What is the right multiple? 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. Revenue multiples for eCommerce businesses tend to be in the range of 0.7-3x. LGBTQ+ people are a large and growing part of the workforce, with 1 in 5 Gen Z identifying as LGBTQ+. 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). The great resignation poses a breaking point for the supply of clinicians, 5. By Peter Micca, partner, National Health Tech Practice leader, and Neal Batra, principal, Deloitte & Touche LLP. In short, we do not have the answers. Overall, U.S. digital health funding scraped by with $15.3B, underperforming 2021s pot and just beating out 2020s total. Several D2C digital health equities including Peloton (-78%), Owlet (-79%), and Beachbody (-78%) ended the year at fractions of their 2022 opening prices. | The more restrained digital health . Supply chain challenges, inflation, interest rate hikes,3 and investor pullback reversed investment momentum. Big H2 2022 splashes from retail giants Walmart and Walgreens have raised the stakes for primary care, at-home, and omnichannel care delivery expansion. But the principle driving revenue multiples is that startups of a particular industry operate in similar . Get news, advice, and valuation multiples reports like this one straight into your inbox. 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. Financial or Operating Metric ( EBITDA, EBIT, Revenue, etc.) If you do not agree with this statement you should refrain from accessing any further pages of this website. An overview of Bellevue Healthcare Strategies. 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. 2022 marks the 13th anniversary of the passage of the HITECH Act which ushered in the digital era in healthcare. 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. We need to find ways to help health systems reduce admin burden and free up clinician time. WASHINGTON, Oct. 09, 2022 (GLOBE NEWSWIRE) -- Global Digital Health Market was valued at USD 145.57 Billion in 2021 and is projected to surpass the valuation of USD 430.52 Billion by 2028 at a . A mandatory rule is that the represented . May 9, 2022 2. 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. We expect this to result in more consolidation and opportunities for M&A. By 2028, it's expected that this number will reach $720.44 billion, with a CAGR of 25.25% during the forecast period of 2022 - 2028. 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. The answer is valuation. 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. In the digital health space, it is much more likely to be acquired than go public. Ulili Onovakpuri, Managing Partner, Kapor Capital, Investors interested in strong horses spent 2022 scoping out earlier-stage opportunities. 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 . 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. Investment or other decisions should not be made solely on the basis of this document. 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. Prospectus, the key investor information document ("KID"), the management regulations and the semi-annual and annual reports. Update your browser to view this website correctly. We support this omnichannel delivery of care through our care coordinators that navigate members to high performing in-network gastroenterology providers, labs and pharmacies, as needed, said Founder and CEO Sam Holliday of Oshi Health. 23 M&A activity for cell towers is higher than data . 2022 Public SaaS Valuation Multiples. The pandemic has led to an increase in workloads and burnout among clinicians. :-) 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 Later Stage VC: 22-Dec-2022: $2M: 00.00: Completed: Generating Revenue: 4. Rock Healths databases are continuously assessed and updated as new information becomes available. Legal entities or natural persons to which such prohibitions apply must not access or use these sites. 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.. 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 . What is the right multiple? Prospectus, the key investor information document ("KID"), the management regulations and the semi-annual and annual reports are available 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 Universal-Investment-Gesellschaft mbH, Theodor-Heuss-Allee 70, D-60486 Frankfurt am Main, https://www.universal-investment.com. Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. Numerator / Denominator = Ratio = Business Value / Business Metric = Multiple. The share of HCIT deals held steady at around 15% of overall . As an example, when we set out to build Clearing 1.5 years ago, we developed an EMR in-house because legacy systems were too inflexible to meet our needs. This tells me that analysts believe the operating environment for companies in our space will continue to be at least good, if not improving. 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. If you can't read this PDF, you can view its text here. In this article, we provide an overview of the digital health . 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. In the current VC climate, strong horses will beat out unicornsthough investors run the risk of betting on the wrong equine. For information on opportunities and risks as well as tax information, please refer to the current detailed sales prospectus. Take a look at the above chart which shows the average EV/NTM Revenue multiple for the peer group. 3. performing companies, the valuation premium is much higher. 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. Due to the historically low rating, 2022 presents itself with enormous growth potential. Past performance is not an indication or guarantee of the future performance of the investment. : While the sector was expanding before COVID-19, the pandemic has caused a critical acceleration toward digitalising systems, with HealthTech solutions booming. Adoption of B2B models doesnt necessarily change a D2C companys customer-centricity. Ambitious hospitalathome initiatives were launched to free up hospital beds, allow top of license practice, and reimagine care pathways. Rated 4.3 by 3 people. Dear valuation folks, our new market essentials is out with data on risk free rates, beta, multiples etc. On the way down from the Q2 2021 peak to present day, investors steadily decreased the flow of capital every quarter, excluding two quarterly upticks: one in Q4 2021 and a smaller notch in Q4 2022. Only one company, Amwell, has analysts who believe that their revenue will be lower in one year than it is now. Where will the market settle? At one point, the group traded at 15.4x NTM revenue and most recently traded at 4.6x NTM revenue. As a three-year digital health funding cycle comes to a close, the investment market will recalibrate to a more sustainable run rate. Pharma and biotech M&A will continue to focus on oncology and immunology, but other areas such as central nervous system and cardiovascular diseases as well as vaccines will see interest. 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. Digital health startups offering mental healthcare secured the top clinical funding spot in H1 2022, according to the research. While 2020 was the first year where virtual care was widely adopted as a tool to treat people at home and mitigate the spread of COVID-19, 2021 was the year where the industry swiftly innovated and adopted a hybrid approach with a mix of both virtual and in-person care models as the new normal. By JEFF GOLDSMITH and ERIC LARSEN. Jennifer Bellin, VP of Marketing, Artemis Health: The market has seen an influx of healthcare point solutions over the past few years. 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. 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. 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. . For those that choose to pursue investment instead of M&A, grounded approaches will be the most successful. Last year we predicted that the commoditization of telemedicine would unlock holistic virtual care. For example, our portfolio company Folx began selling to employers as LGBTQ+ employees requested these services. 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. 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. 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. In fact, the group is down 50% versus the S&P 500, which is up 10% during that period. Teladoc Health is a pure-play tech-enabled disruptive healthcare peer that was recently trading north of 20x forward revenue. At one point, the group traded at 15.4x NTM revenue and most recently traded at 4.6x NTM revenue. In the absence of cheap cash to purchase consumers or a captive audience of pandemic-time buyers, D2C companies were forced to look hard at operational efficiency and customer lifetime value. According toRock Health, a US-based venture fund dedicated to digital health, the number of HealthTech unicorns is growing, and share prices for digital health companies have broadly increased since the COVID-19 pandemic took hold. Provider venture capital funds remained the top corporate investors by deal volume, and provider organizations increased their acquisitions by 5x, from three deals in 2021 to 15 in 2022 (acquisition targets included specialty care coordinators and telemedicine startups). The best healthcare entry points exist where teams already hold expertise (fertile ground remains in these familiar pastures). 4 paragraph 3-5 and Art. We therefore recommend that you check this statement regularly. The swiss agent is IPConcept (Schweiz) AG, In Gassen 6, PO Box, CH-8022 Zurich. Interestingly, the average round size in 3Q20 was $41.2 million, greater than the year-to-date . 80 people interested. 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. You can also find us on twitter and LinkedIn. A total of 4,579 companies were included in the calculation for 2022, 4,326 for 2021, 4,023 for 2020 and 3,779 for 2019. Multiples expected to hold strong in 2022. Disclosed value also surged from $15.1 billion to $38.1 billion. As investors competed to back early-stage prospects, Series A deals got bigger than ever before. We ended 2021 reflecting on the rise of digital health solutions selling direct-to-consumer (D2C), as increased out-of-pocket healthcare spend gave startups consumer dollars to aim for. 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). Depending on your domicile and the investor type that you select, you will have full or restricted access to the information due to legal reasons. Digital health companies must rethink incentives to recruit and retain the best clinician talent. In fact, the group is down 50% versus the S&P 500, which is up 10% during that period. . Report. 2021 was huge for health tech2022 may be bigger. Equity Multiples. 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. 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. 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. 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. 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. Deeper clinical services translate into lower margins and more extensive and expensive clinical apparatus. 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. 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 European market in particular saw investment levels skyrocket by a whopping 131% from $2.9bn in 2020 to $6.7bn in 2021. Funding for Digital Health Companies has continued to grow year on year. The increased acceptance of digital solutions in the wake of the pandemic has pushed up the potential growth trajectory of the Digital Health investment case. Q4 2022: How did the Swiss valuation parameters and the European M&A volume develop? With all these forces compounded, several hospitals across the U.S. recorded losses of over one billion dollars in 2022. 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 . You can reach the Healthcare team via Steve Kraus (steve@bvp.com), Sofia Guerra (sguerra@bvp.com), Andrew Hedin (ahedin@bvp.com), and Morgan Cheatham (morgan@bvp.com). 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 . 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. Inflationary pressures burned consumers discretionary dollars. Rarely do we find a pure-play public comp that we can compare to a startup. Although HealthTech companies posted their best-ever multiples in 2021, they are still significantly lower than the SaaS industry median. David Kopp, Executive Chair, Oar Health. In 2022, many more infrastructure companies will blossom to support the virtual care ecosystem. 3.5 to 3.9 times: 15 percent. In turn, doctors can perform electronic consultations as well as monitor their patients remotely for less threatening situations and illnesses. 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. 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. 2 FinSA, Professional/Institutional investors: according to Art. That number is still much higher than pre-pandemic . Please join the conversation and dont forget to introduce yourself when you join. 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. 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). Growth and crossover funds that are new to digital health have been particularly active in digital health (e.g., Tiger Global made 25 digital health investments in 2021) On the other hand, 55% of digital health investors in 2021 were repeat investorssimilar to the average 58% repeat investors across the prior three years 2018-2020 Finally, stay up to date with the latest headlines in healthcare technology and Rock Health news by subscribing to the Rock Weekly. 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. That reflects a 70% decrease in the value of revenue within our peer group in an environment in which revenue estimates are rising. Notably, 2022s years Q4 $2.7B total was less than half of last years Q4 raise ($7.4B). MedCity News - Healthcare technology news, life science current events 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. [Online]. Later Stage . 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. The last 18 months have increased valuation complexity in the media sector. Its too early to say whether weve reached the end of this macro funding cycle, or if more low funding quarters are on the horizon. Published on 15 November 2022, 09:32 America/New_York. U.S.-based digital health startups brought in almost $30 billion in 2021, almost doubling the total investment the year prior. 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. It is a 2 day event organised by Riverstone Training and will conclude on 14-Oct-2022. 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. For others, 2023s continued pressures might be a final nail in the coffin, with shuttered doors or acquisitions on the horizon. Not to mention, conservative VC activity shortened cash runways. We saw a record of more than 30 IPOs and 80 mergers and acquisitions. To deliver its potential, national or regional Digital Health initiatives must be guided by a robust Strategy that integrates financial, organizational, human and . H2 2021 averaged $7.1B in quarterly funding, a small decline from the first half of that year. Particularly for health systems, 2022 may be remembered as the year things went upside down. The most successful companies in this infrastructure category will enable virtual care companies to go to market quickly, be flexible to evolve as companies grow, and integrate seamlessly with other tools and API platforms. 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. Thus, the technology that these services are built upon should not be reinvented every time. The information contained on this site does not constitute a financial, legal, fiscal or any other recommendation.