Optum/UnitedHealth clinches $1.3 bn deal for Advisory Board’s healthcare practice

The Advisory Board consultancy group confirmed its splitup and sale, as originally reported by TTA in mid-July. The Optum data analytics/information/consultancy unit of UnitedHealth Group is acquiring the healthcare practice for $1.3 bn and the education consultancy will be purchased by Vista Equity Partners for $1.55 bn. 

According to Bloomberg, The Advisory Board has 3,800 employees and roughly $807 million in annual revenue. Reports indicate that it has served over 4,400 healthcare clients. According to the Washington Business Journal, regulatory filings show it will operate as a wholly owned subsidiary of Optum headed by Advisory Board Chairman and CEO Robert Musslewhite. As to relocation, Advisory Board spokespersons confirmed that they will still be moving into a new headquarters on New York Avenue NW, indicating that a move to Minnetonka is not imminent and that at least some of the management will stay. There is no word on relocation out of Washington for the education practice. At closing, outstanding shares of Advisory Board will convert at $52.65 per share, plus an additional amount per share based on the after-tax value of Advisory Board’s 7.6 percent stake in publicly traded Evolent Health. The deal is expected to close by early 2018.

This confirms an earlier trend of healthcare consultancies merging and cross-acquiring. In July, Dublin’s UDG Healthcare acquired Philadelphia-based healthcare consultancy Vynamic last week, gaining a US foothold, then added marketing/communications company Cambridge BioMarketing in Boston. Rumors still have publicly-traded Evolent Health as a likely acquirer or acquiree of a healthcare consultancy. WTOP, Reuters

 

UDG Healthcare buys American, adds Vynamic, Cambridge BioMarketing for up to $67 million

Consultancy acquisitions the latest trend–who’s next? Dublin’s UDG Healthcare acquired Philadelphia-based healthcare consultancy Vynamic last week, then topped it on Monday with marketing/communications company Cambridge BioMarketing. Cambridge has an unusual specialty–campaigns for orphan and specialty drugs and treatments with clients from small to large pharma and biotech. Vynamic, an industry management consultancy, provides services from strategic planning to process design and systems implementation.

This follows on the reveal earlier this month in Bloomberg of the potential sale of The Advisory Board’s healthcare practice to UnitedHealthcare. Last week, this Editor mentioned Evolent Health in Rock Health’s record-breaking review of first half 2017 funding. It turns out that publicly traded Evolent is partly owned by The Advisory Board, with a share valued at $170 million, and reportedly had been seeking funding to itself purchase The Advisory Board, now considered unlikely (BizJournals). What will happen to this share isn’t known.

The Vynamic acquisition is structured as an initial purchase price of $22 million with an additional consideration of up to $10 million payable over the next three years, based on the usual achievement of agreed profit targets, for a total of $32 million (€27.8 million). Irish Times Vynamic will join UDG’s Ashfield Division. Release For Cambridge, it’s a similar arrangement of $30 million (€26m) paid up front, with the potential for an additional $5 million (€4.3m) paid over the next 12 months, again dependent on achieving financial targets. RTE.ieRelease

‘Record-shattering’ Q2 for digital health deals: Rock Health’s volte-face

In a pirouette worthy of Nureyev in his prime, Rock Health’s latest Digital Health Funding review for Q2 and the first half of 2017 bangs the drum loudly. With $3.5 bn invested in 188 digital health companies, it’s a record in their tracking. (∗See below for their parameters, which focus on larger fundings and omit others by type.) Q2 reversed the muddling results of Q1 [TTA 11 April] and then some. If the torrid pace is maintained and the market doesn’t take a pratfall, this year will easily surpass 2016’s full year venture funding at $4.3 bn and 304 investments.

Looking at trends, the average deal size has ballooned to $18.7 million from the 2015-16 range of $14 million. Seven $100 million+ deals led the way: Outcome Health, Peloton, Modernizing Medicine, PatientPoint, Alignment Healthcare, PatientsLikeMe, and ShareCare. Of these, three are consumer health information (Outcome, PatientPoint, ShareCare), with PatientsLikeMe closely related with a patient community focus; as the lead category of investment overall, there’s now gold in consumer health. All seven businesses are located outside of Silicon Valley, a refreshing change. A surprise is Modernizing Medicine in the settled (we thought) EHR-clinical workflow category. There’s also an interesting analysis of the shift in top categories from last year to this, which takes out the $100 million+ deals (click to enlarge): [grow_thumb image=”http://telecareaware.com/wp-content/uploads/2017/07/Top-Funded-Categories-Midyear-Funding-Report-2017-1200×744.png” thumb_width=”200″ /]

Other changes from the usual: no IPOs and a slowing pace of M&A: 58 this year versus first half 2016’s 87 and full year 146. Their public company index is brighter, with positive gains in first half led by Teladoc (up 110 percent YTD), Care.com (up 80 percent), and consulting favorite Evolent Health (up 70 percent–with United Healthcare’s acquisition of The Advisory Board’s healthcare practice, can an acquisition be far away?). Remaining in the doldrums are NantHealth, Fitbit, and Castlight Health. Rock Health Digital Funding Review First Half 2017

Soon up will be StartUp Health’s first half analysis, which takes a different cut at the companies and looks at the balance of deals by funding series.

∗ Rock Health tracks deals over $2 million in value from venture capital, excluding government and grant funding. They omit non-US deals, even if heavily US funded; healthcare services companies (Oscar), biotech/diagnostic companies (GRAIL), and software companies not solely focused on healthcare (Zenefits), but include fitness companies like Peloton. 

Q1 digital health investment: two perspectives from StartUp Health and Rock Health

StartUp Health’s and Rock Health’s investment/M&A roundups from Q1 2017 have just hit the deck. Before we dig into them, let’s start with the differences in methodology:

  • Rock Health tracks deals only over $2 million in value; StartUp Health seems to have no minimum or maximum; the latter includes early stage deals at a lower value.
  • StartUp Health gathers in international deals at all levels, whereas Rock Health includes only US-funded ventures.
  • Rock Health omits healthcare services companies (citing Forward, Oscar), biotech/diagnostic companies (GRAIL, Theranos), and software companies not solely focused on healthcare (Zenefits)
  • StartUp Health defines ‘digital health’ differently than Rock Health, with categories of ‘patient/consumer experience’, ‘wellness’, ‘personalized health/quantified self’, and ‘research’

StartUp Health is ‘over the moon’, breathlessly (appropriately as the home of the 25-year Health Moonshot) with Q1 trending, seeing the biggest investment quarter since 2010 at $2.5 bn. Topping up this number was GRAIL, which is developing a blood test for early cancer detection, with a massive Series B at $914 million. Far behind it in the $85-110 million range were (in descending order) Alignment Healthcare (population health), PatientsLikeMe (patient/consumer experience), Nuna (big data/analytics), and PointClickCare (EHR). Population health, patient/consumer experience, and research top their investment activity. Most deals are still seed and Series A (59 percent), but that is down five points from full year 2016; Series B’s share is up three points to 25 percent. But it remains a difficult bridge to cross to C+ rounds.

Rock Health splits the difference and calls it ‘business as usual’, surprised that there hasn’t been a tailspin. Its Q1 sandwiches between 2016 and 2015, well above 2015 but trending 23 percent below Q1 2016. Their biggest deals include the aforementioned Alignment, PatientsLikeMe and Nuna, omitting GRAIL and PointClickCare. Their top three investment categories are analytics/big data, care coordination, and telemedicine (over $50 million). Rock Health tracked almost 20 M&A, noting that many transactions are now ex-California. They also uniquely track public company performance. Here in 2016 is where Readers first noted weakness in NantHealth, but Fitbit and Castlight Health also had miserable quarters. Teladoc, Evolent Health (consulting), and Care.com had a good winter as well. Let’s see what Q2 brings.

Rock Health announces its Top 50 in digital health (US)

This Editor observes that digital health is at the state of maturity (so to speak) where entities assemble a Top 50 list and host a dinner to pass out awards. Rock Health, Fenwick & West, Goldman Sachs and Square 1 Bank cast a wide net from investment to startups in their just-released list. (Of course there will be a glitzy dinner, soon, at the kickoff of the JP Morgan Healthcare Conference, 9 – 12 January 2017 in San Francisco. Want an invite?)

Of great delight is an award to John Carreyrou of the Wall Street Journal as Reporter of the Year for his investigative work on Theranos. Other highlights are Validic (clinical/wellness data integrator) as Fastest Growing Company, Evolent Health for Best Performing IPO and BSX Technologies‘ LVL hydration monitor as Crowdfunding Hero (having raised $1.1 million when goal was $50,000). Rock Health website

What is increasingly curious to this Editor is that digital health companies, in nearly all cases, aren’t crossing borders and oceans. Every one seems to stick and be unique to its own country of origin, creatures of their own unique petri dish.

Also in other Rock Health news, having evolved a position as a venture fund/business support provider, they have added to their list of prominent partners kidney care and medical group operator DaVita. Rock Health release.

Rock Health’s mid-year report: 2015 investment leveling off

Rock Health‘s 2015 report is revealing in one aspect–that the authors try to put a game face on what is a flat situation in digital health investment for first half. Not even the most optimistic of the digerati expected a lift of 16 percent as we saw in 2014 versus 2013 [TTA 2 July 14], but the 8.7 percent fall off from 2014’s blistering $2.3 billion to $2.1 billion in 2015 year-to-date was unexpected. StartUp Health’s report indicated a slower start to 2015, though slightly less, so the reports correspond. Digital health still is growing faster than software, biotech and medical device.

Other highlights:

* The top six categories accounted for 50 percent of investment funding: wearables, analytics, consumer engagement, telemedicine, enterprise wellness, EHR/clinical workflow

*  In M&A action, this year’s first half has almost matched 2014’s full year total, but with only 13 percent of the investment. Most are digital health companies acquiring others for small amounts. (more…)