The importance of guarding against hospital complications thanks to changes in US reimbursement was underlined by Stryker’s decision to spend $3bn on Sage Products, whose devices help guard against these events.
Now a much smaller company developing home-use products with similar aims could be next in line for a buyout. A study has shown that a contactless patient monitor developed by the private group EarlySense could reduce hospital readmissions. The cost of readmissions must be borne by hospitals, meaning that there is great demand for this type of technology – and it seems unlikely that Stryker will be the only large company after a slice of this pie.
EarlySense’s device is a pad that is placed under the mattress and monitors a heart failure patient’s respiration rate, heartbeat and motion. It contains a piezoelectric motion sensor that can discern the different types of movement and alert medical staff when these change. Changes in breathing and heart rate are important indicators of patient deterioration, and can provide warning signs up to eight hours before a crisis.
Go to the mattresses
A study in 30 patients discharged after hospitalisation for heart failure has shown that change in respiratory rate as detected by the under-the-mattress sensor was an effective predictor of hospital readmission.
The trial was small, not randomised, observational and conducted at a single site: not the most robust clinical evidence in the world. Nevertheless this result might well make the technology extremely appealing to hospitals, which are likely to want to provide these devices to patients so they can receive an alert before they become ill rather than returning to hospital.
As a consequence, EarlySense could find itself a target for larger groups hoping to gain or increase a foothold in this high-growth area. Brian Scullion, managing director of the healthcare at investment bank William Blair, says patient safety is an area of keen interest to acquirers.
“In the US new regulations came though recently under which hospitals will not be reimbursed for care for complications related to contact with the healthcare system,” he told EP Vantage last month, explaining that a complication might be anything from a hospital-acquired infection or a fall after a hip operation, as long as it happens within 30 days of the patient leaving hospital.
These regulations pertain to reimbursement by the Centers for Medicare and Medicaid, but some private insurers have similar rules.
“The few players that are in that segment are very much in demand by acquirers,” Dr Scullion said. “If you have a company that can help reduce those hospital-acquired conditions, I think that’s a hot property for 2016.”
Welch – on a bet?
A guide to potential acquirers is provided by the list of EarlySense’s investors. Two corporate VCs have backed the company: Samsung Ventures and Welch Allyn both participated in the $20m first tranche of EarlySense’s series F round.
|EarlySense's VC backers|
|April 14, 2015||Series F (second close)||5.0||Mitsui & Co Venture Partners|
|January 20, 2015||Series F||20.0||Samsung Ventures, JK & B, Noaber, Pitango Venture Capital, ProSeed Capital, Welch Allyn|
|November 12, 2012||Series E||15.0||Pitango Venture Capital, Bridge Investment Fund, Docor International, JK & B, ProSeed Capital|
|October 20, 2010||Series D||7.0||JK & B, Pitango Venture Capital|
|June 3, 2010||Series C||13.0||Pitango Venture Capital, Bridge Investment Fund, Docor International, Etgar Challenge Fund, Noaber, ProSeed Capital|
|November 28, 2006||Series B (second close)||1.8||Etgar Challenge Fund, Bridge Investment Fund, Docor International|
|October 23, 2006||Series B||3.0||Etgar Challenge Fund, ProSeed Capital|
|December 31, 2005||Series A||-||The Challenge Fund|
|December 31, 2004||Seed capital||-||Undisclosed investors|
This is not to say that either of these companies will make a bid for EarlySense. But it might not be a bad fit, particularly with Welch Allyn, or more accurately its new owner, Hill-Rom ($2bn buy moves Hill-Rom away from the hospital, June 18, 2015).
Hill-Rom’s rationale for buying Welch Allyn was to add more innovative products to its largely hospital infrastructure-based business. Welch Allyn was more of a patient-monitoring specialist, especially in the area of respiration.
EarlySense could fit nicely into Hill-Rom’s portfolio. Other buyers could be interested too – and of course there is no guarantee that EarlySense will be acquired at all. But the new trial data will certainly not put buyers off.