digital health valuation multiples 2022 digital health valuation multiples 2022

Funding for Digital Health Companies has continued to grow year on year. 3 to 3.4 times: 23 percent. Bottoms-up sales strategies may become the norm as companies evangelize clinicians as their customers and focus on use cases spanning clinician-focused fintech products, retail, healthcare, and online community-building ecosystems. 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%). Several companies in this category have grown during 2021, including Truepill, which has become a best-of-breed API for pharmacy fulfillment and Wheel, which is a leading clinician matching marketplace. U.S.-based digital health startups brought in almost $30 billion in 2021, almost doubling the total investment the year prior. I was slightly curious regarding whether or not equity research analysts believed that the operating environment would deteriorate over the coming 12 months. $230M / (1 + 50%)^5 < Post-money valuation < $230M / (1 + 40%)^5. 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. Healthcare IT surged as the digital transformation accelerated across sectors. For others, 2023s continued pressures might be a final nail in the coffin, with shuttered doors or acquisitions on the horizon. Similarly, we have seen a dramatic shift in market valuation multiples for digital health companies. Surgery Partners' revenue was $707.1 million in the fourth quarter of 2022 and $2.5 billion in the full year 2022, respective increases of 15.9 percent and 14.1 percent year over year. It has been a rough year so far for digital health. 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. The EV/Sales multiple of the Bellevue Digital Health fund portfolio is currently under the long-term range of 6-10x, and about 40% lower than it was 12 month ago. More than private market valuations, this trend will pressure the amount of capital available, and even more so if the public markets continue to contract and investors can find yield in less-risky public securities. Growth stage of the business. The pandemic has led to an increase in workloads and burnout among clinicians. 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. Please join the conversation and dont forget to introduce yourself when you join. The unprecedented number of M&A deals, as well as consistently goodand growingrevenue multiples shows that the HealthTech sector is approaching its maturity, and its keeping its momentum in the crucial stages of the post-pandemic era. Instead, the developer teams at virtual care companies should rely on a series of API platforms and tools to build their technology stack. 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. Now we must discount the exit value to obtain the post-money valuation as shown below: Post-money valuation = Exit value / (1 + IRR)^5. Digital health companies must rethink incentives to recruit and retain the best clinician talent. Many Digital Health companies are now at a much more advanced stage of business maturity, their business models have been firmly established, and their path to profitability has gained visibility. EBITDA multiples valuation is a go-to technique for most investors and financial analysts dealing with high-profit mergers and acquisitions. Rated 4.3 by 3 people. Staffing crises and wage inflation hiked up operating costs faster than CMS-influenced rate adjustments, squeezing health system margins rather than allowing hospitals to pass costs through to payers. Our most recent investment, HouseRx, is helping independent physicians in a different way by enabling doctors to run medically integrated dispensing of specialty drugs and helping them connect therapeutics with care journeys, which will ultimately be better for patient adherence and outcomes. These new companies are great examples of the new breed of digital MSOs serving the independent practitioner. Get news, advice, and valuation multiples reports like this one straight into your inbox. Investment or other decisions should not be made solely on the basis of this document. 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. We expect to see activity in areas of high expected future growth in 2023. Inflationary pressures burned consumers discretionary dollars. Several D2C digital health equities including Peloton (-78%), Owlet (-79%), and Beachbody (-78%) ended the year at fractions of their 2022 opening prices. Take a look at the above chart which shows the average EV/NTM Revenue multiple for the peer group. Take a look at the above chart which shows the average EV/NTM Revenue multiple for the peer group. What is occurring in the public markets, and how do these developments impact startups and VCs in the digital health and mental health markets? An example was seen in early 2022 when Stryker issued a takeover bid for Vocera, a leading provider of communication software and hardware for hospitals. Global Strategy on Digital Health 2020-2025. Others expanded their revenue potential by diversifying into B2B. WANT TO SHARE THESE INSIGHTS WITH YOUR TEAM? By competing in earlier rounds, investors are more likely to pay more on a risk-adjusted basis for a startup than its later-stage funders, twisting the risk-adjusted valuation upside down. Launched two years ago, the startup netted $300 million in a Series C round in December, increasing its valuation to $4.8 billion. The average revenue multiple for small tech companies increase slightly as their market cap increases, from 2.2x to 2.6x. Emerging new platforms and tools are helping clinicians become more independent and run successful businesses by enabling flexible hours, additional revenue streams, or owning their audience. Besides investments, health systems pursued long-term partnerships with software providers to make efficiency inroads, such as Cleveland Clinics 10-year deal with Palantir to roll out AI solutions that better forecast and manage patient flows. Enterprise value = Market value of equity + Market value of debt - Cash . Currently, valuation multiples on the data center side are high at 20-25x EBITDA. 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 . 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. Moreover, pure-play telehealth and mental health companies have underperformed not just the market, but also the peer group (see the chart below). 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. 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 large-scale enterprise category led the global SaaS industry in 2022 and is projected to continue throughout the forecast period. But overall, the average revenue multiple of 2.3x to 2.6x is 50% to 60% lower than the revenue multiples of tech companies in 2022. For example, Zaya Care uses this model in the maternal health space. Similar to the transition that ecommerce and retail industries had over the last 20 years. The year 2021 brought with it a return to pre-pandemic trends across all five sectors: pharmaceuticals, medtech, payers, providers, and . Not to mention, conservative VC activity shortened cash runways. 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. 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. Despite CMS announcing their intent to maintain reimbursement for select video-and-audio-only services through 2023, we saw a drop in the number of visits and declining satisfaction across consumers with telemedicine in 2021. By Peter Micca, partner, National Health Tech Practice leader, and Neal Batra, principal, Deloitte & Touche LLP. The answer is valuation. We expect this to result in more consolidation and opportunities for M&A. Oops! Prospectus, Key Investor Information Document (KID), fund contract as well as the annual and semi - annual reports of the Bellevue Fund under Swiss law are available free of charge from: Switzerland : PMG Fonds Management AG, Dammstrasse 23, 6300 Zug or Bellevue Asset Management AG, Seestrasse 16, CH - 8700 Kusnacht. 2022. 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. 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. Of course, no one knows, but we take the Rarely do we find a pure-play public comp that we can compare to a startup. 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. Notably, 2022s years Q4 $2.7B total was less than half of last years Q4 raise ($7.4B). The list below shows some common equity multiples used in valuation analyses. Drivers toward this cycles crest in mid-2021 have been well documented. This button displays the currently selected search type. The numerator is going to be a measure of value, such as equity value or enterprise value, whereas the denominator will be a financial (or operating) metric. For example, the short supply for full-time clinicians has increased wages for per-diem and travel nursing and Allied Health 3x in 12 months, furthering a negative spiral of nurses quitting full-time jobs to access more flexible hours and higher wages. In addition to dealing with frontline priorities, 2022 saw key health systems continue to carve out brainspace to expand and explore new businesses that would diversify revenue streams in years to comean important balance even as tough times bias toward short-term solutions. Revenue valuations have come in. This holds true within the mental health space and largely within the digital health startup landscape. As a cherry on top, 2021 saw the Fed underestimate percolating inflationary concerns and extend monetary easing measures, inflating asset prices and valuations. 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. 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. An overview of Bellevue Healthcare Strategies. If the past two years have demonstrated anything its that healthcare innovation is driven and inspired by patient needs, clinicians, and builders who strive to better the frontlines of care. Two quarters ago, we noted a shift in investors attention from growth-stage players to early-stage digital health companies perceived as less likely to carry inflated valuations from 2020-2021. The sectors that experienced the largest decline were . Navid Farzad, Partner, Frist Cressey Ventures. Despite . Value on investment alongside return on investment, Additional predictions from healthcare leaders. 2021 saw a record-breaking number of new companies and newly minted unicorns leveraging telemedicine as a tool to deliver care virtually. Pharmaceutical & life sciences deals outlook. Noom and Oura targeted employers interested in modernizing health and wellness benefits, Calibrate sought out payer reimbursement, and Whoop explored applications in remote monitoring.6, D2C businesses that have established strong consumer DNA and proven unit economics could be well-positioned to add more healthcare services under their brand umbrellas. I also believe that this valuation trend is just now beginning to pressure private market valuations. In December, Oracle, a sector outsider, issued a USD 29 bn takeover bid for Cerner, one of the two major providers of hospital software in the US. Lifestance Health Group is the only pure mental health comp that I can find. We saw a record of more than 30 IPOs and 80 mergers and acquisitions. Moreover, pure-play telehealth and mental health companies have underperformed not just the market, but also the peer group (see the chart below). In 2022, the strained supply of clinicians in healthcare is likely to be exacerbated. In a tight labor market, employers are keen to attract and retain the best and most diverse workforce and many employees expect certain benefits as part of the compensation package. In short, we do not have the answers. This tells me that analysts believe the operating environment for companies in our space will continue to be at least good, if not improving. The S&P Healthcare Services Index decreased by 13.4% in January compared to the S&P 500 Index, which decreased 5.3%. Disrupting healthcare isnt as effective as targeting transformation opportunities in tried-and-true operational fieldsa lesson Big Tech learned all too well. 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. : For growth-stage startups that didnt raise in 2022, limited cash reserves may push once-crowned digital health unicorns back to the fundraising table (possibly at lower valuations) or toward M&A territory. Its worth calling out that competition is a powerful motivator for health system innovation, especially as retail giants battle their way into care delivery. The answer is valuation. | The more restrained digital health . Nothing on this page is intended to be or should be construed or taken as accountancy, investment, tax or any other kind of advice. For information on opportunities and risks as well as tax information, please refer to the current detailed sales prospectus. HealthTech 2022 Valuation Multiples. While the sector was expanding before COVID-19, the pandemic has caused a critical acceleration toward digitalising systems, with HealthTech solutions booming. Many startups were benchmarking to that valuation when they raised money in our space at 20x and even 40x ARR (or higher). The Digital Health 150 is CB Insights' annual ranking of the 150 most promising digital health startups in the world. 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.