Q2 2018 HIT Digital Health Update

2018 Q2 HIT Sector Report Excerpt

Executive Summary

  • Global M&A dollar value of closed deals for Q2 2018 totaled $471B, ↑ 33% compared to 1Q 2018. Deal count dropped 26% for the same time frame. Compared to Q2 2017, Global M&A $ volume & deal count were also down on a YoY basis. While U.S. M&A deal count ↓ on a QoQ and YoY basis, $ volume ↑ during the same periods due to an increased number of megadeals.
  • Global Private Placements totaled $179B in Q2 2018, ↓16% from Q1 2018 and ↓15% YoY. North American Private Placements for all sectors totaled $65B, ↓26% QoQ and ↓36% YoY while deal count was ↓23% QoQ and ↓29% YoY.

    Private Placements: North American HIT Sub-sector* breakdown
  • N. American Digital Health M&A deal count increased ↑27% QoQ with 71 deals announced in Q2 2018. The three largest transactionsof the quarter were Amazon’s announced acquisition of PillPack, Altaris Capital Partners’ acquisition of Analogic and Veritas’ acquisition of GE Healthcare’s IT division. All three deals were inthe$1Brange.
    • The most popular sub-sectors for Digital Health M&A targets in Q2 2018 was the Patient Engagement/Monitoring Sector, registering an ↑117%QoQ. One of the more popular M&A targets of Q1 2018, HIM/Workflow Management, saw activity↓45%
  • Q2 Private Placement transactions in the N. American Digital Health sector increased 6% QoQ at 186 transaction and ↑19% YoY. Total $ amount of disclosed sector investments decreased 16% QoQ to ~$1.6B, with H1 2018 transactions totaling ~$3.5B.
    • Despite the increased QoQ deal count, Q2 ‘18 saw only 3 deals at $100M or larger (including Welltok’s $117M) whereas Q1 saw 3 deals over $200M (such as investments in HeartFlow and Helix) and 4 deals valued between $100-$200M.
    • Patient Engagement/Monitoring continued to be the most active sub-sector in Q2 with twice as many deals as the second most active sub-sector, Clinical Data/Pop Analytics. Telemedicine deal count decreased slightly QoQ but remained among the more popular areas to invest in during Q2.
  • Although the U.S. IPO market in Q2 2018 experienced activity levels that equated to a 3-year high, there were no U.S. based digital health IPO’s during Q2 ‘18, a trend carrying over from 2017. Strategic exits are more attractive than the IPO market.
  • For LTM Q2 2018, Novahill’s Digital Health Public Comparable Index outperformed the S&P 500 Index, gaining 27.6% vs. 12.2% for the S&P 500. Digital Health companies continue to trade at 2x the EV to EBITDA or Revenues multiples of the S&P.