The Position of AI in Well being Care M&A: Driving Worth in a Tough Market

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Well being care merger and acquisition (M&A) exercise reached a vital degree in 2022, even when not matching 2021’s record-breaking customary. This displays the general economic system’s holding sample wherein assets are nonetheless being deployed strategically, however not at full throttle. On the identical time, prognosticators together with Moody’s have predicted that dealmaking could stay excessive over the following 12 to 18 months. This is because of a mix of things, together with pharmaceutical corporations searching for to restock their pipelines within the face of approaching patent cliffs and long-term pricing stress.

A lot of final 12 months’s offers have been underscored by vital ties to synthetic intelligence (AI) applied sciences, a development more likely 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.

Specifically, AI applied sciences can drive worth for well being care corporations by:

  1. Including new or complementary capabilities
  2. Increasing buyer and person bases
  3. Enabling corporations to extract new insights from current knowledge
  4. Permitting entry to new knowledge sources

This text will overview a number of well being care M&A offers from 2022 and Q1 2023 to attract out these traits and spotlight how corporations can purchase AI capabilities to reach the quickly evolving well being care panorama.

Notable Well being Care AI Offers

Lots of the High 10 medical tech M&A offers in 2022, as recognized by Fierce Biotech, had direct AI concerns. For instance, Microsoft’s acquisition of Nuance was based mostly on increasing the addressable marketplace for its Microsoft Cloud for Well being Care platform:

“In shelling out the large 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 whole 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 scale back clinicians’ workloads — and due to this fact 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 direction of including knowledge 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 techniques can use to investigate medical data and billing and insurance coverage knowledge, with an goal of uncovering “underpaid or unidentified income.”

Whereas most AI exercise within the pharmaceutical and drug improvement area 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 high 10 offers had AI-related nuances, significantly in producing new knowledge 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 medical communication knowledge.

These main offers illustrate a number of the worth propositions of AI expertise, particularly when it comes to how they display a number of of the methods wherein AI can worth.1

Additional Insights and 2023 Outlook

These traits are additionally in step with 2022’s M&A exercise for hospital and well being techniques. Commentators have famous that exercise on this area underscores that “the motion to capability-based scale is far more outstanding 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 techniques, an more and more vital characteristic contemplating the present regulatory panorama.” A noteworthy aspect of lots of this 12 months’s cross-market mergers is that the techniques have a typical focus (e.g., rural well being), complementary skillsets (e.g., educational medication and group 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 achieve current clients 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 corporations via all 4 key worth propositions. On the medical gadget 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 via ultrasound procedures. Following its acquisition of Nuance, famous above, Microsoft additional just lately introduced a brand new collaboration with Epic to combine their platforms for enhancing 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 corporations with long-term outlooks may be on the lookout for methods to compete after the patent panorama adjustments by round 2030 for a number of blockbuster medication. Corporations creating computational drug discovery applied sciences could show to be worthwhile acquisition targets, offering helpful platforms to plug into current drug improvement roadmaps.

What’s Forward?

Including AI capabilities via M&A may also help well being care corporations innovate and create worth in a number of alternative ways. Current offers on this area have emphasised how AI options can create new affected person service alternatives, whether or not corporations have extra conventional enterprise and care fashions or are extra technology-centric. These traits 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 techniques searching for so as to add knowledge analytics and patient-service capabilities, to medical gadget corporations trying to enhance how their applied sciences function and ship the fitting outcomes on the proper time, to pharmaceutical corporations needing to strategize in view of impending patent cliffs, buying AI applied sciences will likely be worthwhile for continued success.

Appendix 1 – AI Worth Propositions in 2022/2023 M&A Offers

Appendix 1



1 Please confer with Appendix 1 for element of the important thing AI worth propositions for every of those main offers.

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