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Digital Health M&As Gain Precedence in the New Normal

Debanjana Dey
·5 min read

Digital healthcare, especially telehealth and robotic-assisted surgery, witnessed an unprecedented surge in demand in 2020, thanks to the coronavirus pandemic. As patients continue to avail services from the comfort of their homes via telehealth and as telehealth has the potential to reduce healthcare costs, this space is expected to witness robust expansion even in the post-pandemic era. Also, the clinical advantages and importance of robot-assisted surgery have never been more pronounced than during the pandemic, and it looks like digital health is here to stay.

Healthcare companies engaged in various mergers and acquisitions (“M&A”) throughout 2020 to strengthen their digital health services and tap the unmet demand pool.

According to a Mercom Capital’s report, global venture capitalist (“VC”) funding for Digital Health companies in the first half of 2020 alone was $6.3 billion, exceeding all previous records and sailing past the year-ago period’s VC funding by 24%. In total, in this period, 83 digital health M&A transactions were announced.

In the third quarter of 2020 alone, global VC funding was $4 billion in digital health, up 100% from the year-ago quarter. One of the biggest M&As in the history of digital health took place in this period with Teladoc Health, Inc. TDOC acquiring digital health company Livongo Health, Inc. for a colossal $18.5 billion.

Considering how this space gained importance through the pandemic, it’s time for investors to keep a close eye on the digital health space and add suitable stocks for robust portfolio gains going forward.

Hot Digital Health M&As Throughout 2020

As stated above, Teladoc, a renowned provider of virtual access to high-quality care, in October 2020 completed its merger with Livongo. Following the merger, the combined company is slated to become the only consumer and healthcare provider partner to cover a person’s entire health journey. The company currently carries a Zacks Rank #2 (Buy).

Another company that has been quite active in the digital health space is well-known travel healthcare staffing company AMN Healthcare Services, Inc. AMN. The company, which presently carries a Zacks Rank #3 (Hold), announced a definitive agreement to acquire Stratus Video in January 2020. AMN Healthcare’s management believes that this buyout will expand the company’s workforce solutions offerings via the addition of a key healthcare remote video interpreting company.

Renowned non-invasive monitoring technologies player Masimo Corporation MASI is also quite active in the digital health space. This Zacks Rank #3 company signed a definitive agreement with NantHealth, Inc. (a next-generation evidence-based personalized healthcare company) in January 2020. Per the agreement terms, Masimo acquired the Connected Care assets from NantHealth. The buyout enabled Masimo to aid hospitals improve the continuum of care via hospital automation, connectivity and innovative non-invasive monitoring technologies.

Boosted by the rapidly expanding telehealth space and the M&A spree of the medical companies, non-medical companies are also coming to the forefront to lap up the opportunities in this niche space. A prominent name that is currently in focus is Koninklijke Philips N.V. PHG, a Zacks Rank #2 stock. This key health technology player entered into a definitive merger agreement with renowned U.S.-based provider of remote cardiac diagnostics and monitoring, BioTelemetry, Inc., in December 2020. The combination of the companies is expected to result in a key player in patient care management solutions for the hospital and the home for cardiac and other patients. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Another non-medical company which is worth-mentioning in this booming digital health space is R1 RCM Inc. RCM, a well-known name in the technology-enabled revenue cycle management service providers to the healthcare sector. This Zacks Rank #5 (Strong Sell) stock, in April 2020, announced the completion of the acquisition of SCI Solutions, Inc. The combination of the two companies is expected to deliver enhanced value for healthcare providers by enabling them to expand digital front door strategies for their patients, improve operating efficiency and increase capacity utilization, among other benefits.

Price Performance Chart

Wrapping Up

Year 2020 made us all realize the importance of digital health. The medical as well as the non-medical companies, which actively participated in this space via M&As throughout 2020 are expected to reap the benefits in 2021. As patients continue to book healthcare services from the comfort of their homes and minimize contact amid the pandemic to reduce the chances of infection, this booming space is expected to witness more M&A activities this year. Also, adoption of robotic surgeries is expected to gain momentum in 2021 on the back of continuous technological advancements.

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Koninklijke Philips N.V. (PHG) : Free Stock Analysis Report
 
Masimo Corporation (MASI) : Free Stock Analysis Report
 
AMN Healthcare Services Inc (AMN) : Free Stock Analysis Report
 
Teladoc Health, Inc. (TDOC) : Free Stock Analysis Report
 
R1 RCM Inc. (RCM) : Free Stock Analysis Report
 
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