Across regions, investors will keep a few common themes in mind.

Generative AI to transform the health care sector. Generative AI promises to drive significant productivity gains, improve patient and provider experience, lower administrative costs, speed biomedical research and drug development, and help develop next-generation diagnostic equipment. Big technology companies are partnering with health care organizations to apply generative AI, and investors are deploying capital in nascent companies built around the tool. Bain found that about half of the top 20 biopharmaceutical firms published press releases about generative AI in 2023.While traditional, analytical AI has been used in health care for many years, generative AI is distinguished by its ability to create new content, summarize and translate existing content, and, ultimately, to "reason and plan." Among investors, venture capital and growth equity funds have been deploying capital in companies built around generative AI as a core competency. Investors need to consider generative AI's disruptive potential on portfolio companies and new investments and identify opportunities to take advantage of the technology.
Health care IT provides attractive upside potential with lower downside risk. Despite deal volume dropping around 23% from 2022 and buyout activity slowing, health care information technology (HCIT) continues to attract investment due to its ability to drive innovation and offset macro factors such as inflation, labor shortages, and reimbursement headwinds.Excitement around digitalization, following the outbreak of Covid-19, resulted in a slew of portfolio companies still early in their holding periods. Despite the decline in transactions, HCIT represents 10% of health care sector deal volume, seeing sizeable deals in 2023. Looking ahead, providers will prioritize increasing their returns on investment, with revenue cycle management, clinical workflow optimization, and patient engagement as top priorities for new investments.
Life sciences: navigating the demand for glucagon-like peptide-1 agonists (GLP-1s). Sales in the GLP-1 class of medications surged in 2023. Looking ahead, three implications confront PE investors, given the potential market for these drugs. First, demand for inputs or services supporting the manufacturing of GLP-1 therapies will likely increase. Second, an expanded ecosystem to support patients will be needed, including services to identify, qualify, and enroll eligible patients, as well as physical or digital health platforms to support patients on these therapies. Finally, investments with business models based on high rates of obesity could see long term growth projections decline.

SOURCE: Bain & Company

Health Care Holds Its Own Amid Tepid Deal Market, Reaching $444 B in 2023

Related Stories

Recommended For You