Medicine and Health Panel and Entrepreneurs’ Panel – 15 November 2022

The Current Landscape of Digital Health M&A and Financing presentation by Jonathan Ishee and Geoff Starr

Jonathan is a long standing WCIT member and with his colleague Geoff both work for Troutman Pepper, a US law firm that guides their clients in raising funds, securing exits and general legal business matters.  in the Health Tech Sector.

This event was a new collaboration between the Medicine & Health and Entrepreneurs Panels and was well attended by some enthusiastic contributors including the Deputy Master Alistair Fulton.  The event was also reviewed using the Mentimeter online tool allowing participants to make easy comments about the event.

Paul Finch welcomed everyone, describing the role of the Panel and the Panel’s new IT4Health group and then introduced our two guest speakers.  We also welcomed the chair of the Entrepreneur’s Panel, Mark Bridger. 

The purpose of the discussion was to look at the volumes and types of M&A (mergers and acquisitions) transactions within the Health Tech Sector.

Geoff introduced himself and went on to explain that the Health Sector is now one of the largest areas of investment and has been responsible for high growth in Equities for over 10 years particularly in Digital Health (DH).  Geoff explained in more detail what DH was, everything from wearables such as iWatch to full provision of care including drug usage, and mental health.  The average investments last year were $39.7m and the total just under $30B

We were presented with several charts outling some trends in M&A and funding deal sizes which showed that 2021 was a very significant year with a large spike in investments, now starting to reduce.  There had been a focus on early-stage companies which were unable to reach IPO stage and there had been no transactions this year.  There was a ‘gloomy’ forecast and there was a lack of clarity in the market.  The conclusion is that there are a lot of companies wanting to invest but are waiting to see what happens and that there were many single point solution companies that would benefit from merging to survive.  It was interesting that within the area of investment, mental health had seen significant funding and year to date all sectors had seen a downturn.

We looked at 4 different trends in the market which suggested there was some consolidation happening with growth, internal efficiencies, ‘Buy and Build’ as well as what was described as Disruptive Innovation – where a large organization acquires a portfolio of unrelated technologies.  The performance post IPO for 20 companies from 2021-2 showed only 1 with growth, which could be seen as opportunity for future investment.   A notable slide showed a lot of red bars indicating that post IPO many firms had not lived up to the hype – indicating there was a lot of high valuations in the past which had not come through to the bottom line.  The Panel believes this could partially explain the current drop in M&A activity.

There was a Q&A session where it was noted that

  • The US health sector was a difficult market as regulation varied across States and many hospitals were still ‘Analogue’.  This highlighted the difficulty of getting them to invest in digital solutions.
  • There were many patents still being filed but not amounting to much.
  • We were in a consolidation period in the market with mergers and acquisitions still being an investment opportunity

Views collected about the meeting from the participants:

  • It was very interesting and I had no idea of the status of investments in healthcare.
  • Excellent event building understanding of the medical technology investment landscape.
  • The interactive nature worked really well
  • Great awareness of current state of the health tech market
  • The direct experience of the speakers
  • Fascinating, insightful, great double act !
  • Health Tech is hard!
  • Clear, data-oriented, relevant