HGP HIT September InsightsOctober 02, 2019
The Health IT IPO streak continued during the month of September, with Peloton, an interactive fitness platform, completing its IPO on September 29, and SmileDirectClub, a network-based provider of orthodontic aligners, on September 12. Also during the month, Progyny, a provider of fertility benefits management, filed for an initial public offering. While the volume of listings has been strong, the recent performance has been lackluster, with Peloton and SmileDirectClub trading down 11% and 19% on the first day of trading, respectively. Health IT is not alone - 2019’s IPO class across the board has generally been a disappointment, with several IPOs valued lower than their pre-IPO private valuations. However, after a nearly three year drought, the six new Health IT listings in 2019 with more in the queue is a very strong sign for Health IT investors.
September 2019 saw continued strong interest from buyout investors, including:
- Warburg Pincus acquired Qualifacts Systems, a SaaS-based behavioral health record platform, for an estimated $300mm.
- eMids, a provider of business process outsourcing services designed to improve the quality of healthcare, was acquired by New Mountain Capital.
- Francisco Partners announced its intent to acquire Orchard Software, a provider of a laboratory information system software.
- RxStrategies, a provider of comprehensive pharmacy services designed to offer and implement customized 340B pharmacy, was acquired by Renovus Capital Partners.
Noteworthy M&A transactions during the month include:
- Mango Health, a developer of consumer-focused mobile health apps, was acquired by Audax and Odyssey-backed TrialCard.
- VitreosHealth, which offers on-demand predictive population analytics for population health management, was acquired by its existing partner, HMS, for $36.5mm.
- GoodRx entered the telepharmacy market with the acquisition of online prescription services provider HeyDoctor.
- Crossix, which offers solutions that measure cross-channel media campaigns aimed at patients and healthcare professionals, was acquired by Veeva Systems for a total deal value of $550mm (including $120mm in retention bonuses).
Several investments during the month focused on remote care and device connectivity, including:
- Healthy.io, an Israeli company that offers a mobile app for homebased urinalysis tests, raised a $60mm Series C.
- Capsule, a developer of a digital platform designed to provide home delivery of prescription medication, raised $200mm of Series C and debt at a $250mm pre-money valuation.
- Virtual-first primary care vendor Firefly Health launched with a $10.2mm Series A at a $35mm pre-money valuation.
- Digital diabetes care and self-management platform, OneDrop, raised $40mm from Bayer AG.
- AllinMD, a China-based digital orthaepedic hospital, raised a $100mm Series B.
Another investment theme during the month of September was clinical decision support, including:
- InsightRx, a precision dosing and clinical analytics platform, raised a $10mm Series A at a $22mm pre-money valuation.
- UK-based Kheiron Medical, which offers an AI-based breast screening platform, completed a $22mm Series A.
- UK-based BenevolentAI, which offers AI-based technology for drug discovery, raised $90mm at a $1 billion valuation, halving its valuation from 2018.
Noteworthy News Headlines
The Mayo Clinic and Google are partnering to accelerate the delivery of healthcare “through digital technologies.” Mayo said its selection of “Google Cloud” is designed to be “the cornerstone of its digital transformation” as part of a 10-year partnership with Google, a unit of Alphabet. Financial terms of the deal announced Tuesday weren’t disclosed but Google will be making a sizable investment in the relationship by opening a new office in Rochester, where Mayo is based, so its engineers can work closely with Mayo researchers, doctors and data scientists.
As Amazon gets into the pharmacy space following its purchase of online pharmacy PillPack in the summer of 2018, its potential competitors aren’t making it easy. Surescripts, a company that manages electronic prescriptions, said this week that it is ceasing its relationship with ReMy Health over a patient data dispute. That move has serious repercussions for Amazon-owned PillPack, which had a deal with ReMy that allowed it to access patient medication history collected by Surescripts.
Fitbit surged as much as 7% in early trading on September 23rd after reports the company is exploring a sale drove shares 12% higher on the previous Friday. The stock has climbed as much as 19% over the two days, and currently sits near its highest levels since late July. The smartwatch maker has been discussing possible acquisition plans with investment bank Qatalyst Partners, Reuters reported Friday. Qatalyst has reportedly encouraged a sale for weeks and argued the company could attract a bid from Google-parent Alphabet.
A federal law enforcement action involving fraudulent genetic cancer testing has resulted in charges in five federal districts against 35 defendants associated with dozens of telemedicine companies and cancer genetic testing laboratories (CGx) for their alleged participation in one of the largest health care fraud schemes ever charged. According to the charges, these defendants fraudulently billed Medicare more than $2.1 billion for these CGx tests. Among those charged today are 10 medical professionals, including nine doctors.
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 September:
The following tables include summary statistics on the four sectors tracked by HGP as well as the S&P 500 and NASDAQ for September 2019: