Rapidly converging digital technologies and societal changes have created a “perfect storm” for the global healthcare sector, driving intense innovation and mergers and acquisitions (M&A).
A new report from Hampleton Partners reveals there were nearly $9.5bn (£6.8bn) worth of healthtech M&A deals in the second half of 2017 – four times more than in the previous six months.
The firm predicts rising demand for wearables and connected systems as a result of ballooning costs and ageing populations will likely fuel a further increase in deal volume and value over the coming years.
“This vast healthcare sector where patient care systems have remained largely unchanged for decades is experiencing a seismic shift in funding and technology innovation,” Hampleton Partners director, Jonathan Simnett, said.
“Healthcare systems are struggling to deal with the spiralling costs allied to rising patient expectations, more expensive treatments, and the consequences of dealing with ageing populations and chronic lifestyle diseases.”
This comes after Amazon, Berkshire Hathaway and JPMorgan Chase & Co said last month that they would create a new healthcare company in the US to help address rising costs.
The announcement fuelled speculation that tech firms could also attempt to enter foreign markets, capitalising on their vast resources, consumer data, and reputation for excellent customer service.
Simnett added: “The customer care and logistics expertise that comes with Amazon’s market-moving plan to offer healthcare services is an indication of just how big this shift is going to be.”
Hampleton Partners’ research shows that North America led the way in healthtech M&A last year, with 77 out of 100 announced deals driven out of the US.
It also reveals that the UK received more funds from US investors than any other European country, and that Express Scripts’ $3.6bn acquisition of eviCore healthcare was the biggest deal recorded in the second half of last year.
“Significant innovation rarely comes from within an industry – it’s outsiders that have to break the mould,” Simnett continued.
“So it’s the movement of new players into the healthcare M&A market during 2018 that could be its most interesting feature, with step-changes being driven by the likes of Apple and Google.”
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