Global funding for ventures in digital health and healthcare information technology (HIT) passed the billion-dollar mark in the second quarter of 2015, according to research firm Mercom Capital Group’s latest report.
The comprehensive report on funding and mergers and acquisitions (M&A) takes into account deals of all sizes, including private equity and corporate venture capital raised by digital healthcare start-ups and companies across the globe.
VC funding in the digital health sector witnessed an impressive 53 per cent quarter on quarter increase in Q2 2015, with 138 deals netting $US1.2 billion, compared to $784 million raised through 142 deals in the previous quarter.
Interestingly, debt and public market financing in the digital health sector has increased to $1.6 billion, with capital being raised in eight big market deals including four IPOs taking the aggregated corporate funding in health IT to $2.8 billion in Q2 2015.
Mercom CEO Raj Prabhu said that in the healthcare IT sector, companies have ranged more money through IPOs than venture capital in this quarter, which he described as “an encouraging sign as it opens up a new avenue for raising funding and an exit path for investors”.
“However, out of the 14 IPOs since 2012, six IPOs have decreased in valuation,” Mr Prabhu said.
Year on year, VC funding for digital health has almost reached the $2 billion mark in the first half of 2015, compared to $2.6 billion raised during the same period in 2014.
There has been a sharp increase in funding raised by both patient-centric companies and consumer-centric companies, with patient-centric companies raising $473 million in 41 deals compared to $347 million in 44 deals in Q1 2015, and consumer-centric companies raising $724 million in 97 deals compared to $437 million in 98 deals in Q1 2015.
The areas that received the highest investment include mobile health companies ($214 million), followed by clinical decision systems ($206 million), personal health/wellness companies ($209 million), telehealth companies ($152 million), data analytics firms ($91 million), and electronic health record companies ($26 million).
A total of 271 investors including two accelerators/incubators participated in healthcare IT deals this year, with the highest number of funding deals closed by Venrock, followed by 500 Startups, Cambia Health Solutions, Qualcomm Ventures, Khosla Ventures, Rock Health, Slow Ventures and Tencent Holdings.
Globally, US companies raised more than $1 billion in 111 deals, with other transactions spanning European countries like Finland, Germany and the Netherlands as well as Asian powerhouses China, India and Singapore.
There were 53 M&A transactions (eight disclosed) in the health IT sector in the following quarter, compared to 56 transactions (14 disclosed) in Q1 2015. Practice-focused companies accounted for 43 of the total M&A transactions, while consumer-centric companies had 10 transactions.
Out of the top five M&A transactions in Q2 2015, four US-based companies bagged a net total of $698.5 million, with acquisition of Virtual Radiologic Corporation (vRad), a provider of teleradiology and telemedicine services, the largest disclosed M&A transaction at $500 million.
Australian laboratory information system specialist PJA Solutions was the only Australian company to make it to the top five, with its $45 million acquisition by the Citadel group.
With rapid growth predicted for mHealth in Asia, the growth equation looks to shift slightly towards Asian geography in the next few quarters. The shift could largely be attributed to better market opportunities, increased healthcare problems, and a pressing need for digital healthcare infrastructure.
While the US still records the highest number of VC deals, numerous healthcare start-ups from Asia are now becoming active in one of the fastest growing healthcare markets in the world.
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