Healthcare IT Investment Banking + M&A Advisory

Healthcare IT M&A Update, Q2 2017 Healthtech and Digital Health July 18, 2017

Table of Contents

Contents M&A Market Brief ................................................................................................................................................................ 3

Global M&A Deal Value — Quarterly Comparison ....................................................................................................... 4

US Enterprise Value/ EBITDA Multiples Comparison by Year .................................................................................. 5

Publicly Traded Healthcare IT Sector Performance .................................................................................................... 6

2017 Healthcare IT M&A Trends & Drivers ..................................................................................................................... 7

Notable Healthcare IT M&A Transactions, Q2 2017 ................................................................................................... 10

Publicly Traded Healthcare IT Firms Valuation Table (as of 6/30/17) .................................................................. 12

M&A Spotlight .................................................................................................................................................................... 13

Castlight Health Completes Strategic Acquisition of Jiff for $134m ...................................................................... 13

McKesson acquires CoverMyMeds for $1.1 billion ..................................................................................................... 14

HMS Holdings Acquisition of Eliza Corporation for $170m ...................................................................................... 15

About Solganick & Co. ...................................................................................................................................................... 17

DISCLAIMER

The information contained herein is of a general nature and is not intended to address the circumstances of any particular company,

individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such

information is accurate as of the date it is received or that it will continue to be accurate in the future. We perform our own research

and also use third party research. No one should act on such information without appropriate professional advice after a thorough

examination of the particular situation. This is not an offer or recommendation to buy or sell securities nor is it a recommendation

to merge, acquire, sell or exit a specific company or entity. We do not hold any equity or debt position in any of the securities listed

herein as of the date of this report.

Sources for our research and data include: PitchBook, MergerMarket, Wall Street Journal, Company Websites, SEC Filings, Bloomberg, TechCrunch, MergerMarket Corum Group, Rock Health, Mercom Capital

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M&A Market Brief

Global, U.S. and Healthcare IT M&A Activity Q2 2017

Source: Solganick & Co. Analysis, Pitchbook, KPMG M&A Survey, & PwC’s Mid year review and outlook,

Worldwide

Global M&A activity in Q2 2017 wasUSD $793.9 billion - the deal valueincreased by 6.36% compared toQ1 2017.

Global M&A activity will bemotivated by limited organicgrowth options and the need toaddress the business modeltransformation that is occurringacross industries.

Technological disruption is animportant deal motivator.Companies involved in M&A aremost interested in acquiringrelevant technologies andresponding to transformation intheir industry as well as a desire toexpand on their products.Established businesses aremodernizing through technologyfocused deals, making traditionalindustry boundaries blurry andunconventional.

High liquidity, access to cheapfinancing, healthy balance sheetsand a need to demonstrate growthto shareholders via M&A allprovide a positive outlook for 2017.

United States

Sluggish international growth andglobal uncertainty has made theUnited States a favored destinationfor M&A activity. Western Europe isthe next preferred destination forM&A deals.

Large amount of available capital,increased corporate acquisitionactivity and buying power,improved financing markets andexpected policy reforms from thenew administration position 2017 tobe a strong year for M&A activity.

The total value of U.S. deals fellsharply due to uncertainty aboutPresident Donald Trump's taxreform and deregulation agenda.

U.S. M&A dropped 36 percent to $281 billion in Q2 2017.

Healthcare IT

In 1H 2017, there were a total of 90Healthcare IT M&A transactions,compared to 110 in 1H 2016. M&Aactivity in the second quarter of2017 was down with 41 M&Atransactions (five disclosed)compared to the 49 M&Atransactions (seven disclosed) inQ1 2017.

Practice Management Solutionsand Data Analytics companieswere involved in the most M&Atransactions in Q2 2017 with fiveeach, followed by Medical Imagingcompanies with three transactions.

Prominent M&A transactions in Q22017 included: the acquisition ofBest Doctors for $440 million byTeladoc, Cochlear’s acquisition ofSycle for $78 million,athenahealth’s acquisition ofPraxify Technologies for $63million, and the acquisition ofEntrada by NextGen Healthcare(a subsidiary of Quality Systems)for $34 million.

Valuations for publicly traded Healthcare IT companies averaged 4.0x EV/Revenues this latest quarter.

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Global M&A Deal Value — Quarterly Comparison Total transaction value for M&A deals announced in Q2 2017 was $1.54 trillion (according to MergerMarket) while 1H 2017 booked $1.54.54 trillion globally.

Source: MergerMarket and Wall Street Journal IB scorecard ( http://graphics.wsj.com/investment-banking-scorecard/)

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US Enterprise Value/ EBITDA Multiples Comparison by Year

Source: PitchBook

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Publicly Traded Healthcare IT Sector Performance

The average Healthcare IT public company revenue multiples dipped down in Dec 2016 and Jan 2017, principally due to the presidential election effects. EV/Revenue multiples have since rebounded and outpaced NASDAQ soon after for 1H 2017.

EV/Revenue Multiples Source: Nasdaq, Capital IQ & Results Analysis

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2017 Healthcare IT M&A Trends & Drivers Demand for data storage, cloud technology, analytics, interoperability, cybersecurity, smart medical devices and electronic health record (EHR) management will help drive industry growth in 2017. Consumerization is also driving HCIT M&A activity. Individuals have become accustomed to paying for many of their healthcare expenses out-of-pocket and seek ways to empower their purchasing decisions through education and personalized care. As the industry becomes more customer-centric, buyers are turning to digital health solutions (such as online training and smartphone applications) by which they can promote value-based business models. Cloud Computing in Healthcare: Overcoming Barriers and Evolving Due to concerns about security, transparency, availability and uptime – where technology failure can pose a risk to patient safety – some healthcare professionals hesitate to move to the cloud. While these apprehensions may be valid, they are surmountable. As this eBook shows, HIMSS17 provided an excellent venue to discuss how various players are optimizing patient care, engagement and business operations using the cloud, along with where this technology is taking us. Patient Engagement Though the original motivation may remain the same, the methods and technologies that enable patient engagement are changing. This theme showed up strongly throughout HIMSS17. In fact, perhaps "engagement" itself has even become an inadequate term. As seen in this eBook, "personalization" and "empowerment" may be better descriptors of how digital innovations in connected health are changing the ability of patients to take ownership of their respective health experiences. Artificial Intelligence and Machine Learning: Poised to Transform Healthcare Delivery From predictive security to productive analytics to bot-based patient engagement, applications of artificial intelligence and machine learning will surely revolutionize healthcare tomorrow. But make no mistake: they're already making an impact today.

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Big Data and Analytics: Leveraging Synergies to Support Outcomes As the relationship between big data and analytics matures, new concepts are in the offing. Such as the application of cognitive learning, which means looking at as many factors as possible outside the actual medical record to more fully understand a particular patient's health condition. As more opportunities arise to collect and track big data, the extent to which systems and devices can interchange information has grown increasingly crucial. Furthermore, new Department of Health and Human Services (HHS) policy requirements under the Medicare Access and CHIP Reauthorization Act (MACRA), Merit-based-Incentive Payments System (MIPS) and Advanced Alternative Payment Models (APMs) are expected to drive the need for new data exchange solutions in 2017. Key interoperability projects for HCIT executives in 2017 will be: connecting external databases to exchanges, connecting applications within the organization and adding connections from medical devices to existing systems, according to a survey by Healthcare IT News.

Source: Healthcare IT News

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High Volume of VC Funding Creates Need for Healthcare IT M&A Exits Venture capitalists have invested a record amount of money into startups over the past several years and the influx of capital has created a surplus of companies that are poised for an M&A exit. While overall funding slowed slightly in 2016, HCIT companies remain attractive investment targets for VC firms. In 2016, venture capitalists invested $4.2 billion in HCIT companies, an 8.7% decline from 2015. Nevertheless, the total number of funded HCIT companies increased by 8.0% year-over-year. According to Bobby Franklin, President and CEO of National Venture Capital Association, “The large amount of capital raised for deployment to the ecosystem as well as optimism surrounding the IPO pipeline are all positive signs as we look ahead. Given the 2016 election results and the venture industry’s return to normal, 2017 will prove a pivotal year for venture investors and the startups they support.” Q2 2017 Q2 is turning out to be a spectacular quarter for Healthcare IT funding with the total VC funding amount reaching $2.4 billion, making it the best quarter ever for digital health. This is also the first time VC funding has crossed $2 billion in a single quarter. Funding activity was led by mega deals from Outcome Health, Moderning Medicine, PatientPoint and Blink Health, who together accouned for almost a billion dollars. Healthcare IT VC Funding Trends

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Deal Date Seller Acquirer Description of Target Deal

Size EV/

Revenue EV/

EBITDA

4/1/17 Eliza Hms Holdings (NASDAQ: HMSY)

An integrated healthcare communication and management software created to help their clients connect customers and service providers.

172 2.87x 14.3x

4/1/17 Metro Medical

Solutions

Dean Dorton Healthcare Solutions

Physician billing and credentialing software.

4/1/17 KinnserSoftware Mediware

Information System

Developer of SaaS and web-based software and applications designed to deliver clinical and business results.

4/3/17 CoverMyMed McKesson (NYSE: MCK)

Developer of software applications designed to automate the submission of patient prescriptions.

1,400

4/3/17 Jiff Castlight Health (NYS: CLT)

Provider of employee healthcare-engagement platform for enterprises. 134 19.14x

4/3/17 Sense Health Merged with Voxvia

Healthcare communications software companies Sense Health and Voxiva have merged to form Wellpass, a messaging platform to connect payers, providers and the patients they serve.

4/5/17 WPC Healthcare Intermedix

A data analytics company that works with hospitals and payers to improve compliance, outcomes, data management and patient engagement. The terms of the deal were not disclosed.

4/10/17 Leonardo MD Azalea Health EHR provider.

4/12/17 Entrada, Inc

NextGen Healthcare

Informational Systems

A provider of clinical documentation and data exchange platform.

5/11/17 Provant Health Solutions

Hooper Holmes (PINX: HPHW)

Provider of healthcare and integrated wellness strategies intended to improve employee health.

5/16/17 California

Telehealth Network

OCHIN

Provider of tele-healthcare services including health information exchange enabling patients to access a wide range of services.

5/31/17 Expert 24 Medvivo

Clinical decision support platform. Expert 24 creates clinical decision support tools for use in acute and primary care, integrated chronic care, and population health management.

5/31/17 My Science Academy Idepod Holding

The company delivers quality science, engineering and technology content that matters on a daily basis for healthcare organizations.

Notable Healthcare IT M&A Transactions, Q2 2017

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Deal Date Seller Acquirer Description of Target

Deal Size

EV/ Revenue

EV/ EBITDA

6/6/17 Calriture Aegis Health Care Group

Developer of an online health marketing and advertising platform.

6/14/17 Captify Health Continuum Health Alliance

Operator of a specialty-care services company created to offer doctor recommendation.

6/19/17 Novadaq Stryker (NYSE: SYK)

The company offers medical imaging technology to healthcare organizations. 701 8.75x -

Source: Solganick & Co. Analysis, Pitchbook

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Publicly Traded Healthcare IT Firms Valuation Table (as of 6/30/17)

Company Name Ticker Symbol Stock Price Market Cap ($mm) EV/Revenue EV/EBITDA

Allscripts MDRX 12.75 2,330 2.2x 16.0x

Athene Holding ATH 49.54 9,920 2.1x 9.8x

Benefitfocus BNFT 36.30 1,110 3.7x -

Care.com CRCM 15.09 444.59 1.8x 50.6x

Castlight Health CSLT 4.15 541.63 2.6x -

Celanese CE 94.99 13,200 2.9x 11.6x

Evolent Health EVH 25.35 1,730 3.8x -

Fitbit FIT 5.31 1,230 0.3x -

HMS Holdings HMSY 18.50 1,550 3.7x 18.5x

Inovalon Holdings INOV 13.15 1,930 3.7x 18.3x

McKesson MCK 164.57 34,600 0.2x 4.8x

Medidata Solutions MDSO 78.16 3,215 6.6x 41.7x

Mindbody MB 27.20 1,110 6.9x -

NantHealth NH 4.23 537.77 6.3x

Omnicell OMCL 43.10 1,600 2.5x 38.1x

Quintiles IMS Q 89.49 8,349 4.1x 17.7x

RWS Holdings RWS.L 380.00 703 4.4x 17.3x

Tabula Rasa Healthcare TRHC 15.06 230 1.9x 998.4x

Teladoc TDOC 34.70 1,930 7.3x -

Veeva Systems VEEV 61.32 8,580 12.6x 51.7x

Vocera Communications VCRA 26.42 751.28 4.4x -

WebMD Health WBMD 58.63 1,989 4.0x 14.3x

Average 4.0x 93.5x

Source: Solganick & Co. Analysis, Pitchbook

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M&A Spotlight

Castlight Health Completes Strategic Acquisition of Jiff for $134m April 3, 2017 – Castlight Health, Inc. (NYSE: CSLT) today announced that it has completed its acquisition of Jiff to create the most comprehensive health benefits platform in the industry. Serving more than 240 customers, the combined company’s platform will seek to improve every aspect of an employee’s health experience — from staying healthy, to accessing care, to managing a condition — while helping benefits leaders lower healthcare costs and increase workforce wellbeing.

“Benefit leaders are eager for a health benefits platform that drives employee engagement and reduces the administrative burden of managing multiple health benefit solutions. The combination of Castlight and Jiff enables us to address these needs in one solution,” said John Doyle, chief executive officer of Castlight Health. “Together, we will leverage our data and ecosystem partnerships to deliver a truly personalized experience for employees. Our ability to deliver this experience in complex benefits environments with best-of-breed point solutions is unique in the market.”

Castlight issued approximately 27 million shares and options to former Jiff equity holders, which represents approximately 20 percent of the combined company on a fully-diluted basis. The issuance of up to an additional four million shares is contingent on Jiff’s achievement of specific 2017 growth objectives. As previously announced, many management and board of director’s changes became effective today with the completion of the transaction. John Doyle assumed the role of chief executive officer, and former Jiff chief executive officer Derek Newell was named president. Castlight Health co-founder Giovanni Colella transition from CEO to executive chairman of the board, and John Doyle, Derek Newell and Jiff co-founder James Currier were appointed to the board. Additionally, Ann Lamont stepped down from the board.

Jiff is expected to generate approximately $7 million in GAAP revenue for the full year 2016, with ARR of $17 million exiting the year. Jiff’s ARR was up over 100% from the end of the first half of 2016, a reflection of their strong momentum in the market place during the year. This implies an EV/ Revenue (2016) multiple of 19.14x., Source: http://www.castlighthealth.com/press-releases/castlight-health-completes-strategic-acquisition-of-jiff/

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McKesson acquires CoverMyMeds for $1.1 billion April 3, 2017 – McKesson (NYS: MCK) has entered into a definitive agreement to acquire CoverMyMeds, a developer of electronic prior authorization technology, for $1.1 billion or $0.9 billion net of cash incremental cash benefits, the companies announced Jan. 25. The agreement also includes a maximum $0.3 billion of consideration contingent upon CoverMyMeds' financial performance through the fiscal year ending in 2019. Officials said the transaction is subject to customary closing conditions, including regulatory review and is expected to close in the first half of fiscal year 2018. The acquisition will strengthen McKesson's technology products to pharmaceutical manufacturers, clinicians and payers, officials said. CoverMyMeds has partnered with McKesson's RelayHealth Pharmacy since 2010.Under the agreement, CoverMyMeds will continue to operate as an independent business unit under its existing leadership headed by co-founders Matt Scantland, CEO and Sam Rajan, sales leader. "We're excited to build on our long-term partnership so that the combined capabilities of both companies are used to bring even more innovative solutions to pharmacies, providers, payers, manufacturers and patients," CoverMyMeds officials said. The "acquisition of CoverMyMeds supports McKesson's commitment to provide a comprehensive set of services and solutions that drive value across the healthcare continuum and secure patients' access to their prescribed drugs," McKesson's Chairman and CEO John H. Hammergren, said in a statement. "McKesson continues to further enhance its diverse suite of pharmaceutical technology solutions to support the very best in patient care." Source: http://www.healthcareitnews.com/news/mckesson-acquires-covermymeds-11-billion

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HMS Holdings Acquisition of Eliza Corporation for $170m April 1, 2017 – HMS Holdings Corp. (the “Company” or “HMS”) (NASDAQ: HMSY), a leading provider of coordination of benefits, payment integrity and member health management solutions for payers, has completed the previously announced acquisition of Eliza Corporation (“Eliza”).

Eliza is a cloud-based platform which provides comprehensive and personalized outreach and health engagement solutions to improve quality of care and clinical outcomes. It utilizes sophisticated communication techniques and proprietary predictive analytics, behavioral science and data-driven design methodologies to achieve targeted outcomes for customers and their members.

Eliza has 70+ customers, including eight of the top ten health plans in the U.S. Their health engagement analytics and services successfully integrate proprietary data assets, a deep understanding of the healthcare consumer, and multi-channel outreach and technology to deliver desired results for health plans, PBMs, home health agencies and disease management companies. The Eliza solution suite helps target gaps in care and provides tools to pursue appropriate condition management; raise quality scores; improve cost savings; and increase wellness, preventative care, medication adherence, member satisfaction and retention. For additional information, see: http://www.elizacorp.com.

Source: https://www.parthenoncapitalpartners.com/news/hms-holdings-announces-closing-of-eliza-corporation-acquisition/

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Stryker Corp. to acquire Novadaq Technologies for $701 million June 19, 2017 – Stryker has agreed to acquire Novadaq, which specializes in fluorescence imaging systems with the goal of improving quality of care and reducing healthcare costs, for $701 million. Novadaq’s Spy Imaging Systems are CE-marked and cleared in the U.S. and Canada. The Spy Elite device allows surgeons conducting open procedures, such as cardiothoracic surgery and gastrointestinal surgery, to visualize blood flow and tissue perfusion in real time. The Mississauga, Canada-based company also markets a hand-held version of the Spy system, as well as an endoscopic version for minimally invasive procedures. "This acquisition aligns with Stryker's focus on enabling our customers to see and do more by enhancing cross-specialty surgical visualization," said Timothy Scannell, president of the MedSurg and NeuroTechnology group at Stryker, in a statement. "Novadaq's unique innovative technology complements Stryker's advanced imaging portfolio and expands our product offerings into open and plastic reconstructive surgery.” Novadaq is Stryker’s first acquisition in 2017, following a strong 2016. Last year, the company acquired U.K.-based Stanmore Implants for £35.6 million ($45.5 million), disposable device maker Sage Products for $2.8 billion and Physio Control, which makes defibrillators and CPR-assist devices, for $1.3 billion. Also in 2016, the device maker bolstered its neurology and spine units with a pair of tuck-in deals. It acquired Synergetics’ neuro portfolio and Becton Dickinson’s vertebral compression fracture products at a time where its neurotechnology group was faring well and its spine unit was struggling. While Stryker’s spine business still showed “softness” in Q1 2017, CEO Kevin Lobo said on an earnings call that he expects it to “improve over the course of the year.” Source: http://www.fiercebiotech.com/medtech/stryker-to-pony-up-700m-for-imaging-player-novadaq

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About Solganick & Co. Solganick & Co., Inc. is an independent investment banking and M&A advisory firm focused exclusively on the global technology and digital media industry sectors, including an active practice within healthcare IT. We advise buyers and sellers of companies and efficiently execute M&A transactions that help increase shareholder value. Our professionals have advised on $20+ billion in M&A transactions to date and have current clients and relationships globally with entrepreneurs, companies and leading private equity firms within the sectors we cover. Please contact us for information regarding this report or to inquire about an M&A transaction.

Los Angeles: 515 S. Flower St. Ste 500, Los Angeles, CA 90071 San Francisco: 71 Stevenson St, Suite 400, Los Angeles, CA 94105 +1 (310) 684-3130 www.solganickco.com Aaron Solganick, CEO Alexander Khoras, Director of Business Development aaron@solganickco.com akhoras@solganickco.com Rachael Fang, Vice President Erica Xue, Associate rfang@solganickco.com exue@solganickco.com Michael Okayo, Senior Associate Tapsi Dubey, Associate mokayo@solganickco.com tdubey@solganickco.com Follow Us on Twitter: @Solganickco