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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

In today's deal doldrums, investors are learning the art of patience, sources tell Aaron at Nashville's ViVE health care conference.

Why it matters: This has been the slowest first quarter for global M&A since 2013, according to preliminary data from Refinitiv.

What's happening: With dry powder available but few new deals to deploy it to, firms are using their capital to invest in their own portfolios, one managing director at a bulge-bracket PE firm says.

"This way they capture more ownership and also lengthen the runway on their hold of the business," the MD says.

"With this current investment environment, there are going to be down rounds," one general partner at an early-stage VC firm comments. "Series B could be the trickiest going forward."

Coining it the "Series B blind spot," the VC partner says investing at that level means taking a risk on a company without a long track record.

Yes, but: Activity hasn't halted entirely, and in the private equity world, dealmakers are starting to pick up their pencils.

"Things are starting to thaw a bit," says a principal at a middle market PE firm. "There are good businesses that still need funding."

"We are working proprietary deals that we sourced, as those are more economical than going through the auction process," he says.

Zoom in: "Value-based care outcomes continue to be very investable," says one health tech investment banker. "There is no cap to growth despite some headwinds; profit pools are shifting to better and more efficient business models."

The bottom line: "The absence of capital does not mean absence of innovation," says another VC partner.

"We have to remember, especially in times like today, that it's not just about the next round of funding, it's building a successful company for the long haul," he says.

1 big thing: Investors talk patience at ViVE

Illustration of an hourglass with money in the top half stuck and not falling down. 

Cardinal Health is exploring the sale of its nuclear medicine business, with private equity firms mulling offers, in a deal that could fetch around $1 billion, Bloomberg reports.

Why it's the BFD: Corporate carve-outs will likely yield the most new deal flow as sponsors hold off on auctioning their platforms until market conditions improve, Claire writes. 

Details: The Dublin, Ohio-based drug distributor has hired advisers to gauge interest in the unit, Bloomberg says, citing sources.

The report adds that a final decision has not been made and Cardinal could elect to keep it.

Catch up fast: Cardinal Health announced a strategic review last September after activist investor Elliott Investment Management took a stake in the company. The hedge fund's head of corporate engagement, Steven Barg, took a seat on the company's board.

Cardinal Health, a major distributor of pharmaceuticals and medical products, settled lawsuits last year regarding allegations that it supplied excessive amounts of opioids to American communities.

Be smart: Any sponsor pursuing a deal with a price tag that starts with the letter "B" needs quite a bit of leverage to get over the finish line, at a time when not much of it is available.

The intrigue: Alongside its distribution business, Cardinal Health also provides data and technology solutions for health care providers.

Back in September, CNBC highlighted the company's Cardinal Health at-Home Solutions business line as another unit ripe for takeout.

Cardinal Health weighs sale of nuclear medicine arm

2. The BFD: Cardinal Health weighs divest

Inato, a provider of technology designed to power more inclusive clinical trials with offices in Paris and New York, raised $20 million in Series A2 funding led by insider Cathay Innovation with support from insider Obvious Ventures and new backers La Maison and Top Harvest Capital. https://inato.com/ 

Emulait, a Las Vegas-based developer of baby-feeding tech, raised $11m in a round led by family offices and private backers, bringing total funding to $16m. https://axios.link/40FZZE1 

Mate Fertility, a Los Angeles-based family planning startup, raised $4.2m in Series A funds from strategic investors and crowdfunders. https://axios.link/3Kfmuub 

It's official — CVS Health completed its $8 billion acquisition of Signify Health. https://axios.link/40JSrAd 

3. Deals o' the day

Oscar Health named former Aetna CEO Mark Bertolini its CEO, effective April 3. Current CEO Mario Schlosser will become president of technology.

SteadyMD named former Biofourmis chief commercial officer Sheeza Hussain chief growth officer.

4. It's Personnel

VALID's hazy future — Axios Pro Health Policy

What states are restricting transgender health care — Axios

5. Your daily dose

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

It's Wednesday, Health Tech readers. You made it halfway through the week!

💊 Situational awareness: Amazon Pharmacy today rolled out a coupons feature that automatically applies manufacturer-sponsored coupons directly to eligible orders. Watch out, GoodRx...

📺 Breaking with her long-held tradition of waiting until social media spoils all television, Erin started the latest seasons of "Yellowjackets" and "Succession."

😍 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Jay Bennett. Please ask your friends, family and colleagues to sign up.

March 29, 2023

1 big thing: Investors talk patience at ViVE