Well being care merger and acquisition (M&A) exercise reached a vital stage in 2022, even when not matching 2021’s record-breaking customary. This displays the general financial system’s holding sample wherein sources are nonetheless being deployed strategically, however not at full throttle. On the similar time, prognosticators together with Moody’s have predicted that dealmaking might stay excessive over the subsequent 12 to 18 months. This is because of a mixture of things, together with pharmaceutical firms searching for to restock their pipelines within the face of approaching patent cliffs and long-term pricing strain.
Lots of final yr’s offers have been underscored by vital ties to synthetic intelligence (AI) applied sciences, a development prone to turn into extra prevalent going ahead. Extra broadly, Priority Analysis estimated that the worldwide AI in well being care market will develop to over US$180 billion by 2030 – up from a 2022 estimate of US$15 billion.
Particularly, AI applied sciences can drive worth for well being care firms by:
- Including new or complementary capabilities
- Increasing buyer and consumer bases
- Enabling companies to extract new insights from current information
- Permitting entry to new information sources
This text will evaluation a number of well being care M&A offers from 2022 and Q1 2023 to attract out these tendencies and spotlight how firms can purchase AI capabilities to achieve the quickly evolving well being care panorama.
Notable Well being Care AI Offers
Most of the High 10 medical tech M&A offers in 2022, as recognized by Fierce Biotech, had direct AI issues. For instance, Microsoft’s acquisition of Nuance was primarily based on increasing the addressable marketplace for its Microsoft Cloud for Well being Care platform:
“In shelling out the massive bucks, Microsoft forecasted that including Nuance’s conversational AI and different ambient intelligence merchandise particularly to its Microsoft Cloud for Well being Care service would double its complete addressable market amongst well being care suppliers, making a income alternative of as much as US$500 billion. The duo, which have been working collectively since 2019, goals to assist cut back clinicians’ workloads — and subsequently the epidemic of well being care employee burnout — by embedding automated note-taking expertise and different cloud-based instruments into digital well being document software program.”
In the meantime, R1 RCM’s buy of Cloudmed was directed in the direction of including information processing capabilities to uncover added income streams:
“It kicked off 2022 by providing US$4.1 billion in inventory to buy Atlanta-based Cloudmed, which has constructed an AI-powered, cloud-based platform that hospitals and well being methods can use to research medical data and billing and insurance coverage information, with an intention of uncovering “underpaid or unidentified income.”
Whereas most AI exercise within the pharmaceutical and drug improvement house has targeted on enterprise capital investments, BioNTech made a notable acquisition of InstaDeep so as to add InstaDeep’s AI applied sciences for drug discovery and manufacturing.
As well as, a number of different prime 10 offers had AI-related nuances, significantly in producing new information streams and different integrations. The QuidelOrtho merger mixed Quidel’s digital well being platforms with Ortho’s level of care options, whereas Stryker’s acquisition of Vocera blends voice help with day-to-day scientific communication information.
These main offers illustrate a number of the worth propositions of AI expertise, specifically when it comes to how they exhibit a number of of the methods wherein AI can worth.1
Additional Insights and 2023 Outlook
These tendencies are additionally per 2022’s M&A exercise for hospital and well being methods. Commentators have famous that exercise on this house underscores that “the motion to capability-based scale is rather more distinguished than adjoining market-based scale,” significantly in cross-market mergers that create worth with out altering “the aggressive construction of the markets concerned within the merger — there is no such thing as a enhance within the focus of native hospitals or well being methods, an more and more essential characteristic contemplating the present regulatory panorama.” A noteworthy component of a lot of this yr’s cross-market mergers is that the methods have a typical focus (e.g., rural well being), complementary skillsets (e.g., educational medication and neighborhood well being), or a shared want to enhance well being outcomes. These widespread focuses – together with emphasis on complementary skillsets – mirror the worth proposition of buying AI companies to succeed in current prospects in new methods, enter new markets, develop market share, and create new worth for purchasers.
2023’s early M&A exercise demonstrates how AI performs can add worth for well being care firms by means of all 4 key worth propositions. On the medical machine aspect, in its first acquisition as a sole firm, GE HealthCare is bolstering its ultrasound portfolio by buying Caption Well being’s AI-powered expertise for serving to information medical employees by means of ultrasound procedures. Following its acquisition of Nuance, famous above, Microsoft additional not too long ago introduced a brand new collaboration with Epic to combine their platforms for reinforcing productiveness and enhancing affected person care. Inflect Well being – the incubator of Vituity – merged its startup Healthful with Sympto Well being, combining every firm’s core applied sciences to create a brand new AI and personalised care automation platform.
Pharmaceutical firms with long-term outlooks might also be on the lookout for methods to compete after the patent panorama adjustments by round 2030 for a number of blockbuster medication. Firms growing computational drug discovery applied sciences might show to be invaluable acquisition targets, offering helpful platforms to plug into current drug improvement roadmaps.
Including AI capabilities by means of M&A may help well being care firms innovate and create worth in a number of other ways. Current offers on this house have emphasised how AI options can create new affected person service alternatives, whether or not firms have extra conventional enterprise and care fashions or are extra technology-centric. These tendencies are anticipated to proceed because the AI in well being care market expands into the US$100 billion-plus vary within the coming years. From well being care methods searching for so as to add information analytics and patient-service capabilities, to medical machine firms seeking to enhance how their applied sciences function and ship the best outcomes on the proper time, to pharmaceutical firms needing to strategize in view of impending patent cliffs, buying AI applied sciences will probably be invaluable for continued success.
Appendix 1 – AI Worth Propositions in 2022/2023 M&A Offers
1 Please seek advice from Appendix 1 for element of the important thing AI worth propositions for every of those main offers.