1 big thing: Progyny actively looking at deals

Illustration of a pregnancy test with a dollar sign appearing on the screen.

2. The BFD: Wellplaece snags $5.5M seed 

Illustration of a mouth with the two front teeth made out of money.

3. Deals o' the day

4. It's Personnel

5. Your daily dose

illustration og a person holding an x-ray that reads "daily dose" up to a light

Situational awareness: Disgraced Theranos founder Elizabeth Holmes is scheduled to report to prison today in Bryan, Texas, where she'll begin her 11-year sentence for defrauding investors.

🍜 🍡Erin returned from a week in Japan where she walked an average of 12 miles a day visiting family, inhaling ramen, and touring as many shrines as possible.

🫶 Thanks for reading, and thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece. Please ask your colleagues, friends and family to sign up.

Health Tech Deals

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1. Illumina shareholders vote chairman out after Icahn fight

Photo illustration of Carl Icahn and Francis de Souza and John Thompson of Illumina surrounded by rectangles  

2. FemTec Health comes to an end

 3. Deal values Sterling Pharma near £500

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4. Florence acquires Zipnosis from Bright Health

Illustration of a hundred dollar bill puzzle with pieces missing out of the center in the shape of a red cross

5. Mate Fertility closes $5M Series A

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🇺🇸 Programming note: Health Tech will not publish on Monday in observance of Memorial Day. We wish you all a safe holiday weekend.

That's all for today. Catch you next week!

✅ Thanks for reading, and thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece. Please ask your colleagues, friends and family to sign up.

1 big thing: Med tech investors paying up for patents

Illustration of a woman's hand holding a lightbulb with a dollar sign for the filament

2. The BFD: Deal values Sterling Pharma near £500

Illustration of a Axios brand medicine bottle that says "your daily dose" next to a spoon.

👀 Situational awareness: Illumina, the $32 billion gene sequencing equipment maker, faces a nail-biting shareholder vote today, with its chairman and CEO under threat from activist investor Carl Icahn.

📖 Claire (unlike her world-traveling team) is looking forward to curling up at home with Jenny Offill's "Weather" this weekend. 

🙌 Thanks for reading, and thanks to newsletter editor Claire and copy editor Mickey Meece. Please ask your colleagues, friends and family to sign up.

1 big thing: Francisco Partners' Chris Adams talks carveouts

portrait of Chris Adams of Francisco Partners surrounded by circles and binary code

2. The BFD: Strive Health raises $166M Series C 

Illustration of a saline bag solution with money as the liquid in the bag. 

3. State of play: Tech-enabled kidney care

Illustration of sticky notes overlapping that say State of Play

4. Deals o' the day

5. It's Personnel

6. Your daily dose

Situational awareness: Erin is in San Francisco tomorrow moderating a panel on the future of health care with the leaders of Ōura, Trial Library and Next Ventures.

📺 Claire is giving her thinking brain a break to watch tonight's second reunion episode of "Vanderpump Rules." 

✅ Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece. Please ask your colleagues, friends and family to sign up.

1 big thing: Stepful raises $8M to train new health care workers

2. State of play: Health care staffing 

Illustration of a person retrieving a newspaper titled "State of Play" from a mailbox.

3. The BFD: Florence acquires Zipnosis from Bright Health

Illustration of a prescription with a handwritten note saying "daily dose."

It's the halfway point of the week, Health Techies!

Situational awareness: First Citizens Bancshares laid off just under 500 Silicon Valley Bank employees, two months after buying the failed lender, Axios' Dan Primack scoops.

🇮🇹 Aaron is heading to Florence, the northern countryside of Tuscany and Bologna, to drink all the wine and eat all the pasta and gelato. 

Med tech startups with patents or patent applications saw more funding at higher valuations than non-patent peers last year, a new PitchBook report finds.

Why it matters: Intellectual property is a value creator, particularly in a market as mature as med tech.

By the numbers: Companies with patents saw the majority of overall VC deal funding last year.

Nearly 50% of funding went to seed-stage companies with patents, and this increased to 81% and 95% for late-stage and venture growth rounds, respectively, the report says.

Since 2020, median venture deal sizes were about 15% to 30%-plus higher for companies with patent applications.

In 2022, there were 439 VC deals in med tech with a combined deal value of $8.7 billion in 2022, down from 561 deals valued at $9.7 billion in 2021.

Early-stage deals saw the biggest slump, with funding down 30% year over year.

Meanwhile, private equity deal activity in the space was muted, with only 16 buyouts.

The report cites surgical devices, dermatology and precision medicine as areas within med tech likely to garner PE interest, given their long-term business models.

Zoom in: In Q1 2023, VCs poured more than $50 million into the surgical technology market, outpacing all other med tech segments, per the report.

Last year saw a handful of notable deals, including Medtronic's $904 million acquisition of cardiac tech company Affera from Bain Capital Life Sciences.

"Medtronic was also a previous investor in Affera, and medtech CVC involvement in mid- to late-stage deals can be a strong sign of potential future deal interest," the report says.

What they're saying: "Med tech is unique and incumbent heavy and that raises the bar for new entrants," says Aaron DeGagne, an emerging technology analyst, digital health and med tech at PitchBook.

"You need a robust business model and a high degree of recurring sales," he says.

Yes, but: "There have been and will be plenty of exit opportunities," he stressed, with public incumbents like GSK, J&J, 3m, GE and Medtronic all seeking to innovate their pipelines.

"The peers of the incumbents are not looking to grow, and that creates more opportunity for providers at good prices," he adds.

DeGagnge predicts the IPO market will open next year, adding, "We expect to see a good amount of these med-tech companies go public"

The intrigue: Not all med tech deals are a slam dunk — just ask Illumina, whose ill-fated Grail acquisition is at the crux of a bitter proxy fight with activist investor Carl Icahn.

Illumina founded Grail in 2016 and later spun off the company at a valuation of around $1 billion to $2 billion, keeping a minority share, but in 2021, brought the business back into the fold for $8 billion.

It has since faced heavy pushback from regulators, and a formal proxy fight from Icahn, though the two parties were close to settling before the fight broke out.

Med tech investors paying up for patents

Med tech startups with patents or patent applications saw more funding at higher valuations than non-patent peers last year.

Illustration of stacks of one hundred dollar bills laid in a medical cross shape

Health tech deals

Med tech startups with patents or patent applications saw more funding at higher valuations than non-patent peers last year,<a class="gtmContentClick" data-vars-link-text=" a new PitchBook report finds" data-vars-click-url="https://pitchbook.com/news/reports/q1-2023-launch-report-medtech" data-vars-content-id="0306c725-1487-483b-bb8f-4f6b96792de6" data-vars-headline="Med tech investors paying up for patents" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://pitchbook.com/news/reports/q1-2023-launch-report-medtech" target="_blank"> a new PitchBook report finds</a>.Why it matters: Intellectual property is a value creator, particularly in a market as mature as med tech.

Fertility benefits management company Progyny is actively vetting prospective fertility and women's health acquisitions, CEO Pete Anevski tells Axios.

Why it matters: While plenty of emerging women's health technology companies are seeking capital, the VC community has taken a step back from the sector of late — leaving room for strategics to scoop.

What they're saying: "We have long been profitable and we have a strong balance sheet," Anevski says.

"We are actively exploring M&A opportunities that make sense for our clients and investors," he says, adding that no deal is imminent.

"And just in areas immediately adjacent to the fertility and family building industry, but across women’s health categories."

By the numbers: Progyny, which reported Q1 2023 earnings earlier this month, is on track to book more than $1.5 billion in revenue this year.

With a market capitalization of $3.5 billion, the company has cash and cash equivalents of about $200 million and no debt.

Context: According to the latest World Health Organization study, 1 in 6 people are impacted by infertility.

The success rate for single embryo transfers is 91% for Progyny members, compared with the national average of 72.5%, per data from management.

The success rate for live births is 54.3% for Progyny members, compared with the national average of 42.7%.

Zoom in: "We estimate that PGNY has captured roughly 380 of 8,000-plus employers and 5.4 million of 80 million-plus lives in the potential TAM," says David Larsen, equity research analyst, BTIG.

"This means that the in-sell and growth potential of PGNY is high, and with a strong labor market, employers seem to be demanding more fertility services," he says.

Zoom out: Women's health technology startups offering family planning services like abortion, contraception and fertility care saw an influx of funding in 2021 and 2022.

The Dobbs decision which overturned Roe v. Wade and triggered abortion bans in over a dozen states nearly a year ago, also buoyed interest

Yes, but: That initial swell of excitement has waned as investors navigate the aftershock of a banking crisis, per PitchBook.

Progyny actively looking at women's health deals

The VC community has taken a step back from women's health investments of late, leaving room for strategics to scoop.

Fertility benefits management company Progyny is actively vetting prospective fertility and women&#x27;s health acquisitions, CEO Pete Anevski tells Axios.Why it matters: While plenty of emerging women&#x27;s health technology companies are seeking capital, the VC community <a class="gtmContentClick" data-vars-link-text="has taken a step back" data-vars-click-url="https://link.axios.com/click/31637789.1003/aHR0cHM6Ly9waXRjaGJvb2suY29tL25ld3MvYXJ0aWNsZXMvZmVtdGVjaC13b21lbnMtaGVhbHRoLWFib3J0aW9uLXN0YXJ0dXBzLXZlbnR1cmUtY2FwaXRhbD91dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX21lZGl1bT1lbWFpbCZ1dG1fY2FtcGFpZ249cHJvX2RlYWxzX2hlYWx0aHRlY2hfc3VicyZzdHJlYW09dG9w/61b8a591584bc520355bcf50Bfe794215" data-vars-content-id="0dd1a2e0-53e1-46cd-abbd-2cae440c32fa" data-vars-headline="Progyny actively looking at women&#x27;s health deals" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://link.axios.com/click/31637789.1003/aHR0cHM6Ly9waXRjaGJvb2suY29tL25ld3MvYXJ0aWNsZXMvZmVtdGVjaC13b21lbnMtaGVhbHRoLWFib3J0aW9uLXN0YXJ0dXBzLXZlbnR1cmUtY2FwaXRhbD91dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX21lZGl1bT1lbWFpbCZ1dG1fY2FtcGFpZ249cHJvX2RlYWxzX2hlYWx0aHRlY2hfc3VicyZzdHJlYW09dG9w/61b8a591584bc520355bcf50Bfe794215" target="_blank">has taken a step back</a> from the sector of late — leaving room for strategics to scoop.

GHO Capital and Partners Group invested in pharma services company Sterling Pharma Solutions at a valuation of just under £500 million, says a source familiar with the deal.

Why it's the BFD: It's the latest example of private equity firms partnering to deploy capital — a phenomenon expected to persist as long as financing is tight.

Details: GHO has been Sterling's majority owner since 2019, when the company was a single asset with a single location in Newcastle. GHO will remain majority owner and the current management team will stay in place.

Partners Group acquires a significant minority stake, per a press release.

GHO's investment is supported by an investor consortium led by funds managed by AlpInvest Partners and Pantheon Ventures.

What they're saying: "We like that Sterling has unique capabilities to partner with pharma and biotech companies over the long haul," Andrea Ponti, managing partner, GHO.

"Their knowledge of complex chemistry and ability to scale up chemistry is unmatched," he continues. "Chemistry in small quantities is different than in big quantities, and to get the same results in bigger batches is hard to achieve and they can do that."

On Partners Group's participation, Ponti says GHO wanted a PE group with experience in pharma manufacturing, "to set the price of the transaction as we were both buyer and sellers."

Partners Group participated in a short sale process, he adds.

He declined to comment on the purchase price.

How it works: Sterling offers contract development manufacturing services for active pharmaceutical ingredients (APIs) and antibody-drug conjugates.

The company has five manufacturing facilities in the U.S., the U.K. and Ireland and is a supply chain partner for several Big Pharma companies.

Under GHO's helm, the company has been acquisitive, adding five facilities to its reach since 2019.

What's next: Fresh funds will allow Sterling to pursue additional strategic acquisitions.

M&A will be a part of future growth but the main objective will be adding more facilities in various locations.

"Will be looking to add more facilities over time," he said. "We made four acquisitions in previous investment and we will make further site acquisitions in the next few years as the company grows."

The bottom line: "Since COVID, there has been more of a focus on supply chain reliability and the outsourcing trend of specialist capabilities," Ponti says.

"We think those will continue to be strong, and strengthened in the case of Sterling."

Scoop: GHO, Partners buy Sterling Pharma Solutions for nearly £500M

GHO and Partners Group team up to buy Sterling for nearly £500m

GHO Capital and Partners Group invested in pharma services company Sterling Pharma Solutions at a valuation of just under £500 million, says a source familiar with the deal.Why it&#x27;s the BFD: It&#x27;s the latest example of private equity firms partnering to deploy capital — a phenomenon expected to persist as long as financing is tight.

This week we're speaking with Francisco Partners partner Chris Adams on how he sources — and wins — carveout deals.

Why it matters: Sponsor-to-sponsor M&A activity has slowed significantly, but private equity is finding deal opportunities in strategic divestitures.

How does Francisco Partners' approach to corporate carveouts differ from your peers?

"If I think about most of our carveouts, they're businesses that we looked at years and years ago — often looked at before the current corporate owner had bought them. And so if the time ever comes when that corporate parent thinks, 'This is no longer strategic, or doesn't fit with where I'm going now,' we don't have two months or three months or six months of history, but we have five years or 10 years of history.

I think longevity in this space is a part of this. If you're a big corporate parent selling what is, for you, a small division — even if it's a big business for us —  there's a lot of things that go into that that aren't just price. For example, you probably still have shared customers that you're going to have in that division for a long time. There's going to be some brand transition most likely of some kind. How you treat those employees that were former employees of the corporate parent who are going to be go-forward employees of your company matters a lot."

What does FP's carveout pipeline look like for the rest of this year?

"With any deal, it's super hard to know until like you actually sign on that dotted line. And the same is true — probably even more so — with carveouts. There tend to be more decision-makers at the corporate that get involved and people can change their minds at the end. So the pipeline is super promising, but you never know until you know.

If you go back to the beginning of COVID ... there was a big wave of both investor interest but also M&A and strategic interest in health care tech in 2020 and 2021, where it was almost like, 'No price is too high  ...' and so a lot of people entered health care that hadn't been in before.

A lot of times when that happens a year or two later, people then realize, wow, health care technology is a little bit different. ... There's still long-term tailwinds that are going in health care technology. And so sometimes corporates are like, 'Well, there's still a good tailwind, we'll eventually figure it out.' But what has happened in past cycles, and you see certainly some of it happening now, is people saying, 'This is just different from what I'm good at. And so I'm not the best owner for this business.'"

Do you feel pressure from LPs to return money to them through an exit? Has your playbook changed with many sponsors still on the sidelines while debt remains expensive?

"Our investors are, I think, very patient and smart and don't need us to do anything unnatural to have capital come back to them sooner or in unnatural ways.

The past 15 years that we've been in health care have almost always resulted in a strategic looking to invest in our health care companies. So I wouldn't say that really changed lately."

Expert Voices: Francisco Partners' Chris Adams talks carveouts

Sponsor-to-sponsor M&A activity has slowed significantly, but private equity is finding deal opportunities in strategic divestitures.

Photo Illustration: Tiffany Herring/Axios, Photo: Courtesy Francisco Partners

This week we&#x27;re speaking with Francisco Partners partner Chris Adams on how he sources — and wins — carveout deals.Why it matters: Sponsor-to-sponsor M&amp;A activity has slowed significantly, but private equity is finding deal opportunities in strategic divestitures.

Lifeforce, a membership-based wellness platform, raised a $12 million Series A, CEO Dugal Bain-Kim tells Axios exclusively.

Why it matters: Lifeforce aims to use fresh funds to develop partnerships with health-care providers and wearable makers.

Details: The oversubscribed round was co-led by Peterson Ventures and M13 and also saw participation by Ridgeline Ventures, Rosecliff Ventures, and Seaside Ventures. 

The company is also backed by co-founder and motivational speaker Tony Robbins, Peter Diamandis, Serena Williams and Scottie Upshall.

What's next: The Santa Monica, California-based company believes that the latest capital will get Lifeforce through the next 24 months.

"If all goes well, we will be in charge of our own destiny at that point and will do another raise then, but we are on a good trajectory," said Dugal Bain-Kim, co-founder and CEO. 

How it works: Lifeforce provides members with at-home diagnostics, access to functional medicine physicians, certified health coaches, and data-driven personalized care plans.

Lifeforce offers its memberships direct to consumers online. The memberships include in-home quarterly biomarker testing, expert clinical support, and unlimited health coaching all to help optimize your personal health. 

Lifeforce also sells  premium nutraceuticals to support a consumer’s personal health journey without a membership through its website as well.

Members get a customized digital dashboard that will include test results and additional information to help streamline and guide members.

Expert clinical support and useful health tools and information delivered directly to members on an ongoing basis.

Meanwhile, a personalized plan inclusive of specific physical routines, supplement regimen, and body tracking indices with clinical insights from the Lifeforce network of medical professionals and physicians.

"There is a lot of spray and pray in health and wellness without proper data," says Bain-Kim. "Our goal is to move away from a guessing game with more precise data."

The platform collects member's health data every three months — and Lifeforce wants to invest in infrastructure to link those data points with patient records, Dugal Bain-Kim says. 

"We have a proactive data set," he says. "Now we need to build the tech to build better programs, as we grow and get closer to the next series of fundraising."

Flashback: Raising capital wasn't easy, given the macro environment, Dugal Bain-Kim says.

"Diligence was rigorous and it took a month or two longer than it would have taken in 2022, as people thought longer and deeper," he says.

Yes, but: The CEO says Lifeforce's preventive care pitch was attractive. 

"In the end, more folks wanted to get in than we could let in," he says. 

"Over 50% of health care is VBC now, as structural incentives are clicking into place and preventive care will get rewarded," he adds.

Exclusive: Wellness platform Lifeforce raises $12M Series A

Lifeforce will use the Series A funds to develop partnerships.

Illustration of a price tag in the shape of a red cross

Lifeforce, a membership-based wellness platform, raised a $12 million Series A, CEO Dugal Bain-Kim tells Axios exclusively.Why it matters: Lifeforce aims to use fresh funds to develop partnerships with health-care providers and wearable makers.Details: The oversubscribed round was co-led by Peterson Ventures and M13 and also saw participation by Ridgeline Ventures, Rosecliff Ventures, and Seaside Ventures. <ul><li>The company is also backed by co-founder and motivational speaker Tony Robbins, Peter Diamandis, Serena Williams and Scottie Upshall.</li></ul>What&#x27;s next: The Santa Monica, California-based company believes that the latest capital will get Lifeforce through the next 24 months.<ul><li>&quot;If all goes well, we will be in charge of our own destiny at that point and will do another raise then, but we are on a good trajectory,&quot; said Dugal Bain-Kim, co-founder and CEO. </li></ul>How it works: Lifeforce provides members with at-home diagnostics, access to functional medicine physicians, certified health coaches, and data-driven personalized care plans.<ul><li>Lifeforce offers its memberships direct to consumers online. The memberships include in-home quarterly biomarker testing, expert clinical support, and unlimited health coaching all to help optimize your personal health. </li><li>Lifeforce also sells  premium nutraceuticals to support a consumer’s personal health journey without a membership through its website as well.</li><li>Members get a customized digital dashboard that will include test results and additional information to help streamline and guide members.</li><li>Expert clinical support and useful health tools and information delivered directly to members on an ongoing basis.</li></ul>Meanwhile, a personalized plan inclusive of specific physical routines, supplement regimen, and body tracking indices with clinical insights from the Lifeforce network of medical professionals and physicians.<ul><li>&quot;There is a lot of spray and pray in health and wellness without proper data,&quot; says Bain-Kim. &quot;Our goal is to move away from a guessing game with more precise data.&quot;</li><li>The platform collects member&#x27;s health data every three months — and Lifeforce wants to invest in infrastructure to link those data points with patient records, Dugal Bain-Kim says. </li><li>&quot;We have a proactive data set,&quot; he says. &quot;Now we need to build the tech to build better programs, as we grow and get closer to the next series of fundraising.&quot;</li></ul>Flashback: Raising capital wasn&#x27;t easy, given the macro environment, Dugal Bain-Kim says.<ul><li>&quot;Diligence was rigorous and it took a month or two longer than it would have taken in 2022, as people thought longer and deeper,&quot; he says.</li></ul>Yes, but: The CEO says Lifeforce&#x27;s preventive care pitch was attractive. <ul><li>&quot;In the end, more folks wanted to get in than we could let in,&quot; he says. </li><li>&quot;Over 50% of health care is VBC now, as structural incentives are clicking into place and preventive care will get rewarded,&quot; he adds.</li></ul>

Aaron Weitzman

Stories

Expert Voices: Francisco Partners' Chris Adams talks carveouts

Progyny actively looking at women's health deals

Scoop: GHO, Partners buy Sterling Pharma Solutions for nearly £500M

Med tech investors paying up for patents

Exclusive: Wellness platform Lifeforce raises $12M Series A

Newsletter editions

Health Tech: Strive raises $166M

Health Tech: Wellplaece snags $5.5M

Health Tech: Illumina's board shake-up

Health Tech: Sterling Pharma scoop

Health Tech: Florence buys Zipnosis