Healthcare Technology & Tech-Enabled Services – 2022 Annual Review
Friends and Colleagues,
With another year of M&A and financings in the books, we’re pleased to provide you with our 2022 Year-in-Review. This past year saw a relative return to 2020 levels, after an outlier ’21 in terms of both deal volumes and aggregate value, with ~$14B in disclosed financing proceeds and nearly $70B in announced M&A deal values. Like the broader capital markets, healthcare tech stock performance was significantly pressured and very few names were spared: 54% ended down 50%, 39% down 70%+, and 5 (9%) down over 90%, eliminating just over $100B of cumulative market cap from the sector. Some key report highlights are below:
1. The Public Markets Punished Everyone … The Only ‘Winners’ Found Strength in Exits – Of the market’s 57 Healthcare Tech stocks, ~10% ended up on the year, where another 10% (5) exited through acquisitions
2. 2021’s Public Market Freshman Class Hit their Sophomore Slump – Of the 24 new issues (IPO & SPACs) in ’21, 18 were down over 50%, 16 down more than 70% and 10 were down more than 90%
3. The Market Giveth, And Taketh Away … $100B+ Cap Loss in ’22 – The Healthcare Tech sector lost $100B+ of cumulative market cap in ’22, beginning the year with a cumulative market cap of ~$255B
4. While Financing Volume was Sobering YoY, the Market Was Very Much In-Line with a Normalized ’20 – Though 2022 had fewer financings than 2020, average and median round size increased 7% and 22%, respectively
5. Similarly, With No Possible ‘Comp’ to ’21, M&A Volumes and Total EV Fell Closer to a More Normalized ’20 Comp – Similar to the financing front, though M&A volumes fell by ~50% versus the prior two years, disclosed EV only dropped by 25% versus 2020 as the market shifted to larger transactions
6. Retailers/Tech Stretch Their Legs … Amazon, Walgreens, CVS ‘Get After It’ in ’22 – Retailers/Tech cumulatively made $11.4B+ of acquisitions in the Value-Based / Primary Care space, inching closer to becoming one-stop healthcare juggernauts
7. The Year of Large-Cap VBC Consolidation … After a Historic ‘Core Tech’ Year in ’21 – Blue ribbon VBC acquisition targets included Summit Health, LHC Group, Signify Health and One Medical and others as the market expands/adopts VBC where ’21’s largest EV deals were marked by ‘core tech’ deals like Oracle / Cerner, Microsoft / Nuance and Athenahealth
8. ‘Care in the Home’ at the Center of VBC’s Push in ’22 – LHC Group, CareCentrix, DispatchHealth, Somatus and CareBridge illustrated new thinking and new care models that are, of course, tightly aligned with care delivery in the home
9. Pharma-Tech Saw the Creation of Another Enterprise Bellwether – With frenetic M&A activity in ’21, pharma-tech saw the creation of a new category leader in ’22 through the combination of Norstella and Citeline, backed by Warburg, Welsh Carson and Hg
10. Behavioral Health Prioritizes Psych over Therapy to Broaden Scope and Relevance to Post-COVID Market Demands – 2022 saw significant investment in companies like OxfordVR, Talkiatry, Sayana and Total Brain as providers and employers explore innovative, technology-driven approaches to mental health
And, last, but not least, 2022 was a busy year for the Healthcare Tech Group. We served as exclusive advisors to Prime Therapeutics on the $1.35B acquisition of MagellanRx from Centene (CNC) and Patient Funding Alternatives on their majority re-capitalization with Leonard Green & Partners.
We saw the return of our Annual Healthcare Collaboration Summit on Cape Cod which hosted 125+ leading venture and private equity investors with their CEOs, and larger-cap consolidators over the 1.5-day event. The summit included our Second Annual Fishing Tournament followed by an evening reception and a morning of ‘hard-hitting’ content from healthcare tech’s greatest minds and influencers. It was amazing to welcome old friends and make new, and all be together on the Cape at Chatham Bars Inn enjoying the beautiful September weather. Planning is already underway for Fall 2023, where we will be back, bigger and better than ever (see the ’22 recap and ’23 Save the Date in the report).