M&A Deals Are Down | Is The 'Pandemic Phase’ Over? | $35M For Lower Drug Prices

Plus: Vice President Kamala Harris tested positive for Covid

The war in Ukraine, supply chain problems and rising labor costs and interest rates are all putting downward pressure on healthcare deal volume, according to KPMG’s first quarter healthcare M&A report. While 2021 was all about stratospheric valuations, the consultancy expects a fall back down to earth as investors exercise more caution with longer diligence processes. There were 427 M&A transactions in the first quarter 2022, which marked a 34% decline from healthcare deal volume over the same period last year. “The exceptional valuations achieved by some sellers in 2021 have raised the expectations of many dealmakers today, but their dreams of liquidity may dim as newly cautious suitors walk away in 2022,” the report notes. 

There was a steep decline in private equity activity with half as many deals completed in the last quarter of 2021 compared to the first quarter of this year. While PE appetite for hospitals, health systems and physician practices declined, there was a 4% uptick in deals involving healthcare IT and analytics. The biggest M&A deal of the quarter was hospital revenue cycle management company R1 RCM’s approximately $4.1 billion bid for Cloudmed, as hospitals facing financial strain from the Covid-19 pandemic look for more ways to collect on unpaid or underpaid bills. 

So what’s ahead? KPMG suggests we can expect more partnerships, joint operating agreements and joint ventures, “in part because they can create value more quickly than acquisitions.” Plus, there'll be some sell offs of non-core assets and low-performing products.

After a 30-year career as an executive at some of the country’s largest pharmacy benefit managers – the middlemen that help set drug prices between manufacturers and insurers – Mark Thierer is ready for his next act: helping customers find the lowest prices. The former CEO of OptumRx and his son Jonathon Thierer, 28, founded Chicago-based Waltz Health in early 2021. The company, which emerged from stealth this week with $35.4 million in Series A funding led by GV (formerly Google Ventures), has collected price data from pharmacies, insurers, pharmacy benefits managers and discount drug card marketing companies. Its first product is a marketplace search tool powered by this data engine that will show a patient the lowest price at the store they’re in, whether that means paying cash or using their health benefits. 

Deals Of The Week

Bridging The Clinical Trials Diversity Gap: Boston-based Reify Health, which helps connect patients and pharma companies in clinical trials, announced it raised a $220 million series D round that values the company at over $4.8 billion. The round, which was co-led by Altimeter Capital and Coatue, will be aimed at accelerating the company’s plans to diversify the pool of clinical trial participants. 

The Next Generation Call Center: Healthcare artificial intelligence startup Syllable, which has developed an automated assistant to speak, text and chat with patients, raised a $40 million Series C funding round led by growth equity firm TCV with participation from Oak HC/FT, Section32, and Verily.  

Scaling Behavioral Health: Concert Health, a medical group and technology platform that helps integrate behavioral health into primary care and women’s health practices, has raised a $42 million Series B led by Define Ventures and including participation from strategic investors CommonSpirit Health and Advent Health. More than half of the 27,000 patients it has served to date are on the government health insurance program Medicaid and Medicare and the capital will go towards expansion in Arkansas, Massachusetts and Washington. 

Noteworthy

Healthcare software company NexHealth hits a $1 billion valuation following a $125 million Series C funding round. 

Artificial intelligence startup Biofourmis is also a unicorn, as it looks to expand its digital therapeutics and care at home programs with $300 million in Series D funding.  

At least 169 children in 12 countries have developed severe hepatitis in an unexplained outbreak that researchers believe may be linked to a virus that usually causes mild cold symptoms.

Health insurer Humana’s profits hit $930 million in the first quarter, reporting better-than-expected results in a competitive environment for its Medicare Advantage business. Centene reported nearly $850 million in first quarter profit as membership grew by 1.9 million thanks to an increase in enrollment in Medicaid, Medicare and Obamacare plans.

Coronavirus Updates

Dr. Anthony Fauci told PBS News Hour yesterday that the United States is “out of the pandemic phase” when it comes to Covid. He supported the claim by noting that hospitalizations, infections and deaths are all at pretty low levels, though he adds that for much of the rest of the world, the pandemic is still ongoing. Of course, that doesn’t mean that Covid is no longer a concern. Fauci told the Washington Post today that “We’re really in a transitional phase, from a deceleration of the numbers into hopefully a more controlled phase and endemicity.” 

This largely tracks what many public health experts told Forbes last month–that years 3 and 4 of Covid will look different from the first two years. This isn’t to say that Covid will be going away–cases, hospitalizations and deaths have all increased in the past two weeks–but that it will likely remain at a lower level, with seasonal and regional surges of infections that might require more local interventions. 

What this characterization of where we are with Covid misses, though, is the lingering impacts of the disease. Potentially as many as 20% of the population that gets Covid will experience long-term symptoms that linger for months and possibly years. Scientists are still working out exactly what causes long Covid, and treatments for people may be further off still. “Until we learn more about how to prevent and treat long Covid, we can anticipate a large burden on the healthcare system for the near future,” Amanda Castel, a professor of epidemiology at George Washington University’s Milken Institute School of Public Health, told Forbes last month.

In other coronavirus news:

The White House has announced a string of initiatives aimed at increasing the use of Covid antiviral drugs, which are not being widely used despite being readily available. 

Authorities in Beijing have ordered nearly 20 million of its residents to undergo mass Covid-19 testing starting Tuesday as they try to clamp down on the rapid spread of the coronavirus to avoid a citywide lockdown similar to the controversial one implemented in Shanghai.

More than half of all Americans—including around 75% of children—had evidence of a prior coronavirus infection in their bloodstream after the omicron variant raged nationwide, according to the CDC. 

Antibodies produced by Covid-19 vaccines and booster shots may be less effective at defending against the omicron variant than previous coronavirus strains, new research suggests. 

Top Trump Administration officials—and potentially the president himself—intervened to help a struggling trucking company receive a $700 million Covid-19 pandemic loan after Defense Department officials recommended against it.

Across Forbes

• Dry Weather Forecast Calls For Higher Food Prices And Billions In Farm Losses

• How TikTok Live Became ‘A Strip Club Filled With 15-Year-Olds’ 

• Elon Musk’s ‘Free Speech’ Idea Could Nuke Twitter’s Vital Ads Business

What Else We Are Reading

• COVID is spreading in deer. What does that mean for the pandemic? (Nature

• Lack of Covid testing leaves researchers blind to evolution patterns, WHO warns (The Guardian)

• The doctor who is trying to bring back surprise billing (STAT)