FINANCIAL

Q2’17 Healthcare M&A Roundup

JUL 21
In Q2 2017, TripleTree tracked 411 healthcare mergers and acquisitions that were either closed or announced but have yet to close. The number of transactions this quarter is down from the 464 deals we reported on in our Q1'17 Healthcare M&A Roundup.

The total publically announced transaction value across all healthcare transactions was just over $88 billion. Further, the average total enterprise value for the transactions was $689.6 million, with a median value of nearly $34 million. The variance was driven in large part by the $24 billion acquisition of Bard by Becton Dickinson, a large U.S. medical equipment supplier.

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Below, we highlight a few of the top transactions by deal size from this past quarter.
 
Outcome Health receives $500M in Funding

Target Description
Outcome Health provides a digital health information network focused on both patient engagement and education. The platform features digital engagement tools that seek to build a relationship between physicians and their patients in an effort to improve health outcomes. This solution provides actionable information to patients through digital renderings of personalized health-related content. It also allows healthcare advertisers the opportunity for targeted marketing in a seamless format. The Chicago-based company received no outside funding prior to this round, at which the Company was valued at $5 billion.

TripleTree Perspective
The use of digital technology to drive personalized, actionable insights for healthcare consumers is a common theme we are observing across the industry. Outcome Health is executing on this trend by offering a platform that involves patients in their care, while providing connectivity with patients and physicians on a national scale.

We find the $5 billion valuation to be an indication that much is ahead of the Company in the way of continued penetration and opportunity. We do not commonly see valuations at these heights in healthcare, where other companies with engagement and patient interaction capabilities have been valued and priced more modestly. The focus certainly seems to be around aggregating lives and physicians as the platform is scaled, and it is clear that this valuation assumes significant monetization opportunities on the horizon. This is a company we are certainly interested in and will continue tracking.
 
Best Doctors Acquired by Teladoc

Target Description
Best Doctors connects patients to a physician in their network of 50,000 doctors in 450 specialties, who remotely provide a second opinion on both diagnosis and treatment plans. The Company contracts with large employers, and also serves ACOs and insurers. The platform allows patients to take greater control of their treatment by providing alternative healthcare options in an effort to improve the long-term outcomes for patients. The Company also reduces financial strain on the healthcare system by reducing the need for in-person clinical visits through its telemedicine technology.
 
TripleTree Perspective
This deal represents Teladoc creating a full-service virtual delivery platform as it expands into second opinion services. It represents a strong stance that virtual delivery will continue to be important to employers and payers and a point of emphasis in providing improved outcomes at lower costs. Teladoc is an established leader in a space poised for continued growth where there are many interesting companies, though most are small and private.

Best Doctors brings its network of physicians that are all peer rated as the top 5% of physicians in their respective fields and provide second opinion recommendations that average $36k savings per case to Teladoc’s telemedicine delivery platform. The combination creates a network of world-class expertise paired with a delivery and engagement platform that can be offered to employers and payers so their high-cost members can engage with a highly effective specialist network. We anticipate this ability to mobilize the best-of-the-best providers to high-cost members will effectively deliver improved care at a lower cost. The broader result may very well be an amplification of perceived capabilities and value of virtual delivery. This transaction is a clear signal to the market that investors believe in the future of virtual care delivery. We expect this will open the gate for further investment in this area.
 
As previously mentioned, Q2’17 saw a slight decrease in M&A transaction activity relative to Q1’17, but was still at a relatively high level when compared to 2016 deal volume. Despite continued regulatory and legislative forces imparting change on the U.S. healthcare industry, we continue to see investor confidence in undeniable themes shifting the healthcare landscape.
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Michael Herrmann