause and particular circumstances, corresponding to PCOS and endometriosis.
    “In 2022, we can have extra M&A exercise in these two markets actually to serve broader populations with the aim of extending attain and the spectrum of care,” she mentioned.
  • Greeley didn’t title particular firms that he thought would get acquired, however famous that one place to look could be for firms that had raised collection B or C rounds a couple of yr in the past, and aren’t actively elevating now. For example, these firms won’t have scaled quick sufficient or raised capital at very excessive valuations that they didn’t develop into.
    “My prediction is that we are going to see numerous firms increase even bigger rounds (‘anoint the winner’ financings) and in addition a lot of different firms discover private-to-private combos (or just promote to massive public firms within the sector),” he mentioned.

Photograph: Dmitrii_Guzhanin, Getty Photographs

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