The Medical Futurist | January 8, 2019
In 2018, the digital health market has seen just as a turbulent year as before – if not even more volatile and unpredictable. MobiHealthNews saw a record-breaking 56 acquisitions and mergers in the space, 13 of which had disclosed price tags totaling $7.6 billion. While the market space relentlessly expands, some trends show the maturing of the scene: growth is mainly due to the slow awakening of huge traditional healthcare/pharma companies or agile tech giants, while small startups have less chance to survive on their own. Let’s see the most important digital health mergers and acquisitions of last year!
Top 10 digital health mergers and acquisitions in 2018:
1) Roche & Flatiron Health
Last year, we estimated that huge pharma companies started to understand the value of health tech start-ups’ solutions and unique expertise. So, instead of trying to come up with their products and services on their own, they rather teamed up with market players coming up with niche, value-based results. As an example, we listed the acquisition of Austrian diabetes management start-up, mySugr by Swiss big fish, Roche.
As the company takes its role in the digital health universe seriously, it continued its investment in the field for example by buying up Flatiron Health, a company building a data platform dedicated to oncology, on 15 February 2018. Flatiron was founded in 2012 in New York, and it develops software that connects community oncologists, academics, hospitals, life science researchers, and regulators on a shared technology platform. It’s an excellent match for Roche specializing in medicines for oncology, virology, inflammation, metabolism, or microbiology.
2) Amazon & PillPack
In recent years, tech giants have shown powerful moves and interest in the healthcare scene – and Amazon has been at the forefront. In 2017, it received wholesale drug distribution licenses in at least 12 US states and induced a lot of fear in big pharma players about disrupting the entire pharma industry. As it already sold over-the-counter medications and health supplements on its US website, an obvious choice would have been to sell prescription drugs online.
In the end, Amazon decided to give itself a head start in the pharmacy business by purchasing PillPack, a mail-order pharmacy company for 1 billion dollars in June 2018. PillPack, which fill, sort and deliver medications in personalized packets, has about 40,000 customers and reportedly collected 100 million dollars in revenue last year. The reason for the purchase was actually that Amazon had to abandon its original plans about selling pharmaceutical drugs through its Amazon Business marketplace – due to the lack of a sophisticated logistics network and not being able to convince hospitals to give up their traditional purchasing process. It seems that even a company as big as the Seattle giant has trouble with the “classic” infrastructure and moving around successfully in the healthcare space. Thus, we expect that years will go by before an Amazon health institution takes shape – and a pharmacy is more likely than an Amazon hospital.
3) Logisticare & Circulation
It’s an uplifting story of how Circulation was founded. Dr. John Brownstein, Chief Innovation Officer at Boston Children’s Hospital, came up with the idea that Uber could be used to fill gaps in patient transportation in late 2013. Brownstein left a comment in the app after a ride, and Uber called him back. Three years later, he co-founded Circulation. Since then, the start-up has established more than 70 partners in 46 states and facilitates transportation to over 3,000 clinical locations across the US – up from 1,500 just in May. They partnered with Uber in 2016, and Lyft in 2017, as well as local transportation providers such as wheelchair van fleets.
Circulation has entered into an agreement to be acquired by Logisticare, the largest non-emergency medical transportation (NEMT) broker in the US, in September 2018. Logisticare contracts with healthcare providers to coordinate rides to appointments for patients using ridesharing but also taxis, public transportation, mileage reimbursement, volunteer drivers, etc. The move shows that the NEMT market takes the Uber-model seriously – and wants to innovate according to the tried and tested recipe: by buying up a startup instead of figuring out how to respond to the sign of the times on their own.
4) Dexcom & TypeZero Technologies
The San Diego-based diabetes management superpower, DexCom has been building continuous glucose sensing technologies since 1999. Its latest system, the Dexcom G6 does not require any fingerpricks or a blood draw, and it was approved by the FDA in March 2018. Similar to other continuous glucose monitoring systems, it allows diabetics to see their blood sugar throughout the day and night with a sensor that is inserted under the skin.
The overall aim is to develop the ultimate artificial pancreas: delivering insulin in the needed amount according to the appropriate intervals automatically and without the need of any intervention – such as a fingerprick. Companies such as Dexcom or Medtronic are close to the implementation of the idea, and the acquisition of TypeZero Technologies by Dexcom will also bring the system another step closer to automation and accuracy. The start-up has been mainly known for its expertise in insulin delivery advisory algorithms; thus we expect from Dexcom a more intelligent, predictive and algorithm-based management of diabetes in the future.
5) Fitbit & Twine Health
The San Francisco-based company established in 2007 created one of the best-known brands on the market of fitness wearables. Fitbit competes with Apple, Garmin, Samsung or lately the Chinese Xiaomi. Unfortunately, compared to previous years, the company slid to third on the fitness wearable market behind Apple and Xiaomi. Fitbit expects a 7% sales decline for 2018, which is better than the 26% decline in 2017, but it still has to shape up to stay in the race.
Its strategy seems to be the expansion of its app universe and its more powerful move into the digital health field. The acquisition of Twine Health, a health coaching platform for chronic disease management, and later the launch of Fitbit Care, shows exactly that. As the weakest feature of Fitbit wearables and fitness trackers has so far been coaching or rather the lack of appropriate coaching on health issues, the acquisition comes in handy. Moreover, the company will have the chance to also expand its offerings to health plans, health systems, and self-insured employers, creating opportunities to increase subscription-based revenue.
6) Eric Carreel re-acquires Nokia Digital Health (Withings)
The French company established in 2009 has definitely a turbulent two years behind it. In 2016, the Finnish tech giant, Nokia acquired Withings, however, after two years, Eric Carreel, its Co-founder and President, repurchased it. The Paris-based company specializes in connected objects, such as its first product, the body scale or the sleep monitor under the mattress – Nokia Sleep turned Withings Sleep.
Unfortunately, Nokia couldn’t integrate one of the most exciting digital health brands, it couldn’t figure out how to scale and meet growth expectations – and it gave up. Thus, from May 2018, Carreel and the team comprising of more than 200 engineers, developers, managers, and technicians started to re-brand the products and start new projects. We can’t wait for the next Withings health gadget!
7) Headspace & Alpine.Ai
Technology and psychological well-being might seem like profoundly antagonistic notions. However, there are excellent digital tools to help you practice meditation leading you to mindfulness. One of the most noteworthy companies is Santa Monica-based Headspace. It was officially launched in 2010 as an events company, but attendees wanted to take home what they learned. Founders, Andy Puddicombe, a Buddhist monk with a meditation consultancy, Rich Pierson, who initially needed help to de-stress from advertising and sought Andy’s advice, and a small team soon made Andy’s meditation techniques available online. That’s when Headspace was born.
Currently, it seems that the mental health venture wants to expand its services to offer more personalized experiences. As part of its efforts, it acquired Alpine.AI, which provides voice and visual solutions. The technology has been integrated into Amazon Alexa and Google Assistant. Eventually, the Headspace team would like to give users the experience to communicate with the virtual mindfulness guru through voice technology.
8) Muse & Meditation Studio
The company behind the brain sensing headband, Muse, the Canadian InteraXon represents another success story in the digital mental health space. One of the founders, Ariel Garten, is the perfect example of how an interdisciplinary background of neuroscience, fashion design, and psychotherapy can help solve global problems and develop innovative solutions. The Muse team started off with a successful Indiegogo crowdfunding campaign in 2012 raising almost $300,000, and from 2014 on, it continued with the shipping of the Muse to thousands and thousands of individuals who want to measure their brain waves at home. We tested it here.
However, as Fitbit and Headspace realized, data and measurement are not enough for users anymore – recommendations and constant coaching is the desired feature from a digital health device. Muse also recognized the power of personalized advice, thus acquired fellow meditation app, Meditation Studio in September 2018. The platform provides guidance from more than 40 experts to reduce stress, ease anxiety, improve sleep or boost confidence.
9) Medtronic acquires Nutrino
Another giant in the diabetes management field, Medtronic, has seen plenty of successes in the last years. For example, in June, the FDA has extended its approval of the MiniMed 670G hybrid closed-looped system for glucose measurement and insulin delivery (the above mentioned artificial pancreas) to include children with type 1 diabetes.
Later on, in November, the company decided to acquire its long-time partner and Tel Aviv-based start-up, Nutrino. The innovative venture offers a data platform using A.I. to determine how food affects the user’s body and creates the basis of personalized diet and nutrition. As proper dieting is crucial for diabetes management, Medtronic had partnered with the Israeli start-up years ago. As a result of the recent deal, the users of the Medtronic devices will be able to connect to the Nutrino app, put their data in context to their food consumption habits and see how carbohydrate-containing food affects blood glucose.
10) Best Buy & GreatCall
What does a retail company do on the health tech market? It follows its long-term strategy to cater to the continually growing over-65 market. Just as the Minnesota-based consumer electronics enterprise, Best Buy. In August, the corporation acquired San Diego-based GreatCall, a well-known brand in connected health for active aging. With health and safety solutions for older adults and their family caregivers, GreatCall’s innovative suite of mobile products and award-winning approach to customer care helps aging consumers live more independent lives.
The acquisition shows that Best Buy aims for developing its own technologies for the elderly, a lucrative and promising business regarding that the segment displays a fast-growing pie on the market. We expect that numerous retail companies will follow their example in the future.
As the kick-off of CES 2019 shows, the year shapes up to be an exciting one, thus The Medical Futurist expects further movements with mergers and acquisitions on the digital health market. However, we keep our eyes open also for the aftermath of M&As, too, as the results of the market steps are even more important for the future.