Healthcare Finance and M&A, What Comes Next? Presentation by Matthew R. Kittay, National Co-Chair, M&A Practice Group, Fox Rothschild LLP. Includes fundraising and investments. Breakouts by subsector- Healthcare (overall), Healthcare services, Digital health, Biopharma, Pharmatech, Medtech, Healthcare IT. Healthcare transaction distribution breakouts. Exits remain flat. Avoiding common legal pitfalls like IP, compliance, governance structure. Current legislation in health law. IP strategy for healthtech.

1. © 2024 Fox Rothschild LLP
Matthew R. Kittay
National Co-Chair, M&A Practice Group
Fox Rothschild LLP
Prepared and presented May 21, 2024
exclusively for
1

2. US investors raised $19B for
new health focused VC and
growth funds in 2023, the
third highest amount for any
year. This may signal
optimism that deployment will
pick up as inflation eases and
the Fed pauses rate hikes.
We expect fundraising to be
strong again in 2024.
2

3. Investment volumes have
leveled off over the past four
quarters, settling 55% below
totals seen in 2021. However,
the pace of deployment is
picking up. Deal counts are
down just 11% from the 2021
peak and gaining speed as
dwindling runways force
founders to accept less
favorable terms.
3

4. PitchBook Data, Inc. EMERGING TECH RESEARCH 2024 Healthcare Outlook. Published on December 18, 2023
Healthcare (overall) Healthcare will decrease as a share of both PE and VC global deal count.
Healthcare services PE healthcare services platform trades will not resume until the Fed begins cutting rates
in earnest.
Digital health Although digital health IPOs will fall short of optimistic projections, at least three
candidates will go public.
Biopharma Biopharma startups will require more robust clinical validation prior to pursuing IPOs.
Biopharma The interval between funding rounds for biopharma companies will lengthen from the
baseline set in 2021 by several months, not accounting for startups that cease
operations or fail to secure additional funding.
Digital health GenAI will begin to disrupt care coordination as the technology accelerates efficiencies
in care search and health benefits navigation.
Pharmatech Despite challenges in public markets and limited exit opportunities, AI-driven biotech
startups will maintain robust growth and high valuations in their early stages.
Medtech Surgical robotics will continue to be a leading VC category—surpassing 2023 funding
levels.
Healthcare IT There will be at least two Value Based Care enabler acquisitions.
4

5. Health Care M&A Insights: Q4 2023 & Outlook for 2024 Deal Activity; EPSTEIN BECKER & GREEN PC, KPMG, AND ZIEGLER; February 01, 2024.
5

6. 2024
The exit market remains tight
as lates stage companies
grapple with valuation
overhang. IPOs were flat vs
2022 with M&A activity
favoring acquirers as
evidenced by a surge the
share of undisclosed deals.
We may see more IPOs in 2024
as public markets adjust to
higher interest rates.
6

7.  Compliance Failure – your company is not “too small
to fail”
 IP Failures – failure to own and manage your IP rights
 Investor Issues –failure to disclose (e.g., conflicts of
interest? Realistic projections?) and keep investors
informed on evolving landscape
 Bad Governance Structure – checks and balances of
respective founders vs investor rights
7

8.  Cerebral - a cautionary tale specifically for mental health care
tech companies looking to provide telemedicine services across
the U.S. Investigation by Federal Trade Commission (FTC),
Department of Justice (DOJ), and Drug Enforcement
Administration (DEA)
 Theranos - the US Securities and Exchange Commission (SEC)
filed civil fraud charges against Theranos, its CEO Elizabeth
Holmes and former president Ramesh "Sunny" Balwani, claiming
they had engaged in an "elaborate, years-long fraud" wherein
they "deceived investors into believing that its key product – a
portable blood analyzer – could conduct comprehensive blood
tests from finger drops of blood"
8

9.  Clinicians must retain independent medical judgment to
evaluate and treat patients on a case-by-case basis
 Develop plans for business model changes that may
result from the expiration of the PHE or the adoption of
new regulatory rules based on current government
investigations
 Advertising: (1) Is the language misleading to an ordinary
consumer of average intelligence? (2) Does the language
misrepresent the products or services in any manner —
either overtly or through omission?
 Develop Controls - many federal investigations are the
result of whistleblowers, who felt unheard by senior
management when they attempted to voice concerns
about the company’s business practices. Developing
open lines of communication, including anonymous
methods of reporting, can alert company leadership to
non-compliance before it is reported to the federal
government.
9

10. Source: How Digital Health Startups Can
Leverage Intellectual Property
 Digital-health companies should protect their
innovations through intellectual property
 Performing an invention audit to identify all
innovations in us or in development can direct and
help startups determine which innovations warrant IP
protection; score innovations according to criteria like:
(1) Whether the innovation provides a
competitive advantage
(2) How different the innovation is from known
practices
(3) The ease of reverse engineering the
innovation
(4) The ability to detect whether competitors
copy the innovation
(5) The value of the innovation to competitors,
business partners, or possible licensees
10

11. • Plan to spend a lot time fundraising or
selling the company –and at some points,
more time than running business
• Honesty is not the best policy… it’s the
ONLY policy; there should be no surprises
in due diligence
• Partner with “smart money” with teams that
add value through experience and network
• Be flexible – but don’t sacrifice your vision
• Be organized and strategic –and rely on
great advisors (like us!)
11

12. © 2024 Fox Rothschild LLP
Matthew R. Kittay
 National Co-Chair, M&A Practice
 Deep experience as outside general
counsel, structuring mergers and
acquisitions and securing private equity
and venture capital for health care
sectors
 Office: New York, NY
 T: 212.878.7978
 mkittay@foxrothschild.com
12