Top-funded digital health categories in 2018:
- Data analytics: $2.1bn
- mHealth apps: $1.3bn
- Telemedicine: $1.1bn
- Mobile wireless technology: $847m
- Clinical decision support: $714m
- Wearable sensors technology: $703m
Mercom Capital Group, a global communications and research firm, released its 2018 report covering funding as well as mergers and acquisitions (M&A) activity for the digital health and health care information technology (IT) markets.
Per the report, digital health global venture capital (VC) funding – including private equity (PE) and corporate venture capital – broke records again in 2018 with 698 deals raising a total of $9.5bn. US-based companies brought in approximately $7bn of this, according to the report. The previous record set in 2017 was $7.2bn across 778 deals.
A 58% increase from 2017, total corporate funding for digital health companies – including debt and public market financing – reached $13bn in 2018, up from $8.2bn raised the previous year.
Raj Prabhu, CEO of Mercom Capital Group, told us the key takeaway is that funding for the digital health sector continues to rise, at a 32% increase year-over-year – a pace that will be difficult to maintain going into 2019 unless there is “a clear exit path for investors,” he said.
Top VC funding rounds in 2018:
- 23andMe: $300m
- American Well: $291m
- Butterfly Network: $250m
- HeartFlow: $240m
- WuXi NextCode: $200m
- Helix: $200m
- SomaLogic: $200m
In the United States, digital health companies raised close to $7 billion in 2018 with the remaining $2.5 billion coming out of other countries.
Data analytics, mobile health (mHealth) apps, and telemedicine were among the “big winners” with each receiving more than a billion each, Prabhu said. Eighteen companies with deals worth more than $100m raised nearly a third of this funding.
More than 4,000 deals saw digital health companies receive $35bn in VC funding and almost $12bn in debt and public market financing, including initial public offerings (IPOs), since 2010.
The absence of US-based IPOs in 2018 the US was surprising, Prabhu noted, especially given the record high funding levels.
Moving into 2019, the firm expects M&A activity to closely mirror 2018, which was flat year-over-year. Data analytics, mHealth apps, and practice management companies are expected to be primary targets in 2019, said Prabhu.
“The major trends I see driving M&A are strategic,” he added, “where health care/digital health companies [are] acquiring other digital health companies to expand market share or acquire important technology.”
The top disclosed M&A transactions in 2018:
- Veritas Capital and Elliott Management’s acquisition of athenahealth for $5.5bn
- Platinum Equity’s acquisition of LifeScan for $2.1bn
- Vista Equity Partners’ acquisition of Mindbody for $1.9bn
- Roche’s acquisition of Flatiron Health for $1.9bn
- Inovalon’s acquisition of Ability Network for $1.2bn
- Veritas Capital’s acquisition of General Electric’s Healthcare IT division for $1bn
- 3M’s acquisition of M*Modal for $1bn
Prabhu said the other trend is private equity and funds acquiring large companies to restructure and sell in the future.
There were 223 M&A transactions in 2018, up from 203 transactions in 2017. According to the report, 18 companies participated in multiple transactions last year.
Among the most acquired company type was mHealth apps, with 32 deals, followed by data analytics companies with 27 transactions.