Dive Brief:

• Philips has agreed to acquire BioTelemetry in a $2.8 billion cash deal, growing Philips' remote monitoring business as telehealth and virtual care are booming. The companies announced the deal Friday morning.
• BioTelemetry specializes in remote cardiac diagnostics and monitoring, with portfolios in wearable heart monitors and AI-based data analytics and services. Philips said that the deal will expand its remote monitoring business outside of hospitals and into patient homes.
• Philips valued the deal at $72 per share, a 16.5% premium on BioTelemetry's closing price on Thursday.  While the Dutch health tech giant's stock price increased by nearly 2% when the market opened Friday, BioTelemetry's was trading at over 18%.  

Dive Insight:

The pandemic has supercharged use of telehealth and remote patient monitoring, spurring M&A activity.

A Baird analyst wrote that while the deal was surprising, $72 is a fair price and represents about 35 times 2021 EPS estimates.

The analyst highlighted BioTelemetry's "massive" valuation move from $40 to $72 over the last month-and-a-half but acknowledged pressures from the pandemic, and competition from fellow cardiac monitoring company iRhythm that kept Baird cautious throughout the year.

Furthermore, while a projected 15% growth in revenue in 2021 "seemed reasonable," questions still linger regarding how exactly the company will hit that mark, according to the Baird report.

Needham analysts wrote that BioTelemetry could be complementary to companies with large atrial fibrillation businesses, such as Abbott, Medtronic and Johnson & Johnson.

BioTelemetry, which remotely monitors about 1 million patients annually, brought in $439 million in revenue in 2019. The company has reported approximately $317 million in revenue through nine months this year, which is about $10 million behind 2019's pace.

CEO Joseph Capper said in a third-quarter earnings release that the rise in virtual care and telehealth during the coronavirus pandemic will help drive growth for the company post-pandemic, and he projected top-line growth of over 15% for next year.

Philips expects BioTelemetry's business to deliver double-digit growth and up its EBITDA margin by roughly 20% by 2025, according to the deal announcement.

"BioTelemetry's leadership in the large and fast-growing ambulatory cardiac diagnostics and monitoring market complements our leading position in the hospital," Philips CEO Frans van Houten said in a statement. 

The deal comes shortly after van Houten stressed that remote patient monitoring and telehealth will be important for the company going forward, and highlighting the growth of remote monitoring out of the hospital space.

"We also expect to see monitoring to take off in the out of hospital space, with more and more chronic patients being monitored on a continuous basis or at least certainly after discharge for a while," van Houten said during a third-quarter earnings call. "These are new monitoring markets that will kick in also post COVID. And therefore, we expect to be very positive about the monitoring and analytics marketplace for the years to come."

The CEO also said that while the company's ventilator business will likely drop to 2019 levels next year, the remote monitoring business should be more resilient.