Digital Health | Q3 2023 Market Review

Public markets had a promising start to the quarter, at one point up ~5% just in July, but new interest rate guidance subsequently turned sentiment slightly sour overall but disproportionately so for our Digital Health index which underperformed by over 10%. YTD, our index is still up 4%. For the first time, Digital Health is now trading at a discount to the NASDAQ at 3x LTM revenue. Revenue growth remained flat at 9% for our index members, although profitability is increasing.

The private placement market for Digital Health assets continued to weaken. Deal count, at 178 in total, was the lowest seen since 2019. Aggregate deal value dropped to $3B, representing a 45% YoY decrease. There is evidence, however, that markets are rebounding for raises $50 – 100M, representing a third of deal volume in Q3. Overall average deal size grew to $17M for the quarter.

The M&A market in Digital Health seemed to be comparatively much healthier. While deal count remained mostly flat once more at 78 transactions in Q3, aggregate deal value quadruped over Q2 to $13B. While this performance was mostly driven by a sharp increase in deals $250M+ and above, it is nevertheless a good near-term signal. As another positive indicator, the average M&A revenue multiple grew to 6x, far outpacing what was seen for public digital health vendors.