Is the long-awaited consolidation of the healthcare AI sector gaining steam? In a deal valued at close to $200M, South Korean AI developer Lunit announced a bid to acquire Volpara Health, a developer of software for calculating breast density and cancer risk.
At first glance, the alliance seems to be a match made in heaven. Lunit is a well-regarded AI developer that has seen impressive results in clinical trials of its Insight family of algorithms for indications ranging from mammography to chest imaging.
- Most recently, Lunit received FDA clearance for its Insight DBT software, marking its entry into the US breast screening market, and it also raised $150M in a public stock offering.
Volpara has a long pedigree as a developer of breast imaging software, although it has shied away from image analysis applications to instead focus on breast center operations and risk assessment, in particular by calculating breast density.
- Thus, combining Lunit’s concentration in image analysis with Volpara’s focus on operations and risk assessment enables the combined company to offer a wider breadth of products to breast centers.
Lunit will also be able to take advantage of the marketing and sales structure that Volpara has built in the US mammography sector (97% of Volpara’s sales come from the US, where it has an installed base of 2k sites). Volpara expects 2024 sales of $30M and is cash-flow positive.
The question is whether the acquisition is a sign of things to come in the AI market.
- As commercial AI sales have been slow to develop, AI firms have largely funded their operations through venture capital firms – which are notoriously impatient in their quest for returns.
In fact, observers at the recent RSNA 2023 meeting noted that there were very few new start-up entrants into the AI space, and many AI vendors had smaller booths.
- And previous research has documented a slowdown in VC funding for AI developers that is prompting start-up firms to seek partners to provide more comprehensive offerings while also focusing on developing a road to profitability.
The Takeaway
It’s not clear yet whether the Lunit/Volpara deal is a one-off combination or the start of a renewed consolidation trend in healthcare AI. Regardless of what happens, this alliance unites two of the stronger players in the field and has exciting potential for the years to come.
