In an attempt to gain a foothold in the cash-laden tech industry, some biotechnology and pharmaceutical companies have begun snapping up choice digital health companies, with a few billion-dollar deals leading the trend.
Digital health deal values in biopharma jumped to $6.4 billion in 2019, largely thanks to software company Dassault Systemes Americas Corp.'s $5.9 billion acquisition of health tech company Medidata Solutions, according to an analysis by S&P Global Market Intelligence. Previous large-scale deals include Roche Holding AG's 2018 purchase of clinical intelligence data platform developer Flatiron Health Inc. for $1.9 billion and IBM Watson Health Inc.'s $2.6 billion deal for health analytics company Truven Holding Corp. in 2016.
The bulk of digital health M&A in the pharma and biotechnology sectors center around the premise that certain technological capabilities like artificial intelligence and machine learning can accelerate life sciences innovation, speeding along tasks such as drug discovery, clinical trials and data interpretation. Smaller startups have contributed to the M&A uptick, building on their own technological capabilities to further the digitization of drug development.
Flatiron's appeal to Roche, for example, was the company's ability to mine patient data for determining appropriate treatment. Since the acquisition, Roche has leveraged Flatiron's platform as a control arm in clinical trials, using the real-world data to compare against study findings, J.P. Morgan analyst Tycho Peterson reported in June 2019.
On the other end of the spectrum are companies like IBM Watson and Dassault Systemes — originally purely tech companies — which have used the biotech and pharma angle to break into the healthcare sector.
"We expect the attention from large corporates to increase over the next 10 years, including some notable acquisitions," Pitchbook analysts wrote in a 2018 report, referring to the entry of technology giants, including IBM and Google LLC's DeepMind.
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