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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

After conducting management presentations, Webster Equity's auction process for clinical site manager CenExel has gone pencils down, two sources familiar with the matter tell Aaron.

Why it matters: While pharma services is a hot area for private equity, valuation uncertainty is putting a wrench in the health care dealmaking gears.

The latest: Advisers for CenExel, including Goldman Sachs and Rothschild, took first-round bids three weeks ago, the sources tell Axios.

Blackstone was among the bidders, as the process was targeted toward large-cap sponsors, they say.

Salt Lake City-based CenExel is angling for a valuation in the $1.2 billion to $1.5 billion range.

Yes, but: Prospective buyers are concerned about CenExel's business not being integrated enough, the sources say. Since Webster invested in 2018, CenExel has completed at least six add-ons.

One source says CenExel hasn't invested enough into its technology backbone, with the business having "seen lots of EBITDA adjustments."

Catch up quick: The process launched at the start of this year and CenExel is marketing itself on about $85 million, PE Hub reported in January.

It's Webster's second time trying to sell the business in the last three years, after it tested the market in 2021.

How it works: CenExel is a clinical research site manager, mostly conducting studies in post-op pain, neurology and psychiatry on behalf of pharmaceutical companies. 

The company offers study services spanning from patient recruitment, and screening and enrollment to medical procedures and monitoring.

Zoom in: Since Webster invested, CenExel has acquired clinical site businesses and research organizations based in California, Colorado, Florida and Georgia. 

Those acquisitions spanned across several disease areas, including dermatology and neurology. 

The big picture: Private equity likes the clinical trial market for its fragmentation, as well as industry tailwinds like expanding U.S. pre-clinical pipelines and augmented R&D budgets.

GHO is looking to sell its clinical trial services provider Velocity Clinical Research, Axios reported in March.   

Webster, CenExel, Goldman, Rothschild and Blackstone did not respond to Axios' requests for comment. 

1 big thing: Webster's auction for CenExel on ice

Illustration of a stop sign in the shape of a red cross

Revenue cycle management tool provider Sift Healthcare raised a $20 million Series B led by B Capital, CEO Justin Nicols tells Erin exclusively.

Why it's the BFD: Financial strains like ongoing health worker shortages are squeezing hospital billing and revenue cycle departments.

Zoom in: Previous investors Allos Ventures, First Trust Capital Partners and Rock River Capital joined the round.

Funds will power additional hires and further investments in AI.

Nicols foresees Sift looking to raise a Series C in the next 18–24 months.

How it works: The Milwaukee-based company offers AI-based clinical workflow guidance tools designed to track payment trends, boost accuracy and avoid clinical denials and write-offs.

Flashback: Sift in 2022 raised a $9 million Series A led by Allos Ventures and First Trust Capital Partners with participation from Rock River Capital Partners and the Winnebago Seed Fund.

What they're saying: Health care organizations can use Sift's tools to pursue past claims that have been denied and to avoid denials in real-time.

"Sift sits in the workflow and can help to mitigate denials prospectively, rather than just after the fact," says B Capital principal Nicholas Whitehead.

"That's our Trojan horse: being able to predict these things in real time," says Sift's Nicols.

The big picture: Providers cited revenue cycle management as a top priority for 2024 in a fall 2023 Bain & Company and KLAS report.

They anticipated investments across a broad set of subsectors including revenue integrity, charge capture and complex claims.

State of play: Hospitals have a plethora of venture-backed and legacy options when it comes to revenue cycle automation tools as more look toward billing tech to alleviate financial burdens and boost efficiency.

AI-powered revenue cycle service provider CodaMetrix in March raised a $40 million Series B.

Health care revenue cycle automation startup Adonis last summer collected a $17.3 million Series A.

Automation-driven medical coding company Fathom in 2022 pulled in a $46 million Series B.

2. The BFD: Sift gets $20M for medical billing tools

Illustration of a red pen held by a robot hand marking up a medical bill.

Want more health tech deals? Check out the Axios Pro Deals Tracker.

• Triomics, an SF-based provider of workflow software for oncologic clinical trials, raised $15m from Lightspeed, Nexus Venture Partners, General Catalyst and YC. triomics.com

• Apollo-backed Lifepoint Health, a Tennessee for-profit hospital network, announced a proposed $900m senior notes offering, along with a $400m new incremental term loan facility and debt paydown. axios.link/44BoCFh

• Vance Street Capital closed fund IV with $775m. vancestreetcapital.com

3. Deals o' the day

• Alex Gorsky, former CEO of Johnson & Johnson, joined Iconiq Growth as general partner. axios.link/4duA1e2

• Mark Sugrue, former managing director at FTI Consulting, joined Alvarez & Marsal's health care group as senior director. axios.link/3Kelx4N 

• Michele Colocci, formerly with Morgan Stanley, is joining Lazard as a London-based vice chair of investment banking focused on health care. axios.link/3UBHi3a

• Tim Garnett, former chief medical officer at Eli Lilly, joined Lindus Health's board of advisors. axios.link/3UTYNx6

4. It's Personnel

🧠 Neuralink's first in-human brain implant has experienced a problem, company says — CNBC

❌ Medicare for All missing from progressives' 2024 agenda — Axios

📈 Oscar Health records first-ever quarterly profit — Modern Healthcare

🩻 AI could spot breast cancer earlier. Should you pay for it? — NYT

5. Your daily dose

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

🍉 Erin started a beginner pottery class and after making a set of flower-shaped pinch pots, she hopes to craft watermelon chopstick rests and a cactus-shaped ring holder.

🔖 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Egan Millard. Please ask your colleagues, friends and family to sign up.

May 09, 2024

1 big thing: Webster's auction for CenExel on ice