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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

Three years into its investment, ArchiMed is poised to make 4x its money with the sale of Bomi Group to UPS, a source familiar with the matter tells Sarah. 

Why it matters: While the deal's value wasn't disclosed, Bomi reflects a winning investment for the selling private equity firm — further validating increased demand for efficient and reliable health care logistics.  

Driving the news: United Parcel Service on Monday announced an agreement to acquire the Italian-based distributor of medical products, gaining a big foothold in temperature-controlled transport.

Catch up fast: ArchiMed, a health care exclusive PE firm, took Bomi private in 2019 for €70 million, representing its first investment out of MED Platform 1.

Bomi since that time has closed 15 acquisitions, all the while organic growth spiked to 18% annually, from 6% over the last three years, the firm says. 

Revenues during its investment more than doubled to €300 million in 2022, it adds.

Context: ArchiMed says that with the deal, and following prior portfolio liquidity events, it is poised to return 70% of its money, on a cash-to-cash basis, to MED Platform I's investors. 

MED Platform I — its first mid-cap fund — closed on €1.5 billion including co-investments just three years ago, and is now at 2.2x multiple or a 69% annualized return, the firm says. 

ArchiMed partners with European and North American growth companies, buying majority stakes for anywhere from €50 million to €1 billion

What we're watching: ArchiMed Med Platform II began fundraising in January — and although it has not disclosed a target, the firm says it has raised a "substantial, undisclosed amount" that makes it one of the largest health care buyout funds globally. 

1 big thing: ArchiMed makes 4x its money on Bomi

Illustration of a cardboard box full of money.

Evidence Partners, an AI-enabled literature review startup, has pulled in $20 million in growth financing, CEO Peter O'Blenis tells Sarah.

Why it's the BFD: Systemic literature reviews are vital to conducting evidence-based research but are historically done manually — an often laborious and time-consuming process that is susceptible to error.  

Details: Led by Thomvest Ventures, with participation from Pender Ventures and Export Development Canada, the fundraise is Evidence Partners' first external capital infusion.

Proceeds will go toward people and R&D, as well as driving growth in existing markets and other non-life sciences areas that are applicable, Thomvest partner Andrew Pinkerton says.

How it works: Applying automation, the Canadian startup aims to improve the accuracy and affordability of this antiquated process. Evidence Partners' DistillerSR platform automates every aspect of a literature review, which is used to refine a data set to support questions or arguments that are made in research.

The company claims that it works with 60%-plus of the largest pharmaceutical and medical device companies, in addition to contract research organizations, government agencies like the FDA, and universities. 

DistillerSR has seen double-digit growth since its 2009 launch, and today works with more than 300 of the world's leading research companies, it says. 

In an environment taking a more balanced approach to growth, DistillerSR's high net value retention signals the company's market value, Pinkerton says.

State of play: Demand for systematic reviews is growing broadly speaking, fueled by the growth of the end market and the labor constraints of its customer base, O'Blenis says. 

The EU recently put into effect new regulation (EU-MDR) such that any company selling medical devices in Europe needs to obtain and update literature reviews on an annual basis. 

Plus, to ensure product safety, the rules after a product is in market are more stringent. "Organizations that have never had to [do literature reviews] are now compelled to," O'Blenis says. 

In the non-medical device arena, "the volume of scientific literature is increasing exponentially, and staying on top of it is almost impossible without AI," the CEO adds. "There are not enough qualified people to do this work."

The bottom line: Evidence Partners may have a first-mover advantage as the market creator around automation of this process. 

"As we're growing, we are uncovering all sorts of adjacent markets," that are driven by its customer base, the CEO says. 

2. The BFD: Literature reviews get an upgrade

Illustration of a laptop with the screen made out of a bookshelf.

A UnitedHealth Group executive challenged the Justice Department's allegation that a United tie-up with Change Healthcare would grant the payor unfair competitive advantage, Law360 reports.

Why it matters: U.S. regulators are hinging their objection to the transaction on the possibility that UnitedHealth (NYSE: UNH), via Change's clearinghouse, could access sensitive data on how its competitors process health care claims data, Axios' Claire Rychlewski writes. 

What's happening: Yesterday was day six of the 12-day bench trial examining the proposed $13.8 billion UNH-Change merger. UNH SVP of strategy innovation Paul Higday testified.

Regulators expressed concerns UNH could use Change's data to avoid higher-risk, more expensive populations when vying for large national employer contracts.

Leveraging Change's clearinghouse data, UNH could tweak pricing models to edge out rivals, as well as get vital intel on how other insurers "edit" health care claims to decide coverage, the DOJ alleges.

UNH and Higday argued that the insurer's business model depends on buy-in from many health insurer customers, which disincentivizes UNH to abuse their data access. 

According to Higday, regulators have a "limited understanding of the underwriting profession in health care," and should be focused on insurers already serving high-risk populations.

Yes, and: UNH has long imposed limitations on how it leverages data from its OptumInsight unit, Higday said.

"Neither I nor anyone on my team are allowed or will share that data," said Higday, who was responsible for determining what UNH does with Change's data. 

The other side: The DOJ tapped Ben Handel, a University of California at Berkeley economist, who said during his testimony that the granularity of Change's data automatically gives UNH the ability to undercut the competition.

Chris Spady, vice president of revenue cycle at hospital chain Erlanger Health System (and current Change customer), testified that contrary to UNH's claims, it's not actually that easy for customers to switch between claims clearinghouses.

Despite the costly and lengthy process of switching (an often yearlong process costing up to $1 million), Spady said Erlanger will likely switch from Change if the deal goes through. 

"They would have access to all of our bills that go out the door," Spady said, sounding warning bells about granting the companies "a treasure trove of all they see." 

3. UNH-DOJ update: Battle over data question

Illustration of a Windows-style folder icon with a padlock on it. 

Nanopath, a Cambridge, Mass.-based molecular diagnostics startup for women's health screening, raised $10m in Series A funding co-led by Norwest Venture Partners and Medtech Convergence Fund, a SV Health Investors venture fund. Gingerbread Capital and Green D Ventures participated. https://www.nanopathdx.com/

Health information network Availity agreed to acquire Diameter Health, a Farmington, Conn.-based clinical data quality and interoperability business. Novo Holdings owns a minority stake in Availity. https://www.diameterhealth.com/

TikTok parent company ByteDance acquired Amcare, a Chinese network of women's and children's hospitals, for about $1.5b, per Bloomberg. Amcare's previous investors included Hillhouse Capital, China Renaissance and Warburg Pincus. https://axios.link/3BTJRWv

4. Deals 'o the day

Houlihan Lokey hired Luiz Greca, from William Blair, as a managing director to lead the firm's health care IT practice out of Miami.  

MRO hired Nathan Eastman as CFO from Availity, where he also held the CFO position. 

5. It's Personnel

It's Tuesday, which means Erin will be back tomorrow! 

Situational awareness: Local and regional leaders are pushing hard for the soon-to-be independent 3M health care spinoff to put its headquarters in St. Paul, Axios Twin Cities reports. Read why. 

😎 Sarah is pumped for her staycation pool day tomorrow in Williamsburg. 

💜 Thanks for reading Axios Pro Health Tech! Please ask your friends and colleagues to sign up.

August 09, 2022

1 big thing: ArchiMed makes 4x its money on Bomi