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Healthcare Technology The Business of Healthcare in a World of COVID-19 FIRST ANALYSIS QUARTERLY INSIGHTS Integrative insights on emerging opportunities April 30, 2020 Andrew Walsh Main: 312-258-1400 Direct: 312-258-7110 awalsh@firstanalysis.com www.firstanalysis.com
First Analysis
Healthcare
Technology Team
Matthew Nicklin
Managing Director
mnicklin@firstanalysis.com
312-258-7181
Andrew Walsh
Managing Director
awalsh@firstanalysis.com
312-258-7110
Joseph Munda
Vice President
jmunda@firstanalysis.com
312-258-7125
Tracy Marshbanks
Managing Director
tmarshbanks@firstanalysis.com
312-258-7111
About First Analysis
First Analysis has a nearly four-decade record of serving emerging growth compa-
nies, established industry leaders, and institutional investors in emerging high-growth
segments in technology and healthcare, both through its venture capital investments
and through First Analysis Securities Corp. (FASC), which provides investment banking
and related services. FASC is a FINRA-registered broker-dealer and member SIPC. First
Analysis’s integrative research process underpins all its efforts, combining 1) dynamic
investment research on thousands of companies with 2) thousands of relationships
among executives, investors, and other key participants in our focus areas, yielding a
deep, comprehensive understanding of each sector’s near-term and long-term potential.
Select First Analysis White Papers: Healthcare Tech
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www.firstanalysis.com Healthcare Analytics: A closer look at the healthcare analytics marketFirst Analysis Quarterly Insights April 30, 2020
HEALTHCARE TECHNOLOGY
The Business of Healthcare in a World of
COVID-19
In our lifetime, there has not been a singular healthcare ecosystem, there have been
event that has so rapidly impacted life on a highly publicized anecdotes of collaboration
global scale as the novel coronavirus, SARS- and innovation. We have seen Bauer, a man-
CoV-2, aka COVID-19. History will tally the ufacturer of ice hockey equipment, pivot to
final comparison, but it’s not hyperbole to producing face shields for frontline workers.
at least contextualize COVID-19 in the same We have seen the maker of Absolut Vodka
conversation as the world’s great plagues, and Jameson’s Irish Whiskey converting
including the Bubonic Plague (14th century), production facilities to instead produce hand
Smallpox (16th century), or the Spanish Flu sanitizer. General Motors has allocated pro-
(early 20th century). And this is for a virus duction capacity to sourcing and assembling
that was unknown and undocumented – any- critical ventilator systems.
where in the world – as recently as 180 days
ago. Rapid-Cycle Diagnostic Innovation
In addition to the impact that COVID-19 is In more traditional healthcare technology
having on personal lives, it is also dramat- sectors, we have seen similar emphasis on
ically affecting the business of healthcare. rapid-cycle innovation. The laboratory and
COVID-19 is wreaking havoc on the front diagnostic industry has been under tremen-
lines of healthcare, turning nurses, doctors dous pressure to make up for critical delays
and emergency room staff into modern-day in the adoption of a global standard for
superheroes. It has consumed much of the COVID-19 testing. Since COVID-19’s arrival in
available capacity of virtually every health- the U.S., we have seen rapid advancements
care system and emergency room across in the spectrum of available testing options,
the U.S. – if not by filling beds with patients, including improvements in polymerase chain
then at least by creating concern about virus reaction (PCR) testing and the introduction
transmission and causing patients to other- of serologic testing.
wise stay away from the traditional consump-
tion of healthcare. PCR testing was the original basis for deter-
mining the presence of COVID-19 in patient
populations and is still the gold standard
for diagnostic evaluation. The limitation of
OPPORTUNITY IN A TIME OF CHAOS PCR testing is its reliance on bench evalua-
Where COVID-19 is altering, temporarily tion in a traditional CLIA laboratory setting.
at least, our understanding of normal, it is In efforts to dramatically shorten response
creating opportunity for others. Across the time and expand capacity for testing, the
April 30, 2020 3 First AnalysisVariation of the Levels of SARS-CoV-2 RNA and Antigen, IgM and IgG after infection
Source: Diazyme Laboratories Inc.
FDA has begun to extend Emergency Use successfully navigated the active incuba-
Authorizations (EUA) for point-of-care test- tion and contagious periods of the virus, and
ing alternatives. It was this EUA that allowed may have developed a degree of immunity to
the adaptation of Abbott Lab’s ID NOW, an the COVID-19 virus. It is this immunity along
established point-of-care testing platform, to with active virus testing that will, literally and
be used for COVID-19 evaluation in a physi- figuratively, re-open the door from today’s
cian setting. shelter-in-place orders and return pockets
of society back to productive, functioning
Much more recently there has been discus- activity.
sion about the use of serologic testing for
COVID-19, which is a complement to the PCR
test in that serologic testing doesn’t indicate
Healthcare Technology on the
the basic presence (or not) of a virus; rather, Front Lines of COVID-19
it highlights the presence of virus antibodies, In addition to the rapid evolution of diagnos-
which are generated within a week or two of tic capabilities, we have also seen the effec-
a patient contracting the virus. tive deployment of enabling technologies in
support of COVID-19 efforts. Two key exam-
As a larger percentage of the population ples of this have been the combined use of
becomes exposed to COVID-19, serology be- data and visualization tools, as well as the
comes the more relevant test from a popula- rapid deployment of virtual care technologies.
tion health management perspective, in that
it can confirm the presence of IgM and/or Large-scale data without the proper contex-
IgG antibodies. From a practical standpoint, tual lens can be overwhelming at best and
a test result that confirms the presence of dangerous at worst due to the potential for
IgG antibodies, but no longer the presence misinterpretation. However, when large data-
of IgM antibodies, means the patient has sets are combined with the right visualiza-
April 30, 2020 4 First Analysistion framework, the results can be extremely Virtual Care in the Spotlight
powerful. Consider the Johns Hopkins Coro-
As the depth and breadth of the impact
navirus website (coronavirus.jhu.edu/map.
COVID-19 is having on the U.S. healthcare
html). With no paid advertising or keyword
system has become clear, there has been a
efforts, this site went from nonexistent before
rapid adoption of various virtual care tech-
February of this year to over 75M visits in
nology solutions to: (1) serve as a triage-style
March alone. It has become the de facto
care extender to limit further strain on finite
source for macro and micro information about
acute care resources and (2) deliver care in a
COVID-19 incident rates, testing rates, hospi-
manner that minimizes exposure for patients
talization rates and fatality rates.
and caregivers in a physical setting, con-
As the spread of COVID-19 became inevita- sidering the highly contagious nature of the
ble, clinical experts have emphasized the im- virus.
portance of “flattening the curve” – reducing
This collective enhancement to the care
the rate of infection to decrease the likelihood
delivery system has created growth oppor-
of overwhelming the capacity of the health-
tunities for companies that have developed
care system. This public health strategy led
AI powered chatbot point solutions, as they
to shelter-in-place orders across cities and
offer a means for hospitals, physician practic-
states within the U.S. Considering the impor-
es, and even insurance companies to engage
tance of social distancing as the key miti-
patients with technology. These solutions
gation strategy, how do we demonstrate the
can be standalone in nature or deeply inte-
collective adherence to these directives? Un-
grated into EMR or care management solu-
acast, an innovative data science company,
tions, asynchronous or synchronous in their
focuses its efforts on quantifying “human mo-
engagement style with patients, and can be
bility” via the use of anonymized cell phone
deployed on the front end of an encounter
GPS data. In response to the COVID-19 crisis,
(i.e. “symptom checker”) or used for aftercare
Unacast has developed a social distancing
follow up. While their use is still nascent and
scorecard based on comparative movement
the ROI picture incomplete, these AI technol-
analysis, that grades, county-by-county, the
ogy solutions are a valuable relief valve for
degree to which we’re staying put. At the
the overall system during this crisis of peak
time of publication, the entire U.S. has earned
demand in acute care settings.
itself a C-, with only two states at a B- or
better (Michigan = B- ; Nevada = B+). Aca-
demic overachievers of the country, unite!
TapCloud, an AI-powered remote patient en-
The infectious nature of a disease like
gagement platform, has answered the call to
COVID-19 highlights the importance of
support providers and patients alike by creat-
immediately deployable data solutions. In
ing workflow solutions specifically designed
considering the capacity challenges present-
for the challenges of COVID-19. In addition to
ed by the pandemic, Enli Health Intelligence,
patient triage, its solution enables asynchro-
a KLAS-leading population health software
nous post-diagnosis aftercare through daily
vendor, developed a COVID-specific care
care plans, nuanced symptom monitoring
coordination solution (eC3) geared at keep-
and intervention efficacy tracking. The com-
ing lower-risk patients out of the hospital
pany is also looking beyond current shelter-
and under surveillance between encounters.
in-place mandates and is offering employers
More importantly, as it developed eC3, it
workforce screening and triage solutions to
knew time was of the essence. Total cycle
minimize workforce risk and maintain compli-
time from ideation to taking its first site live
ance with evolving OSHA reporting require-
was 72 hours. The next implementation took
ments. The capacity demands of COVID-19
just two hours. Ten days later, the application
have highlighted the value of TapCloud to its
was running at provider and health system
existing client base, as it has seen a 10x in-
locations across 14 states!
crease in daily screenings across its platform.
April 30, 2020 5 First AnalysisWhile COVID-19 has presented an opportuni- has issued blanket waivers around the use
ty for emerging use case validation on virtual of telehealth, meaning providers and health
care technology solutions, it has brought systems don’t need to apply for an individual
telehealth fully into the mainstream. The tech- 1135 waiver – by definition, any authorized
nology underlying telehealth solutions has provider is automatically authorized to act in
been available in some form or fashion for accordance with the waiver.
the better part of the past 10-15 years, but it
has remained a solution only available on the Specifically, the following changes have been
margins of the overall delivery system. The made via these 1135 waivers:
best indicator of this is reimbursement policy
y Effective March 6, 2020, Medicare can
– while Medicare only makes up a portion of
now pay for an office, hospital or other
the overall U.S. healthcare funding pool, its
visit furnished via telehealth across the
willingness (or not) to incorporate a solution
country, including a patient’s place of
into CMS payment policy has always served
residence. This waiver applies to doctors,
as a strong proxy for broader market adop-
nurse practitioners, clinical psychologists
tion. Until very recently, Medicare saw tele-
and licensed clinical social workers.
health largely as a means to improve access
to specialty care in rural communities, where y Healthcare providers can practice, up to
the pool of available providers is far more their defined scope of practice, across
limited. In these rural communities, payment state lines. While this ruling doesn’t elim-
policy required patients to travel to a clinic, inate interstate licensing entirely, it does
hospital or other medical facility to “receive” give providers the ability to treat patients
telecare in order to qualify an encounter as in states other than their state of practice.
eligible for reimbursement. Such a narrowly
defined use case severely limited the utility of y Separate from, but as a result of, these
telehealth for the broader market. Additional- 1135 waivers, CMS announced on April 10,
ly, state-level medical board licensing re- 2020, that Medicare Advantage organiza-
quirements presented a significant challenge tions and other organizations that submit
to broader adoption, as the ability to deliver diagnoses for risk adjusted payment (i.e.
“virtual” care across state lines was very lim- Medi-Medi plans) are able to submit di-
ited, and in many cases nonexistent. Based agnoses for risk adjustment that are from
on these systemic restrictions, telehealth has telehealth visits.
largely been limited to remote patient moni-
toring under payer-sponsored care manage-
ment programs, where its use is not depen-
dent on qualifying as a billable encounter or
clinical place of service. Again, it has had its
It is difficult to overstate the impact of these
place in the overall delivery system, but that
policy changes. The telehealth industry has
“place” has been artificially constrained in
been working for years to gain clinical rel-
comparison to what the underlying technolo-
evance and scale as an additional “place of
gy could offer.
care” in the healthcare delivery continuum.
Overnight, these constraints on telehealth Based on these 1135 waivers, that relevance
have been lifted. In response to the consump- is now real. For example, Zipnosis, a white
tion demands that COVID-19 has placed on label telehealth company that powers virtual
the delivery system and contagion threats visits and triage services for 51 large health
associated with face-to-face interaction, systems across the country, has seen a 36x
CMS has made sweeping changes to all increase in utilization on its platform just
aspects of previously restrictive policies since the onset of COVID-19. Monthly visit
regarding the use of telehealth. Under Sec- volume jumped from approximately 37,000
tion 1135 of the Social Security Act, when visits in February to over 412,000 visits in
the President declares a disaster or emer- March! In addition to changing the place of
gency under the National Emergencies Act, care – and therefore reducing the potential
the HHS Secretary has the authorization to for unnecessary exposure – Zipnosis has
issue Medicare, Medicaid, CHIP and HIPAA also used the flexibility of its telehealth plat-
waivers (“1135 waivers”) to help beneficiaries form to prioritize COVID-19 related testing.
access care in times of declared emergency. ZipTicket allows a provider to order COVID-19
In the case of the COVID-19 pandemic, HHS testing for a patient in the context of a virtu-
April 30, 2020 6 First Analysisal visit. ZipTicket serves as a “fast pass” for In a world where medical visits are virtually
higher risk patients, integrating lab tests and eliminated other than for COVID-19 related
clinical decision support to offer a faster test- care, these MA plans would have no mecha-
ing solution for both providers and potential nism to quantify, document and substantiate
COVID-19 patients. HCC or Star Ratings-related revenue, which
can account for as much as 70% of total MA
In addition to the positive impact of these plan revenue.
waivers on the relevance of telehealth ven-
dors, they are also a critical buoy for Medi-
care Advantage plans during the uncertainty
Looking Beyond COVID-19
of COVID-19. As a result of shelter-in-place The global crisis that has been created by the
restrictions during the pandemic, non-emer- COVID-19 pandemic has a reach that extends
gent healthcare utilization is down signifi- far beyond the healthcare sector, and its
cantly. It is estimated that encounter volume impact will likely continue long after the bio-
has fallen anywhere from 50-90% since the logic threat is contained. The lasting result of
arrival of COVID-19, so absent an accelerated the pandemic will cut deep and will be painful
rush during a presumed return to normal in for many – both on personal and professional
the second half of 2020, health plans would levels.
have limited encounters across their collec-
tive membership for the calendar year. On a For innovative companies in the healthcare
sustained basis, this could be catastrophic community, the crisis presents a window of
for Medicare Advantage plans, all of whom opportunity to help save lives and significant-
are dependent on medical encounters as the ly reduce operating strain on the U.S. health-
basis for documenting the health acuity of care system, and as such should create a
their membership as well as demonstrating sustained opportunity for growth and long-
adherence to key HEDIS quality measures term market adoption that will extend well
under the Medicare Star Ratings program. beyond these days of acute crisis.
April 30, 2020 7 First AnalysisPayer, Provider Technology Exhibits
Resilience in the Face of COVID-19
First Analysis’ Provider and Payer Technol- Relatedly, Payer Technology valuations have
ogy indices are quickly regaining ground shown tremendous momentum as measured
lost due to COVID-19. Provider Technology’s by enterprise value / LTM revenue, reaching
stock performance has reached, albeit briefly, 4.09x from their COVID-19 low of 2.80x.
its pre-COVID-19 appreciation high of 20%.
HCIT Quarterly Report Public Comparables
($ in millions) Revenue Growth Enterprise Value /
LTM
Revenue EBITDA
LTM 2018A- 2019A LTM Gross EBITDA
Company Revenue 2019A -2020E Margin Margin LTM 2020E LTM 2020E
Payer Technology
Benefitfocus (BNFT) $295.7 14.3% (11.5%) 51.3% (5.2%) 1.62x 1.83x NMF 18.1x
Castlight Health (CSLT) $143.3 (8.4%) (7.5%) 58.8% (24.7%) 0.49x 0.53x NMF NMF
eHealth (EHTH) $543.8 101.4% 24.4% 99.3% 19.8% 4.81x 4.16x 24.3x 19.6x
EverQuote (EVER) $248.8 52.4% 28.0% 93.6% (2.4%) 4.03x 3.14x NMF NMF
HealthEquity (HQY) $532.0 85.2% 46.8% 61.3% 30.9% 9.48x 6.46x 30.7x 19.9x
HMS Holdings (HMSY) $626.4 4.7% 12.4% 37.5% 22.5% 4.16x 3.70x 18.5x 14.0x
Inovalon Holdings (INOV) $642.4 21.7% 9.2% 73.9% 27.7% 5.82x 5.34x 21.0x 16.0x
MAXIMUS (MMS) $3,040.4 24.9% (0.2%) 22.6% 13.4% 1.44x 1.44x 10.7x 10.6x
Mean $759.1 37.0% 12.7% 62.3% 10.3% 3.98x 3.32x 21.0x 16.4x
Median $537.9 23.3% 10.8% 60.1% 16.6% 4.09x 3.42x 21.0x 17.1x
Provider Technology
Allscripts Healthcare (MDRX) $1,771.7 1.2% (0.8%) 46.8% 5.5% 1.13x 1.13x 20.6x 6.5x
Cerner Corp. (CERN) $5,714.5 6.1% (1.4%) 81.2% 19.8% 3.93x 4.00x 19.8x 13.1x
Change Healthcare (CHNG) $3,280.7 (0.6%) 2.7% 58.5% 30.4% 1.03x 1.00x 3.4x 3.2x
Computer Programs & Sys. (CPSI) $274.6 (2.1%) 0.7% 52.5% 12.5% 1.61x 1.60x 12.9x 9.3x
Evolent Health (EVH) $846.4 35.0% 13.6% 23.3% (7.2%) 1.03x 0.91x NMF 30.9x
Health Catalyst (HCAT) $154.9 37.6% 13.9% 51.4% (29.5%) 4.98x 4.37x NMF NMF
HealthStream (HSTM) $250.5 9.7% (9.3%) 61.1% 13.7% 2.61x 2.84x 19.0x 18.0x
NextGen Healthcare (NXGN) $538.6 1.6% 3.0% 57.9% 7.1% 1.47x 1.42x 20.7x 8.6x
Nuance Comm. (NUAN) $1,821.7 0.4% (19.1%) 59.2% 20.3% 3.69x 4.57x 18.2x 18.2x
Omnicell (OMCL) $897.0 13.9% 9.4% 48.7% 12.8% 3.34x 3.05x 26.2x 16.1x
Premier (PINC) $1,239.5 26.1% 3.1% 69.7% 43.9% 1.90x 1.84x 4.3x 4.0x
R1 RCM (RCM) $1,186.1 36.6% 11.2% 16.7% 11.8% 1.48x 1.33x 12.6x 6.7x
Tabula Rasa HealthCare (TRHC) $284.7 39.4% 19.6% 36.3% 1.6% 5.35x 4.48x NMF 31.2x
Teladoc Health (TDOC) $605.5 32.4% 49.8% 65.0% (4.1%) 21.37x 15.61x NMF NMF
Mean $1,347.6 16.9% 6.9% 52.0% 9.9% 3.92x 3.44x 15.8x 13.8x
Median $871.7 11.8% 3.1% 55.2% 12.2% 2.25x 2.34x 18.6x 11.2x
Source: Capital IQ.
April 30, 2020 8 First AnalysisHCIT Quarterly Report Indexed Performance: 1-Year
Provider Technology Payer Technology S&P 500 NASDAQ
Stock Price
Overall performance, %
30%
20%
18.0%
10%
5.5%
0%
(2.2%)
(10)% (3.6)
(20)%
(30)%
Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20
Enterprise Value / LTM Revenue 1
5.50x
5.00x
4.50x
4.00x 4.09x
3.50x
3.37x
3.00x
2.50x 2.36x
2.25x
2.00x
1.50x
Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20
Source: Capital IQ, First Analysis.
Notes: (1) Displays the median revenue multiple of the constiuent companies for payer and provider indices
While Provider companies appear to have due to Teladoc’s recent performance fueled
outperformed Payers in the short-term, by increased demand for remote care. Pro-
Payer businesses exhibit higher revenue vider organizations, while larger and more
growth rates and gross margins, which are established, exhibit lower gross margins and
reflected in higher valuation multiples. Al- growth rates relative to their Payer counter-
though provider organizations have higher parts.
average revenue multiples, this is primarily
April 30, 2020 9 First AnalysisM&A Remains Steady Through 2019, Makes
a Strong Showing in 1Q20
M&A activity exhibited strong momentum in in an industry characterized by favorable
the first quarter of 2020 with over 65 HCIT reimbursement tailwinds increasingly em-
transactions, as 2019 finished in line with the powering hospitals and health systems to
past four years. While a number of factors fully realize the value of virtual care. Prior
contribute to this momentum, the primary to the onset of COVID-19, 40% of hospitals
factors include an increase in the need for surveyed reported planning to increase their
chronic care, the rise in consumer-friend- budgets for telemedicine solutions, with 61%
ly healthcare models, a willingness of large of hospital revenue forecasted to come from
strategic players (Amazon, Apple etc.) to managed and value-based care models by
explore healthcare technology lines of busi- 2021. In an industry now characterized by
ness, and the rise of virtual care models. hyper-growth due to COVID-19, virtual care
will be a crucial strategy to improve consum-
Regarding 1Q20 M&A, of note was Teladoc’s er engagement, ensure consistent quality and
announced acquisition of InTouch Tech- manage healthcare’s rising costs as provider
nologies, which specializes in the delivery resources are stretched thin and patients’
of virtual care. The announcement comes ability to access healthcare providers face-
during a period when the demand for virtual to-face is limited.
care services is poised for significant growth
HCIT M&A 2Q18 - 1Q20 1
($ in millions)
70 69
# of Transactions
Avg. Deal Size
61 61
58 58
54 55
$836
$700
$489
$390
$295
$78 $112
$35
2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20
Total Deal Size $17,553 $5,317 $9,299 $859 $9,094 $894 $779 $8,183
Source: Capital IQ, Pitchbook, First Analysis.
Notes: (1) Average deal size only considers those deals with reported enterprise values.
April 30, 2020 10 First AnalysisSelect Industry M&A Transactions, 1Q20 (Sorted by date of announcement)
($ in millions) Enterprise
Enterprise Value/
Date Target Target Business Description Buyer Value Revenue
3/26/2020 Insig Corp. Owns and operates an online telehealth plat- WELL Health
form which connects patients with healthcare Technologies $1.4 -
providers (WELL)
3/25/2020 Keona Health A healthcare software company, develops The Riverside
automated patient communication software that Company
- -
helps healthcare professionals communicate
with their patients
3/17/2020 NarrativeDx Develops a data analytics solution for hospitals Press Ganey
$13 3.24x
Associates
3/12/2020 The StayWell A health empowerment company, provides em- WebMD Health
Company ployee health and wellbeing programs for em- Corp. - -
ployers to engage and motivate their workforce
3/10/2020 U.S. State and Develops technology-enabled solutions for ad- Veritas Capital Fund
Local Health and ministration and operations of health programs Management
$5,000 3.57x
Human Srvcs Bus. throughout the U.S.
of DXC Technology
3/10/2020 YouScript YouScript Incorporated develops precision Invitae Corporation
prescribing software solutions for healthcare (NYSE:NVTA) $63 -
providers.
3/9/2020 HealthEdge Develops integrated financial, administrative, The Blackstone
Software and clinical software platform for healthcare Group $730 5.12x
payors
3/9/2020 HcT2 Co. Offers a communication and scheduling solution HealthStream
$25 7.81x
for nurses (HSTM)
3/4/2020 TeraRecon Develops and delivers enterprise medical image SymphonyAI Group
management and visualization solutions for - -
healthcare enterprises worldwide
2/27/2020 AlertMD Designs and develops mobile platform and solu- PaySimple
tions for charge capture, patient care alerts, and
- -
secure messaging for hospital and healthcare
providers
2/24/2020 Connexient Develops MediNav, a turn-by-turn mobile indoor Everbridge (EVBG)
$26 4.40x
navigation software for the healthcare market
2/18/2020 Able Health Provides cloud-based pay-for-performance and Health Catalyst
risk adjustment solutions for care managers and (HCAT) $22 5.52x
physicians
2/13/2020 B4Health Develops vendor management system (VMS) AMN Healthcare
$32 1.90x
software for healthcare facilities Services (AMN)
2/11/2020 Forerunner Doing business as RXTransparent, develops a Inmar
Holdings cloud based software for the healthcare supply
chain to provide regulatory compliance, drug - -
supply chain analytics, and inventory transpar-
ency
1/29/2020 Stratus Video A language services company, provides video AMN Healthcare
remote interpretation, over the phone interpre-
tation, onsite interpretation, telehealth interop-
$475 3.99x
erability, and translation solutions and services
to hospitals and clinics in the U.S. and interna-
tionally
1/28/2020 Wheel A digital health company, operates a tech-en- Charles River
abled marketplace for healthcare companies Ventures; Silverton;
$13.9 -
and clinicians Tusk Venture, Asset
Mgmt Arm
1/27/2020 Revenue Well Develops and distributes a marketing and Marlin Equity
Systems patient communication software for dental Partners - -
practices
1/23/2020 Intelerad Medical Develops and provides medical imaging busi- HgCapital; Novacap
$849 -
Systems ness solutions and services Investments
April 30, 2020 11 First AnalysisSelect Industry M&A Transactions, 1Q20 (Sorted by date of announcement)
($ in millions) Enterprise
Enterprise Value/
Date Target Target Business Description Buyer Value Revenue
1/22/2020 VisionTree Provides cloud-based patient-centered health Brainlab AG
Software record management, communication, and health
- -
data management software solutions to aca-
demic and community healthcare orgs.
1/21/2020 Excel Medical Develops remote monitoring platform and other Hill-Rom (HRC)
$30 3.23x
Electronics systems for healthcare industry
1/16/2020 WiserTogether Provides shared decision-making tools to Evive Health
consumers, employers, health plans, payers,
and providers. Its decision-making tools enable
- -
consumers to achieve better health outcomes;
and employers, health plans, and payers to save
money
1/14/2020 Connected Care Comprises DCX device connectivity software, Masimo Corp.
Business of VCX patient vitals software, HBox connectivity (MASI) $47 -
NantHealth hub, and shuttle interface cable solutions
1/13/2020 Lumere Provides a cloud-based workflow and reporting Global Healthcare
platform for hospitals and doctors which helps Exchange
- -
health systems to eliminate clinical variation and
unnecessary costs
1/13/2020 Intelligent InSites Develops automation software solutions for the Infor
- -
healthcare industry
1/13/2020 TRIGGR Designs and develops a predictive system of SonarMD
care for addiction recovery that supports users - -
on their personal path to long-term remission
1/12/2020 InTouch Doing business as InTouch Health, provides Teladoc Health
Technologies technology-enabled solutions to healthcare (TDOC)
$600 7.06x
organizations for the delivery of clinical care
virtually
1/10/2020 Tonic Solutions Develops and operates an online medical data SCI Solutions
- -
collection platform
1/10/2020 SCI Solutions Develops SaaS-based solutions for healthcare R1 RCM (RCM)
$200 -
providers
1/9/2020 Blue Mesa Health Digital therapeutics company, develops and Virgin Pulse
operates a platform to deliver diabetes preven- - -
tion program
1/9/2020 Amplity Insights Designs and develops de-identification soft- Publicis Healthcare
ware that provides real time data from medical Solutions - -
reports to patients and healthcare providers
1/9/2020 Centauri Health A healthcare technology and services company, ABRY Partners
Solutions designs and develops cloud-based software
and comprehensive data management solutions - -
for risk adjustment and quality-based revenue
programs
1/8/2020 Yaro Operates as a mobile-first digital navigation Virgin Pulse
and health literacy platform to help consumers
better understand, find, and pay for healthcare - -
services according to their specific needs and
preferences
1/8/2020 CareCloud Corp. Owns and operates cloud based practice man- MTBC (MTBC)
agement, electronic health record, and medical $40 1.12x
billing software solutions
1/7/2020 Evariant Provides a healthcare platform for healthcare Healthgrades
organizations to identify opportunities, measure Operating Company
marketing campaigns against reportable return - -
on investment (ROI), and improve patient and
physician engagement
Mean 4.27x
Median 3.99x
Source: Capital IQ, Pitchbook, First Analysis.
April 30, 2020 12 First AnalysisPrivate Investment Remains Active Through
Q1 2020
Private funding sources continue to drive line with funding amounts from a year prior.
the majority of investment in HCIT relative Furthermore, while the number of transac-
to public investment, accounting for ~60% tions reached a two-year low of 138 in the
of total dollars raised between private and first quarter, average deal size remained high
public sources. Prior to the impact of COVID- at an average of $15.6M.
19, private investments in 1Q20 remained in
HCIT Private Placements 2Q18 - 1Q20 1
($ in millions) 220
# of Transactions 203
189 183 183
Avg. Deal Size 181
169
138
$17.3
$15.6
$11.8 $11.9 $12.6
$8.8 $9.6 $9.5
2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20
Total Deal Size $1,343 $2,914 $1,729 $1,428 $1,720 $1,011 $1,475 $1,434
Source: Capital IQ, Pitchbook, First Analysis.
Notes. (1) Average deal size only considers those deals with reported enterprise values.
Select Private Placements: 1Q20 (Sorted by date of announcement)
($ in millions) Total
Raise Amount Amount
Date Target Target Business Description Investors Type Raised Raised
3/31/2020 PatientPay Develops and delivers billing, electronic Mosaik Partners Growth $6.2 $15.2
payment, and reconciliation solutions Round 4
that allow patients, medical groups,
and hospitals to manage expenses in
the healthcare environment
3/30/2020 Olive Provides artificial intelligence and RPA General Catalyst Partners; Growth Undisclosed N/A
solutions for healthcare organizations Ascension Ventures; Drive Round 6
Capital; Oak HC/FT
3/20/2020 AristaMD A digital health company, focuses on Cigna Ventures; Series B $18.0 $44.7
improving the specialty referral process MemorialCare Innovation
through its platform Fund; Avalon Ventures;
Stanford Health Care; Cigna
Ventures; Univ. of Colorado
School of Medicine,
Endowment Arm
April 30, 2020 13 First AnalysisSelect Private Placements: 1Q20 (Sorted by date of announcement)
($ in millions) Total
Raise Amount Amount
Date Target Target Business Description Investors Type Raised Raised
3/20/2020 98point6 Provides primary care services to pa- West Street Capital Series D $43.0 $124.5
tients through its application in the U.S. Partners
3/17/2020 Pristine Develops and markets a single use Undisclosed Growth $18.0 $18.0
Surgical digital imaging platform Round 1
3/10/2020 Fruit Street Operates a digital wellness and tele- Undisclosed Growth $17.0 $20.0
Health health platform for patients to pursue a Round 1
healthier lifestyle
3/10/2020 Bright.md Powers leading healthcare systems' Seven Peaks Ventures; B Series C $8.1 $21.7
virtual convenience care, allowing them Capital Group Management
to deliver high-quality care
3/6/2020 Urgent Provides a cloud-based referral auto- Connecticut Innovations; Series A $2.7 $6.3
Consult mation platform that streamlines the Meyer Ventures; Health
referral process Catalyst Capital Mgmt
3/5/2020 VIDA Provides clinical imaging software and First Analysis Corp.; The Series C $13.1 $21.9
Diagnostics analysis services Angels' Forum; Iowa
Farm Bureau Federation,
Endowment Arm;
3/4/2020 Suki AI Develops artificial intelligence enabled Flare Capital Partners; Series B $20.0 $35.0
voice assistant for doctors VR Adviser; First Round
Capital; Breyer Capital;
Epsilon Health Investors
3/4/2020 HealthiPASS Provides patient centric payment sys- Fifth Third Capital Holdings Growth Undisclosed N/A
tems
3/3/2020 Alignment Along with its subsidiaries, operates Fidelity Mgmt & Research Series C $135.0 $375.0
Healthcare as a healthcare services company Co.; T. Rowe Price; Durable
focusing on providing population health Capital Partners
management services to health sys-
tems and provider groups in the U.S.
3/3/2020 Health Data Develops an analytics and predictive Undisclosed Venture $16.0 $16.0
Analytics platform for clinical risks measurement
Institute
3/2/2020 PharmaCCX Operates a platform that catalyzes the Undisclosed Series A $7.0 $10.3
pricing and procurement of medicine
by healthcare payers and accelerates
patient access to the medicines avail-
able for their diseases
2/28/2020 Pager, Inc. Pager, Inc. develops and operates an Health Catalyst Capital Series B $22.0 $51.6
on-demand service platform that con- Management LLC; New
nects patients with healthcare in their Enterprise Associates, Inc.;
home, office, and hotel. Lux Capital Management;
Three Fields Capital;
Horizon Blue Cross Blue
Shield of NJ Management
Employees Retirement Plan;
Goodwater Capital, LLC
2/27/2020 Axial Connects patients, providers, and .406 Ventures; Sandbox Series C $15.0 $41.9
Healthcare health plans with a platform that covers Industries; BCBS Venture
the substance use spectrum Partners; Oak HC/FT
2/27/2020 Rivet Health Operates a SaaS based healthcare Menlo Ventures; Pelion Series A $8.3 $8.3
revenue cycle management software Venture Partners; Lux
for providers and patients Capital Mgmt
2/23/2020 HealthJoy Owns and operates an online health- Health Velocity Capital; Series C $30.0 $48.5
care decision platform that helps con- U.S. Venture Partners; EPIC
sumers protect out-of-pocket expenses Ventures; Chicago Ventures
through better decisions
April 30, 2020 14 First AnalysisSelect Private Placements: 1Q20 (Sorted by date of announcement)
($ in millions) Total
Raise Amount Amount
Date Target Target Business Description Investors Type Raised Raised
2/21/2020 Lyra Health Operates a platform that connects Institutional Venture Series C $75.0 $175.5
employers with mental healthcare Partners; Glynn Capital;
providers MeriTech Capital; VR
Adviser; CVF; Tenaya
Capital; Casdin Capital;
Greylock Partners;
Providence Ventures
2/19/2020 PocketPills Develops a mobile application for medi- WaterBridge Capital Series A $5.6 $7.6
Pharmacy cation management Advisors
2/18/2020 Epharmix Develops clinically validated and con- Nueterra Capital Mgmt; Growth Undisclosed N/A
dition-specific communication tools for OSF Ventures; 1984 Round 6
healthcare industry Ventures; UnityPoint Health
Ventures
2/14/2020 Intelycare Provides on-demand staffing services Endeavour Vision; Kaiser Series B $45.0 $59.6
for healthcare organizations Permanente Ventures;
Generator Ventures
2/13/2020 Seqster Develops a patient-centric software- Takeda Pharmaceutical Co. Venture Undisclosed N/A
as-a-service (SaaS) platform that
provides interoperability and allows
the members, payer, provider, clinical
research enterprise employees, or pa-
tients to import medical data from elec-
tronic health records (EHR), genetic,
and fitness data from distinct sources
2/7/2020 MedPilot Offers an AI-driven patient relationship JumpStart, Investment Arm; Growth $1.5 $4.0
management platform Plymouth Growth; Hudson Round 5
River Capital; Valley Growth
Ventures
2/7/2020 RubiconMD Provides an online platform that en- Deerfield Management; Series C $18.0 $39.0
ables primary care clinicians to discuss Waterline Ventures;
their eConsults with top specialists to Heritage Medical Systems;
provide care Optum Ventures
2/5/2020 Verana A software company, focuses on GV; Bain Capital Venture; Series D $100.0 $137.8
Health bridging the information gap between Casdin Capital; Define
healthcare providers and mobile diag- Ventures
nostics
2/5/2020 Nursing Doing business as GENTO Platform, Palisades Growth Capital Series A $5.0 $7.8
Without develops a mobile staffing app built
Walls for nurses who focus on Home Health
nursing
2/4/2020 Hinge Health Designs and develops digital health- Bessemer Venture; Series C $90.0 $140.8
care solutions for employees to recover Insight Venture; Atomico
from musculoskeletal disorders Investment; Lead Edge
Capital Mgmt; Quadrille
Capital; Eleven Two Capital;
Heuristic Capital Partners
2/4/2020 Vineti Builds technologies that support thera- Cardinal Health (CAH); Series C $35.0 $96.4
peutic development and delivery Canaan Partners; Threshold
Ventures; Novartis Pharma;
Kite Pharma, Inc.; Casdin
Capital, LLC; Section 32;
Hive Ventures; LifeForce
Capital
2/3/2020 Inbox Health Develops a patient communication Connecticut Innovations; Seed $3.5 $9.4
Corp. platform for medical billers in the U.S. I2BF Global Ventures;
Collaborative Fund;
StartUp Health; Commerce
Ventures; Healthy Ventures
April 30, 2020 15 First AnalysisSelect Private Placements: 1Q20 (Sorted by date of announcement)
($ in millions) Total
Raise Amount Amount
Date Target Target Business Description Investors Type Raised Raised
1/30/2020 Carevive A technology & services co, develops HLM Venture; LRVHealth; Series C $7.5 $14.8
Systems workflow and patient engagement solu- Debiopharm Innovation
tions for customers in the U.S. Fund; Cerner Capital Mgmt;
Philips Health Technology
Ventures
1/29/2020 CareWorx Provides technology solutions to senior BDC Capital; Comerica Growth $18.9 $35.9
care organizations in North America Bank, Banking Investments Round 2
and internationally
1/29/2020 4G Clinical Provides randomization and trial supply First Analysis Corp., Venture Undisclosed N/A
management services for pharmaceu- Schooner Capital
tical companies and clinical research
organizations worldwide
1/27/2020 uLab Develops a software technology for Park West Asset Series D $18.0 $24.4
Systems digital dental treatment planning for Management
orthodontists
1/21/2020 mPharma Develops an app that enables physi- Undisclosed Growth Undisclosed N/A
Data cians and pharmacies to prescribe and Round 4
locate medicines for patients
1/17/2020 eClinical Provides clinical data management Summit Partners Growth $19.3 $19.3
Solutions solutions in the U.S.
1/15/2020 Modern Develops a mental health platform for John Doerr; Kleiner Perkins Series B $31.0 $56.4
Health companies that value the emotional Caufield & Byers; Founders
well-being of their workforce Fund; Afore Capital
1/14/2020 Medsphere Provides healthcare information tech- TPG Sixth Street Partners Growth $40.0 $136.6
Systems nology solutions Round 5
1/14/2020 Glass Health Doing business as Anagram, provides a CareCredit; KEC Ventures; Growth $9.1 $15.1
software platform that assists health- Rogue Venture; Launchpad Round 3
care professionals with the intricacies Digital Health; Waterline
of health insurance networks Ventures; Healthy Ventures
1/14/2020 Avail Develops software that remotely con- Undisclosed Series A $15.0 $28.0
Medsystems nects healthcare experts to practi-
tioners
1/14/2020 Limelight Develops and delivers a quoting, un- Launchpad Digital Health Growth Undisclosed N/A
Health derwriting, and proposal platform for
the employee benefits industry
1/13/2020 Concerto Develops the healthcare software eu- Declaration Partners; AB Series B $150.0 $150.0
HealthAI rekaHealth Private Credit Investors;
Solutions SymphonyAI Group;
Maverick Ventures
1/13/2020 Vesta Develops a healthcare technology Oak HC/FT; Deerfield Series A $30.0 $30.0
Healthcare platform to connect caregivers to the Mgmt; Kaiser Permanente;
care team Lux Capital Mgmt;
CareCentrix; Generator
Ventures; Nationwide
Ventures; The Epstein
Partners
1/13/2020 drchrono Provides an electronic health record SQN Venture Partners Debt $20.0 $52.9
platform for physicians and patients Round 3
worldwide
1/9/2020 Aver A health information technology com- Cox Enterprises; Hearst Series C $27.0 $50.6
pany, provides software for creating Ventures; NCT Ventures;
and managing bundles Heritage Group; GE
Ventures; Drive Capital
1/8/2020 nference Offers an AI based software platform Mayo Clinic Ventures; Series B $60.0 $71.4
that synthesizes siloed biomedical Matrix Partners; Matrix
knowledge for triangulating unstruc- Capital Management; NTT
tured and structured information from Venture Capital
biomedical literature, and molecular
and real world datasets
April 30, 2020 16 First AnalysisSelect Private Placements: 1Q20 (Sorted by date of announcement)
($ in millions) Total
Raise Amount Amount
Date Target Target Business Description Investors Type Raised Raised
1/8/2020 Komodo Develops and provides a platform Andreessen Horowitz; Series C $50.0 $50.0
Health that offers healthcare data to deliver Felicis Ventures; IA
real-time healthcare intelligence and Ventures; Oak HC/FT
transparency
1/7/2020 Ride Health Develops a SaaS product platform Activate Venture Partners; Seed $6.2 $6.3
which enables healthcare providers to BioAdvance; StartUp
schedule, request, and pay for rides on Health; Leading Edge
behalf of patients to and from medical Ventures; Newark Venture
appointments Partners; Anthro Ventures
1/7/2020 Fibroblast Operates a referral management plat- Undisclosed Debt Undisclosed N/A
form
1/6/2020 LynkCare Develops a Software as a Service BIP Capital Pre-Series $2.5 $7.1
(SAAS) solution for multi-disciplinary A
care planning
1/1/2020 Zelis Develops healthcare cost management Bain Capital Private Equity Growth $20.5 $20.5
Healthcare and payment solutions Round 3
Source: Capital IQ, Pitchbook, First Analysis.
April 30, 2020 17 First AnalysisHCIT Quarterly Report Public Comparables Appendix
($ in millions) Revenue Growth Enterprise Value /
LTM LTM
Revenue EBITDA
Market Enterprise LTM 2018A- 2019A Gross EBITDA
Company Cap Value Revenue 2019A -2020E Margin Margin LTM 2020E LTM 2020E
April 30, 2020
Payer Technology
Benefitfocus (BNFT) $325.2 $477.7 $295.7 14.3% (11.5%) 51.3% (5.2%) 1.62x 1.83x NMF 18.1x
Castlight Health (CSLT) $108.8 $70.3 $143.3 (8.4%) (7.5%) 58.8% (24.7%) 0.49x 0.53x NMF NMF
eHealth (EHTH) $2,789.0 $2,617.3 $543.8 101.4% 24.4% 99.3% 19.8% 4.81x 4.16x 24.3x 19.6x
EverQuote (EVER) $1,047.7 $1,001.6 $248.8 52.4% 28.0% 93.6% (2.4%) 4.03x 3.14x NMF NMF
HealthEquity (HQY) $3,935.8 $5,045.2 $532.0 85.2% 46.8% 61.3% 30.9% 9.48x 6.46x 30.7x 19.9x
HMS Holdings Corp. (HMSY) $2,483.5 $2,606.4 $626.4 4.7% 12.4% 37.5% 22.5% 4.16x 3.70x 18.5x 14.0x
Inovalon Holdings (INOV) $2,828.9 $3,741.4 $642.4 21.7% 9.2% 73.9% 27.7% 5.82x 5.34x 21.0x 16.0x
MAXIMUS (MMS) $4,302.1 $4,366.9 $3,040.4 24.9% (0.2%) 22.6% 13.4% 1.44x 1.44x 10.7x 10.6x
Mean $2,227.6 $2,490.9 $759.1 37.0% 12.7% 62.3% 10.3% 3.98x 3.32x 21.0x 16.4x
Median $2,636.3 $2,611.9 $537.9 23.3% 10.8% 60.1% 16.6% 4.09x 3.42x 21.0x 17.1x
Provider Technology
Allscripts Healthcare Solutions (MDRX) $1,089.6 $1,993.8 $1,771.7 1.2% (0.8%) 46.8% 5.5% 1.13x 1.13x 20.6x 6.5x
Cerner Corporation (CERN) $21,832.7 $22,480.4 $5,714.5 6.1% (1.4%) 81.2% 19.8% 3.93x 4.00x 19.8x 13.1x
Change Healthcare (CHNG) $3,342.7 $3,363.0 $3,280.7 (0.6%) 2.7% 58.5% 30.4% 1.03x 1.00x 3.4x 3.2x
18
Computer Programs & Systems (CPSI) $334.1 $442.4 $274.6 (2.1%) 0.7% 52.5% 12.5% 1.61x 1.60x 12.9x 9.3x
Evolent Health (EVH) $600.7 $873.4 $846.4 35.0% 13.6% 23.3% (7.2%) 1.03x 0.91x NMF 30.9x
Health Catalyst (HCAT) $946.3 $770.7 $154.9 37.6% 13.9% 51.4% (29.5%) 4.98x 4.37x NMF NMF
HealthStream (HSTM) $765.8 $653.9 $250.5 9.7% (9.3%) 61.1% 13.7% 2.61x 2.84x 19.0x 18.0x
NextGen Healthcare (NXGN) $730.6 $790.4 $538.6 1.6% 3.0% 57.9% 7.1% 1.47x 1.42x 20.7x 8.6x
Nuance Communications (NUAN) $5,444.2 $6,728.1 $1,821.7 0.4% (19.1%) 59.2% 20.3% 3.69x 4.57x 18.2x 18.2x
Omnicell (OMCL) $3,011.5 $2,995.0 $897.0 13.9% 9.4% 48.7% 12.8% 3.34x 3.05x 26.2x 16.1x
Premier (PINC) $2,340.2 $2,349.7 $1,239.5 26.1% 3.1% 69.7% 43.9% 1.90x 1.84x 4.3x 4.0x
R1 RCM (RCM) $1,160.3 $1,756.3 $1,186.1 36.6% 11.2% 16.7% 11.8% 1.48x 1.33x 12.6x 6.7x
Tabula Rasa HealthCare (TRHC) $1,314.3 $1,523.6 $284.7 39.4% 19.6% 36.3% 1.6% 5.35x 4.48x NMF 31.2x
Teladoc Health (TDOC) $12,971.0 $12,936.9 $605.5 32.4% 49.8% 65.0% (4.1%) 21.37x 15.61x NMF NMF
Mean $3,991.7 $4,261.3 $1,347.6 16.9% 6.9% 52.0% 9.9% 3.92x 3.44x 15.8x 13.8x
Median $1,237.3 $1,875.1 $871.7 11.8% 3.1% 55.2% 12.2% 2.25x 2.34x 18.6x 11.2x
Source: Capital IQ.
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