Which healthtech sectors are mature enough to be of interest to private equity?
The year ahead will undoubtedly bring a plethora of new opportunities for PE. One area we’re seeing exciting new activity in is healthtech.
Thomas Hagemeijer
We spoke with Thomas Hagemeijer, once of global management consulting firm AT Kearney, and then digital consultancy TLGG as Healthcare Lead, about the private equity in healthcare landscape, which sectors are reaching maturity, and the challenges of driving healthcare innovation without risking care quality.
Hagemeijer, who recently announced the launch of his own healthtech company HGM Advisory, says some healthtech companies and segments are now reaching sufficient maturity for PE involvement.
So which sectors do these lie in? Hagemeijer, who will be speaking at the HBI conference in Paris in March, is currently developing a ‘HealthTech maturity index’ for private equity to answer just that. He recently posted on LinkedIn that “now is the right time for PE to make some bets” due to structural changes happening in the market.
While the index is due to be released later this year (and subsequently updated once a year), Hagemeijer spoke to HBI about all the insights he has already, from what PE investors should be aware of, to which healthtech categories are mature enough to be of interest and which to keep an eye on.
Healthtech in recent years
Hagemeijer plans to consider both healthtech and techbio in his analysis of what will be mature enough for PE, and has so far been focusing on the venture capital (VC) side of things. He will consider activity post 2010.
“From 2010, if you look at all the companies that have gone public as healthtech or techbio, it has been a blood bath, to put it simply. Around 90% plus of them lost most of their value,” he said.
“Let’s take two examples, the first being (US consumer genetic testing company) 23andMe. It was valued at $6 billion (USD) and now it’s around $100 million, so it lost 98%+ of its value. That also means the genetic data of 15 million Americans could be bought by any other companies, including, for instance, Chinese companies, which poses a significant national security concern for the United States.
“BenevolentAI, a UK company applying AI to drug discovery, was valued at $3-4 billion (USD), privately, around three years ago. It went public and now is valued at around $100 million plus. And the total founding of BenevolentAI was $800 million, so it’s around eight times less than that.”
Hagemeijer also points to two companies that went public in June (that fall within two of his categories), both under AI/healtech. “One is (non-clinical) Waystar. It has a $6.5 billion (USD) valuation (as of January 2025) with an 80% increase since it was launched in June this year,” he said. This shows that it’s maturing, seems to have a more solid business model and is a sign that things are changing, he explained.
The second company is Tempus AI, a US company using AI to create precision medicine solutions. The stock, priced at $37.00 at Initial Public Offering and now sitting a few cents below, has had a volatile six months since it went public in June, trading on NASDAQ at a high of $79.49 (making its market capitalisation over $12 billion) and a low of $22.89. At time of going to press it is sitting a few cents below its IPO price, at $36.69.
Hagemeijer considers it as a barometer company for segment maturity and should be monitored.
Market changes
Looking at a very high level, Hagemeijer still argues that less than 5% to 10% of the healthtech categories are addressable by PE, so the majority are not. “However I would believe in five to 10 years, we’ll have 50%, and the idea of the index is to be able to say, what’s ready, what’s next, what will take time?” he explained.
Providing more background, Hagemeijer added, “Many PE already own, say, radiology chains. This week I saw more are going into oncology chains too. Typically PE will buy a company, try to turn it around in five years in classic restructuring, but I believe the new kind of turnaround case for PE is buying a radiology or oncology chain, and plugging technology like gen AI, or whatever helps with efficiency gains or accuracy, in order to make the turnaround. You have the classic turnaround methods to bring that profitability, but I believe the technology piece will play a bigger role, especially in healthcare.”
Striking the right balance
Hagemeijer cites what he describes as the “very interesting model” of venture capital firm General Catalyst and its latest news, while also declaring his own approach to be “balanced”, citing the New Yorker article The Gilded Age Of Medicine Is Here, calling out PE’s actions in the last year.
“They did a lot of things they shouldn’t have, so they have a bad reputation. I’m always a bit between the two in that sense. I believe if you have 100% public there is no innovation. But obviously, if you have too much PE, things can go wrong,” he said.
“I think the operating model is a big question for PE in healthcare in general. In Germany, for example, there are talks about banning PE [Ed: not only Germany, but the Netherlands too]. I don’t have the answer yet. I’m not advocating the index to bring even more PE, I’m just trying to bring transparency, because I believe we need investors to move things forward, but at the same time I’m aware that PE and healthcare can lead to bad outcomes. Finding the balance is the challenge.”
Using French multinational listed elderly care group Orpea as an example of how the ‘classic’ PE can lead to a disaster in healthcare, he added, “The problem of PE is that they all have their own metrics they set out to deliver on.”
So, what are the categories?
Hagemeijer reiterates that just 5% to 10% are addressable as of today, and he hasn’t mapped all of them yet.
“But the one thing I will say today is that radiology AI is mature enough. Why? Because it’s actually the most advanced AI category — 75% of FDA approved algorithms are in radiology, and the usage is starting to really scale. Around one out of five or one out of six radiologists in Western Europe and in the US are using AI already, so it’s already a 20% penetration, and you can expect that to go up to 80% in the next five to 10 years,” he told us.
“And the next one is close — pathology. You could say oncology with an image-based approach, so pathology is the same process in the end. Instead of taking an image directly from a scan, you take a little biopsy and digitalise it and then go to the same process. But the pathology, I will say today, is less than 5% adoption, but will go to 20% in five years. You could say it’s next in line.
“With radiology AI, there is a lot of discussion about who will win – the AI algorithm, the one that aggregates the algorithm, or the one that actually has the monitors? This question is still a bit open. But radiology AI and adjacent, like image based AI algorithms, is definitely one big category that is mature enough today, at least to look at.
“There’s a second one which is home care. This is a big category but I would say tech enabled home care. There’s Cera in the UK, I know they’re struggling a bit, but I think they’re still mature enough. So, how do you use technology to empower nurses? There’s a lot of technology to match the right people to the right tasks. I heard that 40% of what nurses are doing in their job could be done by somebody less qualified and in the UK, there could be 30% of nurses missing in 2030, so not enough. If you can unlock the right matching and upskill less people with technology, you can help to address the staffing shortage, which is one of the biggest problems.”
Hagemeijer points particularly to elderly care. “Following the Orpea scandal, the question is how can you keep people at home with technology instead? That is definitely mature enough today to look at.”
He recently posted on his LinkedIn about German healthcare software company CompuGroup Medical essentially being purchased by PE firm CVC. “I would actually put practice software markets as another category which is mature enough. The stock price of CompuGroup is decreasing, and CVC is buying them, taking them private because they still have a great install base, and they want to use that to upgrade the product and keep the install base. You have a few opportunities like these,” he explained. “One example is where the incumbents, you could call it distressed assets, need to be taken private or at least injected with some cash to upgrade. But you can buy yourself a great install base and build on it.”
He also mentions pharmacy group Walgreens in the US that is in talks to be purchased by PE firm Sycamore. “I wouldn’t consider it healthtech because it’s a bit broader. It’s more of a classic PE, but with some innovation, so it’s also interesting.”
Categories to look out for
Hagemeijer says there are more niche plays that might fall in between, like direct to consumer lab testing. “I’ve already seen a few companies that are small, but have found their niche. There are many with 15-12 million revenues, five million EBIT, and companies that have a lot of potential to grow. They’re already profitable but small, and might do gut health, for example. Models like Aware Health are also interesting,” he told us.
“I wouldn’t argue this one is mature enough. It’s at the edge of consumer and healthcare. But I think there are some bridges, because we have, for example, the German payers where they do blood testing and AI analytics to tell you what you might have or would have, and they monitor that over time. And the public payers in Germany said that if some tests are efficient, meaning 99% plus accuracy, and it will happen within two to three years, then we’ll reimburse it.
“So those will be the three categories today I think I will put [in the index], radiology AI and adjacent, home care and D2C approaches.” He also gives Hims & Hers as another example for the latter. “This is a bit too consumer for me to balance, but they have a very solid five billion plus valuation and are publicly listed. They are really one of the very few healthtech increasing its stock price.”
Private equity has a role to play — but it needs to be the right one
“I believe in order to really bring this technology into healthcare, you need everyone to play their role from [planting] the seed [to realising their full growth]…. If they don’t do that, especially in healthcare — which isn’t really a market but more like a political distribution of resources — then many might be banned,” Hagemeijer said candidly.
“So that’s why these kinds of moves, like with General Catalyst, and all these private equity that own some pieces of say radiology already, need to be the driver of the transformation.”
“I think there’s still a lot to do before that too, but everyone has to play a role, including PE,” he added. “And I believe PE also has the right mindset to really move things. For example, if you look at all patient care it’s very fragmented — you build a new product in healthtech and you want to distribute it to hospitals or to medical practice and it’s just a nightmare. You need some consolidation, and to consolidate, you need some bigger players that are able to consolidate.
“Obviously, they are scaring everyone a bit if they buy too much, but I still believe that you need a less fragmented market with a business mindset that the PE will bring, that’s the purpose of it.”
As Hagemeijer notes, success will depend on stakeholders taking the appropriate role in business transformation, with private equity firms having the experience and culture to continue to drive innovation while consolidating and applying scale, and while remaining mindful of and responsive to the role of healthcare service providers in delivering critical public services.
We would welcome your thoughts on this story. Email your views to Hannah Millington or call 0207 183 3779.
