mHealth Israel_Healthcare Finance and M&A- What Comes Next

mHealth Israel_Healthcare Finance and M&A- What Comes Next

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  © 2024 FoxRothschild LLP Matthew R. Kittay National Co-Chair, M&A Practice Group Fox Rothschild LLP Prepared and presented May 21, 2024 exclusively for 1
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  US investors raised$19B for new health focused VC and growth funds in 2023, the third highest amount for any year. This may signal optimism that deployment will pick up as inflation eases and the Fed pauses rate hikes. We expect fundraising to be strong again in 2024. 2
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  Investment volumes have leveledoff over the past four quarters, settling 55% below totals seen in 2021. However, the pace of deployment is picking up. Deal counts are down just 11% from the 2021 peak and gaining speed as dwindling runways force founders to accept less favorable terms. 3
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  PitchBook Data, Inc.EMERGING TECH RESEARCH 2024 Healthcare Outlook. Published on December 18, 2023 Healthcare (overall) Healthcare will decrease as a share of both PE and VC global deal count. Healthcare services PE healthcare services platform trades will not resume until the Fed begins cutting rates in earnest. Digital health Although digital health IPOs will fall short of optimistic projections, at least three candidates will go public. Biopharma Biopharma startups will require more robust clinical validation prior to pursuing IPOs. Biopharma The interval between funding rounds for biopharma companies will lengthen from the baseline set in 2021 by several months, not accounting for startups that cease operations or fail to secure additional funding. Digital health GenAI will begin to disrupt care coordination as the technology accelerates efficiencies in care search and health benefits navigation. Pharmatech Despite challenges in public markets and limited exit opportunities, AI-driven biotech startups will maintain robust growth and high valuations in their early stages. Medtech Surgical robotics will continue to be a leading VC category—surpassing 2023 funding levels. Healthcare IT There will be at least two Value Based Care enabler acquisitions. 4
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  Health Care M&AInsights: Q4 2023 & Outlook for 2024 Deal Activity; EPSTEIN BECKER & GREEN PC, KPMG, AND ZIEGLER; February 01, 2024. 5
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  2024 The exit marketremains tight as lates stage companies grapple with valuation overhang. IPOs were flat vs 2022 with M&A activity favoring acquirers as evidenced by a surge the share of undisclosed deals. We may see more IPOs in 2024 as public markets adjust to higher interest rates. 6
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   Compliance Failure– your company is not “too small to fail”  IP Failures – failure to own and manage your IP rights  Investor Issues –failure to disclose (e.g., conflicts of interest? Realistic projections?) and keep investors informed on evolving landscape  Bad Governance Structure – checks and balances of respective founders vs investor rights 7
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   Cerebral -a cautionary tale specifically for mental health care tech companies looking to provide telemedicine services across the U.S. Investigation by Federal Trade Commission (FTC), Department of Justice (DOJ), and Drug Enforcement Administration (DEA)  Theranos - the US Securities and Exchange Commission (SEC) filed civil fraud charges against Theranos, its CEO Elizabeth Holmes and former president Ramesh "Sunny" Balwani, claiming they had engaged in an "elaborate, years-long fraud" wherein they "deceived investors into believing that its key product – a portable blood analyzer – could conduct comprehensive blood tests from finger drops of blood" 8
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   Clinicians mustretain independent medical judgment to evaluate and treat patients on a case-by-case basis  Develop plans for business model changes that may result from the expiration of the PHE or the adoption of new regulatory rules based on current government investigations  Advertising: (1) Is the language misleading to an ordinary consumer of average intelligence? (2) Does the language misrepresent the products or services in any manner — either overtly or through omission?  Develop Controls - many federal investigations are the result of whistleblowers, who felt unheard by senior management when they attempted to voice concerns about the company’s business practices. Developing open lines of communication, including anonymous methods of reporting, can alert company leadership to non-compliance before it is reported to the federal government. 9
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  Source: How DigitalHealth Startups Can Leverage Intellectual Property  Digital-health companies should protect their innovations through intellectual property  Performing an invention audit to identify all innovations in us or in development can direct and help startups determine which innovations warrant IP protection; score innovations according to criteria like: (1) Whether the innovation provides a competitive advantage (2) How different the innovation is from known practices (3) The ease of reverse engineering the innovation (4) The ability to detect whether competitors copy the innovation (5) The value of the innovation to competitors, business partners, or possible licensees 10
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  • Plan tospend a lot time fundraising or selling the company –and at some points, more time than running business • Honesty is not the best policy… it’s the ONLY policy; there should be no surprises in due diligence • Partner with “smart money” with teams that add value through experience and network • Be flexible – but don’t sacrifice your vision • Be organized and strategic –and rely on great advisors (like us!) 11
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  © 2024 FoxRothschild LLP Matthew R. Kittay  National Co-Chair, M&A Practice  Deep experience as outside general counsel, structuring mergers and acquisitions and securing private equity and venture capital for health care sectors  Office: New York, NY  T: 212.878.7978  [email protected] 12