Physitrack, a London-based provider of digital physical therapy and patient engagement technology, is kicking off an M&A push with news that it has purchased one of its primary competitors.
Physitrack CEO and cofounder Henrik Molin told MobiHealthNews that the company has acquired Physiotools, a Finnish company that got its start selling physical therapy books, but over the years shifted its business toward software, telehealth and other features.
The deal comes just weeks after Physiotools' own acquisition of Mobilus Digital Rehab, another physical therapy patient engagement technology-maker based in Sweden, founded in 1996. As such, both companies now fall under the Physitrack umbrella.
The deal was closed on Monday. Molin did not disclose the terms, but said that it was paid for in a combination of cash and shares. With it, Physitrack's roughly 20 employees will join Physitrack's smaller team of 13, he said.
The Physiotools acquisition isn't likely to be Physitrack's only purchase during the foreseeable future. The company is framing that deal as the launch of an M&A program that will target other digital health companies that Physitrack believes can help its business. Molin said that the next deal will likely prioritize a technical advancement for the Physitrack platform.
"There are other companies that we're looking at that have tech that's really interesting, that can really help us with the innovation side of things and fast-track some things we were looking at in the past," he told MobiHealthNews. "So, ideally, the next company we buy will be more [focused on that], but hopefully we can combine the tech side of things with some of the financial upside as well."
Molin also hinted that his company is already moving into a potential lead, and to expect another deal announcement within the next several weeks or months.
WHAT'S THE IMPACT?
While future purchases may be eyeing new technologies, Molin described this week's deal as "more financial than tech based" in its goal, with a focus on how each business could complement or help the other grow its operations.
Both Physitrack and Physiotools have healthy margins and market leadership in different countries or regions, he said. Further, Physitrack's business serves more than 20,000 smaller entities, while Physiotools has 6,000-entity clientele that skews heavier toward enterprises and larger practices.
Looking more long-term, Physitrack's automated signups and processes could be implemented among Physiotools' more manual processes to drive efficiency, he said, while Physitrack stands to benefit from Physiotools' "very competent sales support team" as they eye international expansion.
"The idea with Physiotools was really revenue focused. It's a way to grow quickly and fill blank spots on the map," he said. "And there are synergies. It's an old business. It's conservative. It's a similar mindset to us. We've grown very rapidly, but we've had that conservative focus on how everything was set up with making and spending money. Looking at it, there [are] so many things we can do as a joint company in terms of making things run more efficiently."
MARKET SNAPSHOT
Pre-merger, Molin said that Physitrack was bringing in nearly $5 million in revenue, while Physiotools was claiming roughly $2.5 million. The combined companies will also have a presence in 187 different countries. Based on his knowledge of competitors in the space, such as MedBridge, Physiotec or PhysioWizard, Molin said that Physitrack now stands as the largest provider of physical therapy virtual care technology in terms of revenue and user base.
It's worth noting that his claim doesn't count digital physical therapy and musculoskeletal care platforms, like Hinge Health or the recently acquired Physera, that also include a human overlay. These business models are more complicated and much higher risk than a technology provider play like Physitrack's, Molin said, and are enabled by major funding support from VCs.
Physitrack, meanwhile, was largely self-funded, thanks to cofounder and CTO Nathan Skwortsow's prior successful exits. As a result, it was structured to stay out of the red. Although the company has so far aimed its capital at high-margin M&A opportunities, Molin wasn't ready to rule out a push beyond software sometime down the road.
"If you're big enough for that high-margin approach, you will have cash that you can deploy, and you can take the risk and pretty much act like a VC-funded company and take that risk," he said. "That's not something that we're ruling out ... We could upgrade and take that risk."
Human layer or not, there's still a broad range of digital musculoskeletal or physical therapy apps available across the market – and it's no small feat for providers to pick out the best option for their patients.
ON THE RECORD
"For where we are in patient engagement and tech, size really matters," Molin said. "That was one of the key deciding factors for us doing this deal, because you need to keep innovating, keep growing, keep localizing and going wider with your tech. And also you need to be more sophisticated. And the twist is that you can't charge that much for it, because this is a highly, highly price-sensitive market. So you need the absolute size in terms of revenue to make this work.
"You need a number of customers who you charge [only a little bit of money] to make that business work," he continued. "That's, I think, the only viable way to justify your existence in the digital health space going forward, if you're not VC-funded."
