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Health Tech Deals Thought Bubble

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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

Amid a nationwide nursing shortage and burnout crisis, our Axios Vitals’ colleague Tina Reed writes that tech companies want to be part of the solution by allowing nurses to essentially join the gig economy.

Zoom in: A number of tech-powered companies looking to disrupt the nurse staffing industry have fielded investments in recent months. 

Nurse staffing app connectRN raised $76 million in VC cash last month, and TrustedHealth raised $149 million in November.

Meanwhile, ShiftMed raised $45 million in October, Nomad netted $63 million in September and CareRev completed a $50 million Series A funding round in April.

Other VC-backed players include Intelycare, SnapNurse and Incredible Health. 

Yes, but: Not all companies are created equal and there are likely to be winners and losers. Is putting a value on these businesses that simple?

For example, a source tells Sarah about one business that sought and failed to lock down a buyer last year, despite growing revenue to around $800 million in 2021 from low single-digit millions in 2019. 

In this case, the source cited concerns that all of the company's contracts were COVID-relief based, as opposed to capturing permanent market share from the traditional incumbent players. 

Meanwhile, labor shortages have also been a boon for the old-school players like AMN Healthcare and Cross Country Healthcare, and private equity also remains a participant.

Centerbridge and CDPQ partnered to buy Medical Solutions in an August deal valued around $2.3 billion. The seller — TPG Growth — had invested in the company a few years earlier in a roughly $500 million deal. 

What we're asking: Are tech-powered companies providing relief but disrupting the market in the long run, as nurses demand more flexibility? Are they helping to meet nurses where they are, balancing supply with demand? Maybe both?

Finally, how will hospitals adapt and change their models if the independent contractor is here to stay? 

1 big thing: Tech's nurse burnout fix

Illustration of a doctor's bag with stethoscope featuring a computer mouse at the end

Shore Capital Partners is evaluating the sale of EyeSouth Partners, a network of integrated eye care practices, sources tell Sarah. 

What’s happening: The Chicago-based private equity firm has engaged Jefferies for financial advice, with an upcoming sale process poised to include both sponsors and strategic buyers, sources say. 

By the numbers: Sources pegged EBITDA north of $80 million. 

Recent ophthalmology platforms have commanded mid-teens multiples of EBITDA, which suggests EyeSouth ought to trade hands at a valuation upwards of $1 billion. 

Shore, which invests exclusively in health care, backed EyeSouth in February 2017. 

Context: EyeSouth, of Atlanta, was originally preparing to come to market in 2020, but like much of the rest of the world pressed pause amid the emergence of the global pandemic. 

EyeSouth’s affiliated network consists of 27 practices with approximately 246 doctors providing medical and surgical eye care services across 10 states.

💭 Sarah’s thought bubble: Retail health care segments have fielded tremendous private equity activity over the last several years, but one recent transaction suggested the market is further evolving.

Last October, Partners Group’s EyeCare Partners bought CEI Vision Partners from Revelstoke Capital Partners at a $600 million valuation, or about 14x to 15x EBITDA. 

While this looks like “just another ophthalmology deal”, it appeared to be the first time that a large sponsor-owned eye care platform bought another scale platform at a platform multiple. 

Platforms of scale in ophthalmology and other retail health segments (like dermatology, for instance) may pursue similar playbooks, sources predict, particularly if the ultimate endgame is the public markets. 

Shore Capital and Jefferies declined to comment. 

2. 👀 The BFD: Shore sets sights on EyeSouth sale

Illustration of an eye chart with dollar signs instead of letters.

Now that it’s got a chief medical officer in the driver’s seat, Uber Health envisions a suite of scenarios to deepen and scale its relationships with clinics, health systems, patients and study sponsors, its leaders tell Erin.

Why it matters: Uber may have made its name shuttling people from bars and restaurants, but the company is carving out a role as part of the connective tissue linking various parts of the health care ecosystem.

Details: Beyond ferrying patients to doctor’s appointments and delivering prescriptions, that could involve shuttling people in rural areas to a clinical trial or sending a nurse to a participant in a remote monitoring program at the right time.

“That’s meeting patients where they are, and thinking about how to bring that into the clinical workflow,” Caitlin Donovan, Uber’s head of health, tells Erin.

What’s next: Uber’s health leaders are also working on new ways to support clinicians and people who use Medicaid and Medicare.

For example, the company could generate reports for clinicians “to see if people are making their appointments and why,” says Michael Cantor, Uber’s newly-minted CMO.

Uber could also help more people access the transportation benefits included in their health care plans, since it enables clinicians to order rides on their behalf and links people to their ride by text or landline phone call.

The big picture: “If we had access to services to coordinate more effectively, this is what we’d want: A one-stop shop to get transit, nutrition, prescriptions, all of those things,” says Cantor.

3. 🚘 Uber as a "one-stop shop" for health logistics

If 2021 lit a fire under digital health deals, get ready to see them keep on burning in 2022, according to a new KPMG survey of roughly 300 industry executives. 

Why it matters: COVID-19 has fueled a tailwind of innovation in health tech that will continue to fuel M&A activity throughout next year. 

Digital health payers and players are increasingly moving towards unification, as employers demand comprehensive solutions and investors and entrepreneurs face fierce competition in a crowded market.

Among health tech companies, it's a race to become the front door of health care, one analyst tells Erin.

Details: Investors’ key priorities for this year are improving operational efficiency and backing joint ventures. 

Telehealth is a top target for 2022 deals in health care IT.

Investors foresee a resurgence of hospital system spending for medical devices used in elective surgeries.

By the numbers: Seven out of 10 survey respondents say they expect to see a lot of M&A action in 2022, with more than half of PE investors saying they foresee doing at least 10% more deals than they did last year.

Valuations are expected to grow by 75% in the medical device category and 70% in the health care IT category compared to last year.

What they’re saying: “We expect that deals will be focused on supporting the new industry reality, one that is more digital and much more consumer-focused,” says KPMG U.S. health care and life sciences deal advisory leader Steve Sapletal.

4. ​​🔥 The heat is on for deals in 2022

Distalmotion, a Swiss maker of robotic surgery devices, raised $90m in Series E funding led by Revival Healthcare Capital. http://axios.link/d4A9 

Talkiatry, a provider of in-network psychiatric care, completed a $37m Series A round with an additional $17m from existing investor Left Lane Capital. https://talkiatry.com/ 

Mayd, a Berlin-based on-demand medicine delivery startup, raised €30m in Series A funding. Lightspeed Venture Partners led, and was joined by Target Global, 468 Capital and Earlybird VC. http://axios.link/VkP3

Eurazeo invested more than $200m to buy a majority stake in Cranial Technologies, a developer of treatments for flat head syndrome in infants. cranialtech.com

Carlyle sold Thomas Scientific, a distributor to the life sciences industry, to Broad Sky Partners. Thomassci.com 

Cigna (NYSE: CI) recently approached rival health insurer Centene (NYSE: CNC) about a takeover, per Bloomberg. http://axios.link/37B8

5. Today's health tech deals 

Maven Clinic, a fertility-focused virtual care provider for women and families, has named Alex Peahl, an assistant professor and physician-investigator at the University of Michigan, as its first visiting scientist. http://axios.link/9R8S

Lyn Health, a virtual care company focused on chronic conditions, named Jeb Dunkelberger to its board of advisers. Dunkelberger is chief executive officer of Sutter Health | Aetna, a jointly-owned payor-provider serving Northern California.

Freespira, maker of a virtual platform for treating post-traumatic stress disorder, named Risa Greendlinger senior vice president of employer sales from Happify Health, where she served in the same role.

6. It's personnel

Situational awareness: In the weeks after this year's entirely virtual JPM Healthcare Conference, we saw a slow but steady trickle of digital health deals and announcements. Since then, it's been eerily quiet — feels a little like the sector is suffering from a delayed hangover.

What about you? Tell us what you're seeing, hearing, or reeling from.

🎿 Erin is getting ready for this year’s Mothership Classic, a day of skiing at Palisades Tahoe to raise funds for the High Fives Foundation, an adaptive sports nonprofit that supports severely injured outdoor athletes in getting back on the slopes. You can support her here.

❤️ Thanks for reading Axios Pro Health Tech! Please ask your philanthropic friends, colleagues, and landlords to sign up.

January 27, 2022

1 big thing: Tech's nurse burnout fix