HGP Health IT January InsightsFebruary 05, 2019
In mid-January, HGP released its year-end Health IT Market Review, which included findings from our latest bi-annual Health IT Private Equity Survey. Among the feedback from the 100+ funds that responded to the survey, investors scored Payers and Employers as the most attractive end-market, taking over the top spot from Hospitals and Health Systems (in our 2016 survey). This trend is evident in January’s transactions and headlines, with noteworthy news and investments relating to opportunities and transactions in the payer, employer and pharmacy markets. We look forward to closely monitoring the ongoing disruption in these key sectors, which increasingly play on the thesis of consumer driven healthcare.
We normally call out select transactions, but given the volume and distribution of deals in January, we’re bucketing transactions by key themes that were evident during the month:
As discussed, benefits management remains a top category for investors, with multiple sizable deals announced during the month:
- Activate Healthcare, a provider of proactive primary care services to the employees of medium-sized enterprises, was acquired by Paladina Health. Spring Mountain Capital led multiple rounds of growth equity in Activate.
- Clover Health, a tech-enabled PPO, raised another $500mm at a likely unicorn value (the company was valued at $1.2B in 2017), led by Greenoaks Capital.
- Limelight Health, a quoting engine for health insurance agents, raised a $33.5mm Series C, with a syndicate of investors valuing the company at a pre-money $50mm.
- Payer Compass, a provider of healthcare reimbursement solutions for employers, was recapitalized by Spectrum Equity and Health Enterprise Partners.
- Discovery Benefits, a benefits administrator, announced its sale to WEX for $425mm, or approximately 4.25x revenue.
Behavioral health garnered substantial interest in January, with notable deals including:
- Pear Therapeutics, which offers digital therapies for behavioral health, raised a $64mm Series C at a post-money valuation approaching $500mm.
- Workit Health, an online provider of counseling for substance abuse, completed a Series A from a syndicate of investors including BCBS Ventures.
- Mynd Analytics, which offers a predictive analytics platform for the treatment of behavioral disorders, was acquired by Emmaus Life Sciences.
- Mindstrong Health, which monitors cognitive function by tracking mobile device usage, raised a $31mm Series B from General Catalyst.
- myStrength, a behavioral health care management platform, was acquired by Livongo.
Lifestyle and personal wellness is a hot category, sometimes including companies that leverage prescription drugs to effectively serve as online pharmacies:
- Hims, a provider of mens wellness products, raised $100mm and hit unicorn status.
- The Pill Club, an online provider of birth control medications, raised $51mm.
- Fertility Focus, (aka, OvuSense), raised $3.5mm to further its product offering of technology that enables women to manage and detect ovulatory issues.
Other noteworthy deals during the month include:
- Tunstall, a health monitoring provider, is selling its Tunstall Americas operation to Connect America.
- Jvion, a clinical and financial predictive analytics vendor, was recapitalized by JMI Equity, Health Velocity Capital, and Health Enterprise Partners.
- Verily Life Sciences, Alphabet’s clinical platform that develops care management platforms, raised $1 billion from Silver Lake.
- Influence Health, a patient engagement platform, was acquired by Healthgrades.
Noteworthy News Headlines
- Epic Systems announced its move to add dentists and life insurers to its software network. Teeth cleanings, drugstore flu shots and even life insurance may soon all be listed in the Epic MyChart web portal. At least 230 million people across the country and around the world — or more than 50 percent of U.S. patients — already have their hospital stays and clinic visits recorded on Epic’s software systems. With more than 95 percent of U.S. hospitals and nearly 90 percent of physicians’ offices equipped with some type of EHR system, according to federal figures, Epic is branching out to put other types of health care providers in the loop, included assisted living, nursing-homes, dental, telehealth, as well as insurers and pharmacies.
- Walgreens Boots Alliance and Microsoft have entered a seven-year agreement to form a strategic partnership to build digital healthcare solutions. The companies say they are joining forces to develop new healthcare delivery models, technology and retail innovations. The intent is to combine Microsoft’s Azure cloud and AI platform—as well as its ability to make healthcare investments and retail solutions—with Walgreeens’ customer reach, retail pharmacy locations, outpatient services and industry expertise.
- The U.S. adult uninsured rate stood at 13.7% in the fourth quarter of 2018, according to Americans' reports of their own health insurance coverage, its highest level since the first quarter of 2014. While still below the 18% high point recorded before implementation of the Affordable Care Act's individual health insurance mandate in 2014, today's level is the highest in more than four years, and well above the low point of 10.9% reached in 2016. The 2.8-percentage-point increase since that low represents a net increase of about seven million adults without health insurance.
- A group of health insurers is collaborating with IBM to develop a blockchain network to process claims and payments, maintain directories, and improve administrative efficiency and cost management in the industry. Anthem, Health Care Service Corp., CVS Health's Aetna and PNC Bank are all involved in the network.
- The Trump administration on Thursday put forth a long-awaited proposal to eliminate certain rebates drug makers pay insurance companies in Medicare, a move it says will ultimately lower prescription drug prices — and one that stands to upend the complicated structure for how drugs are priced in the U.S.
Public Company Performance
HGP tracks stock indices for publicly traded health IT companies within four different sectors - Health IT, Payers, Healthcare Services, and Health IT & Payer Services. The chart below summarizes the performance of these sectors compared to the S&P 500 for the month of January:
The following tables include summary statistics on the four sectors tracked by HGP as well as the S&P 500 and NASDAQ for January 2019: