To conclude our “Top 10 Deals of 2023” blog series, we answer the question - “WHY DOES IT MATTER?”.
Venture Capitalists investing in women’s health are playing on a market arbitrage opportunity where deals are valued at a discount in the early stages, yet the same companies are bought at a premium at exit. This asymmetry makes investing in early stage women’s health companies a “no brainer”.
Exits at a Premium
In 2023, M&A activity hit the lowest level since 2013, yet M&A activity in women’s health and sexual wellness soared. This is yet another testament to the resilience of this industry despite market conditions. Furthermore, these women’s health transactions were valued at a premium as acquirers are motivated to fill gaps in their offerings and portfolios.
By diving into the largest women’s health and sexual health M&A transactions in the “Top 10 Deals of 2023” series, we identify the main acquirer archetypes that were active last year in the women’s health space. In particular, we look closely at what is driving these large transactions.
In 2023, we saw three main acquirer archetypes:
Strategics - From CPG conglomerates to health plans, strategic buyers come in a range of colors and flavors but all seek to acquire assets that will add synergistic value to their existing portfolios. A vaginal atrophy suppository targeting menopausal women is the hero product of Bonafide, which was acquired by a Strategic - Pharmavite LLC - for $425M in 2023 (see blog here). Pharmavite already owns the Uqora brand that makes urinary tract health products. Bonafide is a great addition to Pharmavite’s portfolio.
Another strategic acquisition was made by IVI RMA, a reproductive medicine group backed by KKR. IVI RMA finalized an agreement to acquire the North American Operations of Eugin Group from Fresenius, which includes the Boston IVF fertility network and TRIO based in Toronto. This strategic move expands IVI RMA's presence, positioning it as a premier fertility group in North America.
Big Pharma - Big Pharma players make strategic acquisitions with such frequency and significance they deserve their own category. In the Women’s Health space there are established acquirers like Bayer (maker of the Mirena IUD), Organon (maker of Nexplanon and Nuvaring) and Cooper Surgical. Last year, 4 out of the 10 top deals went to Big Pharma including Cooper Surgical’s $300M acquisition of Cook Medical’s portfolio of OBGYN devices (see blog here).
Private Equity - Large Private Equity firms are finding lucrative opportunities across women’s health and sexual health. KKR, GED Capital and L. Catterton are examples of PE funds that made large acquisitions this past year. L. Catterton, for example, made a $680M acquisition of Thorne Health which sells at-home hormonal health tests and supplements (see blog here).
Strategics, Big Pharma and PE funds alike are actively seeking solutions and finding opportunities in this industry.
Early Stage Valuation Discounts
While late stage exits are valued at a premium, early stage women’s health startups are valued at a discount. This can be attributed to the buyers’ motivation. Acquirers have high motivation to transact in this industry due to business model synergistic value, as explained above, whereas Venture Capitalists tend to overlook this industry. As 98% of VC funds are founded by men, women’s health is generally not a fund thesis focus.
In 2023, a mere .5% of VC funding went to women’s health and sexual wellness startups, a stark comparison to the 25% that went to healthcare at large. The lack of venture funding in women’s health creates a buyers market, where VCs that do invest in this space command discounted valuations. The SVB Innovation in Women's Health Report backs this up by showing that early stage women’s health deals have discounted valuations compared to general healthcare deals (see graph below).
The Opportunity
The Amboy Street portfolio is being tracked closely by acquirers as they scale. Evvy, the vaginal microbiome testing and care company, is attracting attention from large diagnostics companies. LabCorp and Quest have very little information about the vaginal microbiome, while Bacterial Vaginosis is one of their top ordered tests. In fact, LabCorp invested in Evvy’s latest round alongside Amboy Street. Aunt Flow, which is bringing free menstrual products to public and corporate bathrooms, is being tracked by CPG conglomerates that already sell tampons and pads. Aunt Flow has a unique distribution model that can reach a much wider customer base. Contraline, the maker of male birth control, is being tracked by Big Pharma companies with the intention of adding Contraline to fill a large gap in their reproductive health portfolios.
With exits commanding premiums, and early-stage investments available at discounted valuations, a compelling market arbitrage opportunity beckons. There has never been a better time to invest in early stage women’s health and sexual wellness companies.
We look forward to keeping you updated as we invest in the $1T women's health and sexual health space.
