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Good morning, healthcare fanatics.
 
Well, it’s a few weeks out from year-end, and it appears you all are working hard to get deals signed or bids in before year end.
 
According to a report Preqin published just this morning, healthcare-focused private equity is poised for a record year. Through November, 585 healthcare-focused deals totaling $56 billion have been announced – putting the year on track to surpass the 619 deals worth a record $57 billion in 2017.
 
It’s also the fourth consecutive year healthcare-focused funds raised more than $20 billion, Preqin said.
 
Among those that have been active is Audax Capital, which I learned recently prevailed in the process for 3 RiversPhoenix Rehab.
 
And there’s Linden Capital Partners, which, if you haven’t noticed, has been both a busy buyer and seller this year. The Chicago buyout shop agreed to put up a $309 million equity contribution to support its LBO of Avalign, Moody’s said. The anticipated deal follows a William Blair-run auction for the maker of orthopedic implants, sources told me this week.  
 
ICYMI, Linden made about 4x on its recent sale of SeraCare.
 
Elsewhere in Chicago, Vistria Group is buying Frontenac’s Behavioral Health Group, whose network of clinics offer medication-assisted treatment to individuals struggling with opioid addiction.
 
Another tack to investing behind behavior health?
 
Tech.
 
Behavioral Health Group, of course, is just the latest example of sponsors’ continued appetite for providers of behavioral health treatment generally speaking.
 
Activity involving groups of clinics that treat everything from substance abuse to intellectual development disorders and autism disorder ought to remain steady. But sponsors are showing interest in software and tech providers supporting these companies.
 
One currently up for sale, I learned, is Rethink First. The VC-backed company serves various end markets, offering clinical tools such as video-based training for ABA therapists, and separately, physician practice management software for behavioral health providers.
 
Read my full story to learn who’s advising and more.
 
As it relates to Rethink, I’ve heard from more than one source that the sellers expect a big pricetag. It’s unclear what that means, but on the surface, behavioral health + tech seems like a nice recipe.
 
As one source put it: helping employees manage their autism benefits is an important market, and one that doesn’t have a lot of specialty offerings.
 
As for the most likely outcome of the auction for Rethink … well, that’s unclear. Some believe Rethink ought to be part of something bigger. One source suggested a strategic that services the employer ought to buy Rethink for its clinical tools and then sell its practice management business. The two offerings don’t have a ton of connectivity, the source said.
 
Rethink could be “a good arrow in the quiver” for a whole host of employer-facing companies - whether that’s Magellan, Optum or even Virgin Pulse, this source said. Virgin Pulse, btw, has been consolidating employee engagement benefits under the backing of Marlin Equity.  
 
Much of the rationale for greater institutionalization of behavioral health providers holds true for the tech helping support these evolving areas.  
 
One is the lack of reporting requirements from a payer perspective. People don’t know what quality looks like. There’s no standardization, and that’s problematic. One source likened the landscape to the “hinterlands”.
 
There also appears to be growing acknowledgment that if you don’t address behavioral health issues you can’t get ahead of chronic medical conditions or illnesses. In other words, you can’t treat one and not the other, the source said. As things stand today, behavioral health networks are not connected to traditional payer networks.
 
Other activity
 
In other dealmaking to be aware of in behavioral health, there’s Lightyear Capital and Oak HC/FT’s recent purchase of Therapy Brands, whose physician practice management tools serve behavioral health clinicians ranging from ABA therapists to psychiatrists and clinicians focused on substance abuse.
 
It’s fair to say the practice management piece of Rethink competes with Therapy, as well as with Insight Venture Partners-backed CentralReach.
 
It’s also worth giving a shout out to a couple VC-backed assets that have taken different approaches in their participation of behavioral health tech.
 
Oak HC/FT also backs Quartet, a tech provider that streamlines the hand-off between primary care and behavioral health. There’s AbleTo, which offers next-day phone or video access to therapists and behavioral coaches, while Lyra Health helps employees confidentially explore which behavioral health treatment they may be best suited for.
 
The big picture? Investors are not only looking at a consolidation play in terms of behavioral health treatment clinics, but also at the various ancillary areas that can help address industry bottlenecks.
 
Another top of mind bottleneck is diagnosis, a separate source told me this week. While everyone agrees that early intervention - getting kids into therapy early on - is important, that doesn’t occur until there’s been a diagnosis, the source explained.
 
That being the case, the source said another ancillary area to watch will be the various genetic labs and diagnostic providers playing around in the space. While a still nascent and evolving area, there are interesting companies out there trying to find the earliest indicators of developmental disorders, autism, etc., the source said.
 
That’s all I’ve got time for today. Have a great weekend, everyone.
 
Reach me at springle@buyoutsinsider.com with any feedback, tips, or just to say hello.
 
-Sarah
 

 
 
               



Top Stories

Chicago’s Vistria wins auction for Frontenac’s Behavioral Health Group

Frontenac has agreed to sell Behavioral Health Group to fellow Chicago private equity shop Vistria Group, according to three people familiar with the matter. The transaction is poised to close in 2019, one of the people said. While the deal has not been publicly announced, the agreement values the opioid-treatment network at a little north […]
Read more...  

Audax nears deal for 3 Rivers’ Phoenix Rehab

Audax Group is nearing a deal to acquire Phoenix Rehabilitation and Health Services from 3 Rivers Capital, according to four sources. The expected deal would conclude a Cain Brothers-run sales process for the Blairsville, Pennsylvania, network of outpatient physical and occupational therapy clinics. Phoenix Rehab produces adjusted Ebitda just south of $10 million, sources said […]
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Rethink First enlists Evercore for sale

Rethink First, whose best-practice software and tools support the various stakeholders involved in caring for those with developmental disabilities, is exploring a sale, according to four sources. The New York healthcare IT company, formerly Rethink Autism, has engaged Evercore for financial advice, three of the sources said. Sources placed the company’s revenue from $18 million […]
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TPG Growth buys patient data provider Q-Centrix

TPG Growth has purchased Q-Centrix, a data solutions provider that helps hospitals manage information for quality improvement. The deal concludes a Houlihan Lokey-run sales process and marks an exit for Sterling Partners, which first invested in Q-Centrix in January 2014. Varagon Capital Partners provided a $70 million senior secured credit facility to support the acquisition. […]
Read more...  



Roundup
 
Deals Exit Personnel

Deals

Lightpoint Medical snags funding

UK-based Lightpoint Medical, a provider of intraoperative molecular imaging and sensing, has secured 5 million pounds in funding. The investors included Cambridge Capital Group, Venture Founders, Coutts Investment Club, Envestors, Fund Twenty8, SyndicateRoom and Oxford Technology.
Read more...  

Salveo Capital scoops up minority of Ascend Wellness

Salveo Capital said Dec. 6 that it has acquired a minority equity interest in Ascend Wellness. Financial terms weren't announced. Ascend is a cannabis company operating in Massachusetts, Illinois, and Michigan.
Read more...  

DFW Capital forms Continuum Research Group, which invests in Lotus Clinical Research

DFW Capital Partners has formed Continuum Research Group with Jeffrey Kinell, the former CEO of Bracket Global. CRG has made its first investment in Pasadena, California-based Lotus Clinical Research LLC, a CRO and research site focused on improving the scientific accuracy of analgesic programs. No financial terms were disclosed.
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Alto Pharmacy fetches $50 mln Series C

San Francisco-based Alto Pharmacy, a digital pharmacy, has raised $50 million in Series C funding. Zola Global and Greenoaks Capital led the round with participation from other investors that included Jackson Square Ventures and Olive Tree Capital.
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Kallyope snags $21 mln

New York City-based Kallyope Inc., a biotechnology company focused on identifying therapeutic opportunities involving the gut-brain axis, has secured $21 million in funding. The lead investor was Bill Gates. Other investors included Lux Capital, The Column Group, Polaris Partners, Illumina Ventures, Alexandria Venture Investments, Euclidean Capital and Two Sigma Ventures.
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ChrysCapital takes majority stake in GeBBS Healthcare Solutions

ChrysCapital has acquired a majority stake in Culver City, California-based GeBBS Healthcare Solutions, a provider of revenue cycle management solutions for the healthcare industry. No financial terms were disclosed. Houlihan Lokey provided financial advice to GeBBS Healthcare Solutions on the transaction with Mundkur Law Partners and Clark Hill providing legal advice. And, Shardul Amarchand Mangaldas & Co and Wilson Sonsini Goodrich & Rosati advised ChrysCapital.
Read more...  

Providence Ventures backs Trilliant Health

Brentwood, Tennessee-based Trilliant Health, a healthcare analytics and growth company focused on intelligent patient acquisition for hospitals and healthcare providers, has secured additional funding from Providence Ventures. No financial terms were disclosed. Trilliant's other backers include Noro-Moseley Partners, Martin Ventures, Nashville Capital Network and NueCura Partners.
Read more...  

Enzyme Health locks in $1.7 mln in Silverton-led round

Austin-based Enzyme Health, a recruiting marketplace for clinical telehealth jobs, has raised $1.7 million in seed funding. Silverton Partners led the round.
Read more...  

Lumeon picks up $28 mln

Boston-based Lumeon, a provider of a path careway management platform, has secured $28 million in funding. LSP led the round.
Read more...  

Sleep improvement health platform Oura Health picks up $5 mln

Finland-based Oura Health, a sleep improvement health platform, has raised $5 million in funding, bringing its total tally to $20 million. MSD Capital led the round with participation from other investors that included YouTube co-founder Steve Chen, Drew Brees, Apolo Anton Ohno, Shaquille O’Neil, Jimmy Johnson, Lance Armstrong and Will Smith.
Read more...  

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Firms & Funds

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Exits

Blackstone plans IPO of U.S. benefits manager Alight: Reuters

Private equity firm Blackstone Group LP (BX.N) is readying an initial public offering (IPO) of Alight Solutions LLC, a U.S. provider of healthcare and retirement benefits services that could be valued at more than $7 billion, including debt, Reuters reported.
Read more...  

PE-backed Columbus acquires Progressive Comprehensive Services

The Columbus Organization, which is backed by HealthEdge Investment Partners LLC, has acquired New Jersey-based Progressive Comprehensive Services, a provider of support coordination services to adults with intellectual and development disabilities. No financial terms were disclosed.
Read more...  

GSK slides after buying cancer firm Tesaro for hefty $5.1 billion: Reuters

GlaxoSmithKline has agreed to buy U.S. cancer specialist Tesaro for $5.1 billion, a costly investment to rebuild the pharmaceuticals business by new Chief Executive Emma Walmsley that unnerved investors, Reuters reported.
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ResMed to buy digital therapeutics firm Propeller Health for $225 mln

ResMed has agreed to acquire Madison, Wisconsin-based Propeller Health, a digital therapeutics company, for $225 million. DLA Piper is serving as legal counsel to ResMed on the deal. And, Allen & Company LLC is providing financial advice to Propeller while Fenwick & West LLP is serving as legal counsel. Propeller Health's backers include Aptar Pharma, Safeguard Scientifics, Social Capital, Hikma, 3M Ventures and SR One.
Read more...  

Amulet buys OPEN Health, will merge it with Peloton

Amulet Capital Partners has acquired UK-based OPEN Health, a health communications and market access group. No financial terms were disclosed. Amulet is planning on merging OPEN Health with portfolio company Peloton Advantage, a provider of medical communications services to medical affairs departments at pharmaceutical, biotechnology and medical device companies.
Read more...  

Frazier-backed TCGRx acquires Parata Systems

TCGRx, a portfolio company of Frazier Healthcare Partners, has acquired Durham, North Carolina-based Parata Systems, a provider of pharmacy technology solutions. No financial terms were disclosed.
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NMS-backed ADM makes an add-on acquisition

Anne Arundel Dermatology Management, which is backed by NMS Capital, has acquired Maryland-based Rock Creek Dermatology and Skin Cancer Center LLC, a dermatology practice. No financial terms were disclosed.
Read more...  

Hildred-backed Crown Laboratories acquires five OTC consumer brands from GSK

Crown Laboratories, a portfolio company of Hildred Capital Partners LLC, has acquired five over the counter consumer brands from GlaxoSmithKline. The acquired brands include PanOxyl, Sarna and Zeasorb. No financial terms were disclosed. Crosstree Capital Partners New York LLC and Latham & Watkins (London) LLP served as financial and legal advisers, respectively, to GlaxoSmithKline.
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Alliance sells long-term care unit to PE-backed HealthPRO

Alliance Physical Therapy Management, which is backed by GPB Capital, has sold its long-term care unit to HealthPRO Heritage. No financial terms were disclosed. Livingstone was the investment banker to Alliance on the deal. HealthPRO is a portfolio company of Beecken Petty O’Keefe.
Read more...  

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Personnel

Mid-market lender Varagon hires Broderick as healthcare originations MD

New York-based Varagon, a lender to middle market companies and private equity firms, has named Michael Broderick as a managing director of healthcare originations. Previously, he worked at Capital One where he originated debt, equity co-investments and banking opportunities for the firm's private equity clients.
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