Healthcare Investment Banking Q2 2020 Update Telehealth Focus
Member FINRA | SIPC
OUR DEDICATED HEALTHCARE TEAM
Deborah F. Aghib, Ph.D. Managing Director, Healthcare daghib@cs-ib.com 305-438-7817
Healthcare Investment Banking
Dr. Aghib leverages 26 years of executive experience, broad scientific knowledge, and significant international expertise to develop long-term, cross-border and inter-industry strategies for business development, licensing, spinoffs, and mergers and acquisitions. Previous Experience: Chief Business Officer, Stellar Biotechnologies; Vice President of Business Development and Strategy, Neuro-Zone; Chief Business Development and Strategy Officer, Dianax; Founder & Managing Director, DFA Advisors; Consultant, CRG, LP. Board Involvement: Neuro-Zone, CellPly, ImmunGene, OpenWorm Foundation, Open Commons Consortium, SF Art and Film, Stellar Biotechnologies – Strategic Investment, M&A, Audit, and Corporate Governance Committees (Prior). Ph.D., University of Milan; Ph.D., University of Pavia; B.S./M.S., University of Milan.
Margery Fischbein Managing Director, Healthcare mfischbein@cs-ib.com 305-438-7816
Ms. Fischbein has a long track record of successfully advising clients in the healthcare industry on M&A, licensing transactions, public and private equity, and debt financings, as well as providing strategic advisory services. Previous Experience: Managing Director and Head of Healthcare Investment Banking, Seaport Global and FBR & Co.; Managing Director and Head of East Coast Biotechnology, JMP Securities; Vice President Business Development, Human Genome Sciences; Vice President Business Development, ImClone Systems; Managing Director Investment Banking, Citigroup and JP Morgan Chase; Senior Vice President, Lehman Brothers. Board Involvement: Cytodel, EcoHealth Alliance, Inhibrix (Prior). M.B.A, Harvard Business School; B.A. Harvard University.
Ira Z. Leiderman Managing Director, Healthcare ileiderman@cs-ib.com 305-438-7813
Mr. Leiderman has successfully led numerous transactions, as well as conducted strategic advisory work for companies in the healthcare and life science sectors. Previous Experience: Founder & Managing Director, Long Trail Advisors, LLC; Co-Head – Healthcare Group, Ladenburg Thalmann & Co. Inc.; Head of Investment Banking, Punk Ziegal & Co.; Member, The Palladin Group; Senior Healthcare Banker, Gerard Klauer Mattison; Co-Founder & Founding CEO, Futuragene Ltd. Board Involvement: Apthera – Executive Chairman, Collplant, MargineSurgical, Camp Ramah. B.A., CUNY (Brooklyn). 1
ABOUT OUR FIRM
Healthcare Investment Banking
¡ Cassel Salpeter & Co. is a boutique investment banking firm focused on providing independent and objective advice to middle-market and emerging growth companies. We can help. Mergers & Acquisitions
Capital Raising
¡ Financial advisory ¡ Sales to strategic and private equity buyers ¡ Divestitures to strategic and private equity buyers ¡ Buy-side acquisition programs ¡ Leveraged & management buyouts ¡ Going private transactions
James Cassel Chairman
Marcus Wai Vice President
Scott Salpeter President
Other Services
¡ Financial advisory ¡ Equity and debt private placements ¡ Growth capital ¡ PIPEs ¡ Recapitalizations
Philip Cassel Managing Director
Chris Mansueto Vice President
Ira Leiderman Managing Director
Laura Salpeter Vice President
Fairness opinions Solvency opinions Valuations Restructuring, refinancing, and distressed M&A transactions ¡ Debtor and creditor representations ¡ 363 sales & plans of reorganization
¡ ¡ ¡ ¡
Deborah Aghib Managing Director
Julian Astrove Associate
Margery Fischbein Managing Director
Edward Kropf Associate
Joseph Smith Director
Tahz Rashid Analyst
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Healthcare Investment Banking
I
TELEHEALTH MARKET REVIEW
II
M&A & PRIVATE PLACEMENTS REVIEW
III
PUBLIC MARKETS REVIEW
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TELEHEALTH OVERVIEW
Healthcare Investment Banking
Telehealth and telemedicine are broad terms that have been used interchangeably for years. The terms have become synonymous to describe the electronic connection between a healthcare consumer or patient and their healthcare provider. These terms cover the delivery of healthcare services electronically in real-time or the collection of clinically relevant data transmitted either synchronously (in real-time) or asynchronously (batched and transmitted at a later time) to a healthcare provider. Some of these services can be in the form of a video visit in place of an in-office visit with a healthcare provider, or can be used to collect patient data to be utilized by the healthcare provider to evaluate and possibly diagnose a medical condition. The electronic transmission of healthcare data has evolved since its infancy in the 1980s. The early days saw the transmission of text data such as medical records and laboratory results. But as electronic bandwidth increased, larger amounts of data with greater fidelity were able to be transmitted. It is now routine to transmit radiographic images and studies to radiologists to be read remotely. The same is true for pathology images which may be transmitted to a pathologist or a group of pathologists to obtain their opinions and diagnosis. These capabilities have also enabled the remote monitoring of some clinical trial subjects to help advance clinical trial studies. The Covid-19 pandemic has seen an explosive growth of telemedicine. Many physicians closed their offices to all but emergency visits. IQVIA has reported that office visits have decreased by greater than 60%1. However, a great number of patients still needed to be “seen” by their care providers. Frost and Sullivan reports that the number of virtual visits this year has grown by greater than 64% in a year-over-year comparison and is expected to have a five-year compound annual growth of greater than 38%2. In April of this year, one large corporate provider of telehealth solutions reported a spike in the number of video requests of over 200%3. A study from NYU Langone Health, a large New York City based health system, reported a 683% increase in virtual visits for the March 2nd to April 14th period4. In total, it is estimated by Forrester Research that virtual health-care interactions will top 1 billion by year’s end5. Although not a full substitute for a “hands on” physical exam, video assisted visits do offer a feasible substitute for many in-person patient-doctor encounters. As said by Sir William Osler6 over a hundred years ago “Just listen to your patient, he is telling you the diagnosis.” 1. 2. 3. 4. 5. 6.
IQVIA Frost & Sullivan, “Telehealth - A Technology-Based Weapon in the War Against the Coronavirus, 2020”, May 2020 CNBC Health and Science. April 4, 2020 Journal of the American Medical Informatics Association 27(7), 2020 CNBC Health and Science. April 4, 2020 Sir William Osler (1849-1919) was a Canadian physician and is deemed to be the father of internal medicine
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FUTURE TRENDS
Healthcare Investment Banking
The popularity of virtual visits has waned somewhat since its rapid growth several months ago7 due to a somewhat tepid response by patients due to the lack of personal and hands-on interaction with their care provider and some technical challenges faced by patients, particularly the elderly. Telehealth Weekly Visits as a Percentage of Total FFS Medicare Primary Care Visits in Urban and Rural Counties
One survey of seniors found that only 52% of those polled were comfortable using telehealth8. These technical challenges are rapidly being addressed by a number of companies who are developing easy-to-use solutions for the elderly who may lack manual dexterity in addition to having auditory and vision deficits9. With that said, we believe that telemedicine has found a permanent place in many areas of clinical practice and clinical research.
7. 8. 9.
STAT News June 25, 2020 Fierce Healthcare May 27, 2020 Fierce Healthcare July 27, 2020
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OUR THOUGHTS
Healthcare Investment Banking
Our thoughts are based on several key points. In the face of the pandemic, the Centers for Medicare & Medicaid Services (CMS) of the US Department of Health and Human Services (HHS) had eased and increased reimbursement to physicians for on-line visits10, thus allowing care providers to see more patients per hour with lower overhead. It has been publicly stated that this new reimbursement plan will probably stay in place after the pandemic ends11 12. Private insurers are expected to follow suit. Blue Cross of Tennessee has already announced that the new reimbursement for telehealth will be permanent13. Cigna and Blue Cross of North Carolina have stated that their pandemic level of reimbursement for telehealth will remain in place through at least the end of the year14. Also, to assist medical practices to adopt and provide expanded telehealth services, the Office of Civil Rights at DHS announced that it was using its “enforcement discretion” and would not impose penalties on those using HIPAA-noncompliant private communications technology15 16. In addition, medical practices have made investments in technology and practice members are now up-to-speed on its use and utility. Furthermore, the “Zoomification” of telephone calls and meetings has made people much more comfortable with using teleconference technology. Also, the accelerated utilization of telemedicine has carved a growing niche in clinical research. The pandemic has disrupted many clinical trials, so to save these studies, sponsors and investigators have had to find solutions to protect the trials. Institutional Review Boards are meeting online and rapidly approving study protocols as well as monitoring ongoing studies. The exchange of data between investigators has accelerated along with the urgency in exchanging drug protocols and their clinical experience in treating Covid-19 patients. In addition, many, if not all conferences and international congresses have gone virtual, enabling many more to attend these meetings. Going forward, particularly with the addition of artificial intelligence (AI), online clinical research studies and patient monitoring will only grow in scope and effectiveness17.
10. 11. 12. 13. 14. 15. 16. 17.
Centers for Medicare & Medicaid Services (CMS) Medicare Telemedicine Health Care Provider Fact Sheet March 17, 2020 Centers for Medicare & Medicaid Services (CMS) Press Release August 3, 2020 POTUS Executive Order on Improving Rural Health and Telehealth Access issued August 3, 2020 BCBST News Center, Press Release May 14, 2020 New York Times, Health – Is telemedicine Here to Stay? August 3, 2020 N Engl J Med 2020 382:e82 (June 4, 2020) Centers for Medicare & Medicaid Services (CMS) Medicare Telemedicine Health Care Provider Fact Sheet March 17, 2020 JACC Case Reports 2:9 2020
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OUR THOUGHTS (CONT.)
Healthcare Investment Banking
The current pandemic has seen a rapid adoption of telehealth. We are now seeing the rapid adoption of technology that was only in its infancy a short time ago. The accelerated growth of this new way of delivering patient care will drive technological innovation. Innovation will drive deal activity in both funding and M&A. We anticipate that companies will be on the hunt to acquire competitors and companies with technology, that will enable them to develop and maintain dominant positions in their respective industries. In time, the current health crisis will subside, reimbursement will be secure, and telehealth will become one of routine standards of care.
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SELECTED TELEHEALTH MARKET PERFORMANCE
Healthcare Investment Banking
Relative Trading Performance (Apr 1, 2020 to Aug 21, 2020) 600
Indices CS Telehealth Index S&P 500 NASDAQ Composite Nasdaq HC S&P 500 HC Services S&P 500 HC Tech.
500
_________70.2% _________37.5% - - - - - - - - - 53.7% -_________35.4% ….............1 3.0% - - - - - - - - - 18.3% --
CS Telehealth Index Components
400
Teladoc Health, Inc. _________37.5% Livongo Health, Inc. …............. 404.9% 1Life Healthcare, Inc. _________63.9% Allscripts Healthcare Solutions, - - - Inc. - - - - - - 36.5% -BioTelemetry, Inc. _________14.5% Ontrak, Inc. _________ 363.9% Welltower Inc. ….............4 1.9% MTBC, Inc. _________ 100.2% SHL Telemedicine Ltd. …............. 4.3%
300
200
100 On August 5 Teladoc announced its pending acquisition of Livongo
0 Apr-20
Apr-20
Apr-20
May-20
May-20
Jun-20
Jun-20
Jul-20
Jul-20
Aug-20
Aug-20
So urces o f info rmatio n: S&P Capital IQ.
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SELECTED PRIVATE TELEHEALTH COMPANIES
Healthcare Investment Banking
Selected Private Telehealth Companies Company Name
Parent Co.
Principal Location
98point6 Inc.
Seattle, WA
Website www.98point6.com
AMD Global Telemedicine, Inc.
Chelmsford, MA
www.amdtelemedicine.com
Amwell (1) CentriHealth, Inc.
Boston, MA
www.amwell.com
UnitedHealth Group Incorporated
Nashville, TN
www.centrihealth.com
Citra Health Solutions
Cedar Gate Technologies, LLC
Morrisville, NC
www.citrahealth.com
Critical Signal Technologies, Inc.
Best Buy Co., Inc.
Novi, MI
www.cstltl.com
Doctor on Demand, Inc.
San Francisco, CA
www.doctorondemand.com
Education Networks of America, Inc.
Nashville, TN
www.ena.com
Epic Systems Corporation
Verona, WI
www.epic.com
Kareo, Inc.
Irvine, CA
www.kareo.com
MDLIVE Inc.
Sunrise, FL
welcome.mdlive.com
Ontario Telemedicine Network Inc.
Toronto, ON
www.otn.ca
Physician 360, Inc.
Mckinney, TX
physician360.co
PlushCare, Inc.
San Francisco, CA
www.plushcare.com
ScImage, Inc.
Los Altos, CA
www.scimage.com
Secure Medical, Inc.
Tempe, AZ
www.securemedical.com
SOC Telemed
Reston, VA
www.soctelemed.com
Zipnosis, Inc.
Minneapolis, MN
www.zipnosis.com
(1) Amwel l ha s reportedl y fi l ed for a n IPO.
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Healthcare Investment Banking
I
TELEHEALTH MARKET REVIEW
II
M&A & PRIVATE PLACEMENTS REVIEW
III
PUBLIC MARKETS REVIEW
10
M&A OVERVIEW
Healthcare Investment Banking U.S. Healthcare M&A by Sector Count of M&A Transactions
400
23
350
20
22 23
19
300 250
26
14
20
132
123
200
44
150
31
56
100
52
46
50
0
19
20
121
43
97
43
36
48
47 45
30
20
27 25
Q1
Q2
Q3
127
134
116
118
25
49
40
45
39
37
40
45
52
54
51
54
91
93
137
109
8 61
37
28
64
61
66
66
56
39 39
53
64
58
94
93
17
23
24
32
21
30
34
36
35
39
38
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
2017
2018
Biotechnology
17
131
153
123
27
30
31
16
Pharmaceuticals
Health Care Technology
2019 Health Care Equipment
Health Care Services
2020 Life Sciences Tools and Services
Aggregate M&A Transaction Value ($ in millions)
$60,000
$160,000 $140,000
$50,000
$120,000
$40,000
$100,000
$30,000
$80,000 $60,000
$20,000
$40,000 $10,000
$20,000
$-
$0
Q1
Q2
Biotechnology
Q3 2017 Pharmaceuticals
Q4
Q1
Q2
Health Care Technology
Q3
Q4
2018 Health Care Equipment
Q1
Q2
2019 Health Care Services
Q3
Q4
Q1
Q2 2020
Life Sciences Tools and Services
Total M&A Value
Note: Q1 2018 total transaction value for Health Care Services was $71,655 and Q1 2019 total transaction value for Biotechnology was $116,936. Sources of information: S&P Capital IQ.
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PRIVATE PLACEMENT OVERVIEW
Healthcare Investment Banking
U.S. Healthcare Private Placements by Sector Count of Private Placement Transactions 1,000 900 800
37 65
700 600
169
39 63
37 56
192
180
500 152
400 300
173
154
43 69
31 61
31 91
40 62
38 77
156
156
137
186
156
157
180
36 71
167
29 70
42 74
161
128
34 68
148
162
181
157
159
183
174
160
190
212
198
192
184
189
166
220
216
215
226
208
223
218
Q3
Q4
Q1
Q2
Q3
Q4
Q1
116
176
158
27 59
126
162 130
150
124
131
129
215
203
195
232
232
238
Q1
Q2
Q3
Q4
Q1
Q2
200 100
36 76
138 201
0
2017
2018
Biotechnology
Pharmaceuticals
Health Care Technology
2019 Health Care Equipment
Health Care Services
Q2 2020
Life Sciences Tools and Services
Aggregate Private Placement Transaction Value ($ in millions)
$18,000
$7,000
$16,000
$6,000
$14,000
$5,000
$12,000
$4,000
$10,000
$8,000
$3,000
$6,000 $2,000
$4,000
$1,000
$2,000
$0
$0
Q1
Q2
Q3
Q4
Q1
2017 Biotechnology
Pharmaceuticals
Q2
Q3
Q4
Q1
2018 Health Care Technology
Health Care Equipment
Q2
Q3
Q4
2019 Health Care Services
Life Sciences Tools and Services
Q1
Q2 2020
Total Private Placement Value
Sources of information: S&P Capital IQ.
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Healthcare Investment Banking
I
TELEHEALTH MARKET REVIEW
II
M&A & PRIVATE PLACEMENTS REVIEW
III
PUBLIC MARKETS REVIEW
13
SELECTED MARKET INDICES
Healthcare Investment Banking
Relative Trading Performance (Apr 1, 2020 to Aug 21, 2020) 200
Indices CS Telehealth Index S&P 500 NASDAQ Composite Nasdaq HC S&P 500 HC Services S&P 500 HC Tech.
180
160
_________70.2% _________37.5% - - - - - - - - - 53.7% -_________35.4% ….............1 3.0% - - - - - - - - - 18.3% --
140
120
100
80
60
40
20
0 Apr-20
On August 5 Teladoc announced its pending acquisition of Livongo
Apr-20
Apr-20
May-20
May-20
Jun-20
Jun-20
Jul-20
Jul-20
Aug-20
Aug-20
CS Telehealth Index is market capitalizatio n weighted index o f TDOC, LVGO, ONEM , M DRX, B EA T, OTRK, WELL, M TB C, and SHLTN. So urces o f info rmatio n: S&P Capital IQ.
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EQUITY OFFERINGS OVERVIEW
Healthcare Investment Banking
U.S. Healthcare IPO & Follow-On Equity Offerings by Sector Count of IPOs and Aggregate Equity Raised ($ in millions)
4
$4,500 $4,000
$3,500
3
$2,500
2
$2,000
$ Volume
# of IPOs
$3,000
$1,500
1
$1,000 $500
0
$Q1
Q2
Q3
2017 Health Care Technology
Q4
Q1
Q2
Q3
Q4
Q1
2018 Health Care Equipment
Q2
Q3
Q4
Q1
2019 Life Sciences Tools and Services
Health Care Services
Q2
2020 Total IPO Value
Count of Follow-Ons and Aggregate Equity Raised ($ in millions)
35
$9,000 $8,000
30
$7,000
$6,000
20
$5,000
15
$4,000
$ Volume
# of Follow-Ons
25
$3,000
10
$2,000 5
$1,000
0
$Q1
Q2
Q3
Q4
Q1
2017
Health Care Technology
Q2
Q3
Q4
2018
Health Care Equipment
Q1
Q2
Q3 2019
Health Care Services
Life Sciences Tools and Services
Q4
Q1
Q2 2020
Total Follow-On Value
Sources of information: S&P Capital IQ.
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CONTACT INFORMATION
Healthcare Investment Banking
James S. Cassel
Deborah F. Aghib, Ph.D.
Margery Fischbein
Ira Z. Leiderman
Chairman
Managing Director, Healthcare
Managing Director, Healthcare
Managing Director, Healthcare
jcassel@cs-ib.com
daghib@cs-ib.com
mfischbein@cs-ib.com
ileiderman@cs-ib.com
305-438-7701
305-438-7817
305-438-7816
305-438-7813
801 Brickell Ave. Suite 1900 Miami, Florida 33131 www.casselsalpeter.com
The accuracy or completeness of such information and discussion within this report was prepared by Cassel Salpeter & Co., LLC (“CS”) and is meant to provide general information regarding the subject matter. The information has been obtained from sources that are considered reliable, but CS makes no guarantee or representation of this information. This report reflects information known at the time the report was written and is subject to change. The discussion reflects the author’s current judgement as of the date of this report and does not necessarily reflect the judgements of CS, and furthermore, are subject to change without notice. CS has no obligation to update, modify, or amend this report, or to otherwise notify a reader thereof, in the event that any matter stated herein, or any opinion, estimate, forecast, or analysis set forth herein, changes or subsequently becomes inaccurate. This report does not constitute investment advice with respect to the securities of any company discussed herein, is not intended to provide information upon which to base an investment decision, and should not be construed as such. Professional advice should be obtained before taking any action based on any information or discussion contained herein.
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