FINANCIAL

Noteworthy M&A Transactions - February 2018

MAR 15
Healthcare M&A in February 2018 highlighted key themes that provide insight into the direction of further market activity for the rest of the year and beyond:
 
  1. Major technology companies continue to actively push into healthcare. Last month technology companies such as Apple, Alphabet, and Fitbit made moves in the healthcare space. The $3 trillion healthcare sector represents an attractive opportunity as healthcare has lagged behind the technology curve. Additionally, the rise of healthcare consumerism, higher out-of-pocket expenses, and employer sponsored programs have led to an environment ripe for disruption.
  2. Artificial intelligence driven health platforms are creating buzz. Artificial intelligence is an exciting new frontier in healthcare, and its power to reduce costs and improve quality and access to healthcare has drawn immense interest from investors. TripleTree and TT Capital Partners have taken note of the increasing excitement around artificial intelligence in healthcare and explored the space in more detail in a recent blog.
  3. Dermatology continues to attract private equity investment. Our firm has closely tracked the M&A activity in dermatology and published an Industry Perspective on practice management and highlighted the applicability to dermatology. The regulatory environment, reimbursement pressures, need for advanced EMR systems, and extreme fragmentation is driving consolidation in a number of specialties. Private equity is leading the charge in this “roll-up” strategy as the platform’s they back provide the infrastructure and management to attract independent dermatology practices.

Several transactions announced in February align with these themes:
 
  • Fitbit, a leading provider of wearables to track and provide motivation for everyday health and fitness, announced the acquisition of Twine Health for $17.5M in cash. Twine Health is a health coaching platform empowering people to achieve better health outcomes. Through its HIPAA compliant platform, Twine Health combines artificial intelligence-driven insights and engaging content to help people better manage chronic conditions such as diabetes and hypertension which in combination impact approximately 105 million people in the United States. The move comes as Fitbit’s Health Solutions platform is becoming an increasingly important part of its business strategy. Twine will serve as the foundation for Fitbit's expansion into health plans, health systems, and self-insured employers looking to reduce costs and improve member health through intervention beyond the walls of the clinical environment. Eventually Fitbit can extend the benefits of the Twine platform to its 25 million+ users and expand into new condition areas.
 
  • Fitbit’s move comes as both Alphabet and Apple have made recent moves to strengthen their ties to healthcare. Alphabet’s healthcare unit, Verily is weighing a move into the insurance sector through partnerships with payers. According to those familiar with the move, Verily is in discussions with insurers to jointly bid for contracts that would involve taking on risk for patient populations. The move makes sense for Alphabet as it can leverage the patient health information it already has and its data expertise to determine the most appropriate path of care. In another move, Apple announced it is launching primary clinics called AC Wellness to serve its employees and their families. The clinics, which will open in spring 2018, are yet another example of technology companies proactively managing employee health.
  
  • PAIGE.AI, a company utilizing artificial intelligence to improve the diagnosis and treatment of cancer, announced it has raised $25M led by Jim Breyer, founder and CEO of Breyer Capital. The capital will allow PAIGE.AI to invest in building the world’s leading offering in digital and computational pathology. Recently, PAIGE.AI developed its first product for the clinical setting, an application suite and slide viewer, which was implemented institution wide at Memorial Sloan Kettering (MSK) Cancer Center this year. The partnership with MSK gives PAIGE.AI invaluable access to MSK’s intellectual property in the field of computational pathology and rights to their library of 25M pathology slides. PAIGE.AI will be releasing disease-specific modules for their clinical product later this year.
 
  • Austin-based artificial intelligence startup, Closedloop.ai, currently backed by Greycroft, Meridian Street Capital, Social Starts, and Joyance Partners, raised additional equity funding from undisclosed investors. Closedloop.ai’s product offering leverages all available health data in an organization and learns from patterns in their customer’s data in combination with their own EHR data to generate more accurate risk scores, predictions, and recommendations. Closedloop.ai’s platform enables healthcare organizations to identify at-risk patients, see which intervention methods are most effective, and monitor their impact over time.
 
  • Platinum Dermatology Partners, a portfolio company of Sterling Partners, has acquired Phoenix-based Center for Dermatology and Plastic Surgery (CDPS). CDPS provides general and cosmetic dermatology, dermatopathology, and surgical solutions including Mohs micrographic. Platinum Dermatology’s managed service organization enables physician business owners to maintain ownership and autonomy over their practice while benefiting from comprehensive practice management solutions and collaboration with other physicians. The move expands the Platinum network to Arizona through CDPS’s 21 providers across eight locations in the greater Phoenix area.
 
  • Nashville-based United Derm Partners has expanded its reach into Oregon through its acquisition of Bend Dermatology Clinic. The Bend, Oregon-based practice has five physicians across five locations providing general, medical and cosmetic dermatological services. United Derm’s practice management solutions will provide Bend Dermatology with operational support, revenue cycle management, regulatory assistance, contract negotiation, and capital for growth. With the acquisition, United Derm has expanded to nearly 50 providers across 20 locations in Nevada, California, Texas, and Oregon since being founded in 2016.
 
  • Anne Arundel Dermatology Management (ADM), a portfolio company of New MainStream Capital and Pantheon, announced its partnership with Dermatology Associates of Knoxville (DAK) and East Tennessee Dermatology Group (ETDG). With the partnership, ADM is now the largest provider of dermatology services in East Tennessee and has more than doubled its footprint in the state since entering the market last year. Anne Arundel now serves Maryland, Tennessee, and Virginia through 38 clinics and 90 providers.

TripleTree and TT Capital Partners continuously monitor the market to identify the forces and themes impacting the healthcare industry.  Thanks for reading and let us know if you have any feedback!

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Cameron Toler