Noteworthy M&A Transactions - December 2020

JAN 20
December 2020 M&A activity highlighted continued momentum on several compelling themes:
  1. Mental Health Awareness Bolstered by COVID-19: Mental health has rapidly risen to the forefront of public awareness, largely accelerated by the pandemic. Nearly 50% of adults in America have experienced pandemic-related stress associated with fear of infection, isolation, and financial anxiety. TripleTree has previously discussed the evolving landscape in behavioral health care as well as expected market trends in 2021, including increased access to care, growing demand for new solutions, and steady investment in private equity.
  2. Increasing Focus on Managing Patients on Complex and Specialty Medications: Growth in spending on specialty medications continues to outpace traditional pharmacy, with the areas of immunology, oncology, and diabetes accounting for the majority of growth. Revenue of specialty drugs grew from $114 billion in 2015 to $161 billion in 2019, accounting for approximately 36% of total pharmacy industry prescription revenues. Many patients on specialty drugs have complex and chronic conditions, requiring specialized and often high-touch care delivery, medication management, patient education, and therapy support. An ongoing trend we’re watching is the increasing role that hospitals and other providers are playing in specialty pharmacy. Since 2015, specialty pharmacies owned by hospitals, health systems, physician practices, and providers’ group purchasing organizations have more than doubled as a share of specialty pharmacy locations. This trend is leading to the development and growth of sophisticated specialty pharmacies and enabling service providers supporting these providers in delivering coordinated care to often complex and vulnerable populations.
  3. Artificial Intelligence (AI) Platforms Receive Attention from Investors: As AI technologies have continued to advance in capability and scalability, companies continue to apply them to common headaches across the full continuum of healthcare services. AI services that reduce cost and friction within healthcare, especially those that serve providers or integrate into provider workflows, have seen a spike in attention from investors. Cost containment remains top of mind for providers and hospitals who continue to face low reimbursement rate environments and public pressure to keep bills affordable for patients. AI technologies that reduce wasted spend, time, and services for providers alleviate financial pressures facing hospitals while addressing the pain points and factors driving provider burnout. Technology platforms, from back-end solutions that improve prior authorization or analytics, to services that are able to integrate into provider workflows to help improve patient care and experience will continue to receive attention from both financial sponsors and strategic buyers as investors try to capitalize on the proliferation of AI technologies to continue to drive better care and lower spend.

Several acquisitions in December aligned with these themes:
  • Kelso & Co. acquired a majority equity stake in Refresh Mental Health, a provider of outpatient mental health services. Refresh Mental Health operates in over 200 treatment facilities across 28 states. The company’s 2,000 mental health clinicians treat the full spectrum of mental health conditions across all age ranges in physical and virtual settings.
  • Autism services provider Caravel Autism Health announced the acquisition of Behavior Therapy Solutions of Minnesota, a provider of individualized behavioral and mental health services. The transaction will aid the company in expanding access to autism therapy, psychological assessments, and outpatient counseling services.
  • Pharos Capital Group acquired Catalyst Behavioral Solutions via its portfolio company, Family Treatment Network (FTN), a provider of child and adolescent behavioral health services. The acquisition of Catalyst will expand FTN’s outpatient behavioral health services to Utah.
  • CarepathRx, backed by Nautic Partners, acquired University of Pittsburgh Medical Center’s (UPMC) Chartwell subsidiary in a deal valued at $400 million. The partnership will expand patient access to specialty pharmacy and home infusion services.
  • Centene Corporation, a multi-national healthcare enterprise, acquired PANTHERx, one of the largest and fastest-growing specialty pharmacies in the United States. PANTHERx serves patients afflicted with rare conditions, offering a suite of solutions aimed to streamline the delivery of orphan medications.
  • Olive Health, an “AI as a Service” healthcare platform, raised $225.5M in funding in a round led by Tiger Global and joined by General Catalyst and Silicon Valley Bank. It brings the company’s total funding to $385M over the last 9 months and $448M since the company was founded. The company will use the funding to continue to grow its lineup of AI products for cost containment and healthcare intelligence.
  • Verata Health, a pioneer of using AI to streamline the prior authorization process, was acquired by Olive Health. The transaction will bring Verata’s technology to Olive’s network of 400 hospitals across the US, with the goal of reducing write-offs for uncovered services by 40% and shrinking turnaround times for coverage decisions by 80%. Olive will retain Verata’s current workforce.

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 what you think!
Samuel Robinson
Kara Stessl
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