New Mountain Capital’s Ciox Health is joining forces with Datavant to create a combined entity with the aim of empowering the secure and seamless connectivity of medical record data, sources familiar with the transaction told PE Hub.
In conjunction with the merger, Sixth Street is leading a structured investment in the combined company alongside Goldman Sachs Asset Management via its West Street Strategic Solutions fund, the sources said. Ciox CEO Pete McCabe will head the company, which will operate under the Datavant brand.
The sources said the merger, signed last week, assigns the combined business an enterprise value of $7 billion. One of the sources added that the combined company would be generating more than $700 million in revenue. Bloomberg wrote yesterday on the deal talks.
Deutsche Bank, Goldman Sachs and Triple Tree advised New Mountain and Ciox on the transaction, which came together on a proprietary basis after some four to five months of discussions, sources said.
Sources likened the deal’s structure to New Mountain’s (now public) Avantor. When the life sciences tools company merged with VWR in a $6.5 billion deal in 2017, Goldman Sachs Merchant Banking led an equity investment in the combined business. Ciox-Datavant and Avantor were led by the same respective deal teams – New Mountain managing director Matt Holt and Goldman partner Jo Natauri.
The deal is also significant for Sixth Street, marking the first investment led by Marty Chavez since he joined the firm as vice-chairman and partner in May. Chavez is the former CIO and CFO of Goldman Sachs. Sixth Street will join the board upon completion of the deal.
New Mountain, which created Ciox by merging four businesses, will be the controlling shareholder in the new company. All Datavant shareholders will remain invested, including Transformation Capital, Johnson & Johnson Innovation – JJDC, Inc, Cigna Ventures, Roivant Sciences and Flex Capital. Merck Global Health Innovation Fund and Labcorp, investors in Ciox, will also stay on as investors.
Solving healthcare’s data fragmentation problem
The deal is set to dramatically transform the growth trajectory at Ciox, which has already built an expansive network for the exchange of clinical data.
Datavant’s tokenization software, successfully used since 2014, connects health datasets of de-identified patient records – meaning medical data is stripped of any information that can be used to identify an individual. Its purpose is to help life sciences and healthcare organizations safely connect their data in a HIPAA-compliant manner.
Ciox, transferring nearly 50 million medical records every year across a giant network of healthcare industry participants, accelerates capabilities to enable real-world data through the deal.
“That’s where Datavant lives,” one source commented. Datavant “can plug into any sort of data, tokenize it and make it commercially viable.” The idea is that with access to more real-world data, healthcare constituents can use actionable insights to improve decision-making in clinical research or medical care interventions.
Datavant’s technology plugs into the datasets of medical centers, pharmaceutical companies, health technology companies, health insurers and pharmacy hubs, labs and government agencies.
Ciox, for its part, first made a push into real-world data for clinical research through a strategic collaboration with the venture arm of life sciences giant Merck. It built out those efforts in July 2020 with its acquisition of Medal, a biomedical natural language processing technology company.
Ciox Health was created through the 2016 merger of four industry-leading companies – HealthPort, IOD, Care Communications and ECS – that were all identified and acquired by New Mountain on an exclusive, proprietary basis between December 2014 and September 2015.
New Mountain and Sixth Street declined to comment. Goldman Sachs and Datavant did not immediately return a request for comment.