2022 Healthcare and Life Sciences Investment Outlook

The KPMG 2022 Healthcare and Life Sciences Investment Outlook provides insights to investors on nine industry subsectors and incorporates findings from a nationwide survey to illuminate how competition, shifting demand, and innovation -- as well as the pandemic and an evolving regulatory environment -- may impact investment decisions in the year ahead. 

Although the pandemic has challenged the healthcare and life sciences industries in many ways, the disruption has also created some lasting innovations: Managing patient care during the pandemic spurred the uptake of telehealth as a consumer-centric treatment modality and recognition of how value-based care elevates patient outcomes. And the response to the virus accelerated advances in science, e.g., mRNA vaccines and monoclonal antibody treatments, that have set new expectations for how quickly new molecules and biologics can go from lab to patient use.

Despite a landmark year for investment in 2021, 70 percent of investors who responded to our survey indicate that they are ready to accelerate their active deal pace in 2022, and more than half of PE investors will do at least 10 percent more deals this year. With biopharma, healthcare IT, medical devices, and hospitals leading the way, we expect to see targeted, thoughtful investment in high-value targets across all the subsectors we assess in this paper.

Some subsector-specific snapshots follow:

• Biopharma: Intense interest in COVID vaccines and therapeutics is also spurring investment activity around specialty drugs, cell and gene therapies, and other biologics. Many of these will involve creative funding mechanisms, such as outcomes-based payments over time.
• Medical devices: Although medical-device manufacturers have been impacted by elective-surgery and care-delivery disruptions, the subsector will recover, and deal activity will accelerate as COVID moves from pandemic to endemic status.
• Healthcare IT: The increased use of telehealth and the likelihood of rollups in this sector are having a spill-over effect and prompting broad investment interest across all areas of healthcare IT.
• Hospital and health systems: Although many hospitals are still struggling with COVID volumes and delayed resumption of elective procedures, investors are willing to pay high multiples for assets they can combine to realize efficiencies.
• Pharma and lab services: Structural changes in pharmaceutical outsourcing are attracting private-equity investors, particularly in CROs, CDMOs, commercialization services/technologies, clinical research sites, and supply-chain services/technologies.
• Behavioral health: The dramatic increase in depression, anxiety, and substance abuse during the pandemic will likely lead to rollups of behavioral health providers, particularly psychiatry practices, where some EBITDA multiples rise well into the mid-double digits.
• Specialty physician practices: Among specialty physician practices, investor uptake is expected to focus primarily on non-acute care, e.g., aesthetics, behavioral health, dental, veterinary health, and dermatology, as well as home care.
• Home health and hospice: Given the shift toward at-home care during the pandemic, investors are interested in consolidation of smaller home health and hospice businesses.

Our annual healthcare and life sciences investment outlook provides insights at the beginning of the calendar year. Our hope is that the survey responses and analyses provided in this report will help industry players navigate a complex ecosystem comprising both traditional and non-traditional players, innovative products and services, and evolving ways of interacting with healthcare consumers.