Rock Health’s Q3 report: funding and mega-deals cool down

Too hot not to cool down? This year’s digital health funding, as reported by Rock Health, may be ‘just one of those things’ depending on what happens next quarter. After a torrid Q2 which brought first half 2017 to an explosive $3.5 bn [TTA 11 July], Q3 added only $1.2 bn for a total $4.7 bn. Bear in mind that this is larger than the full years of 2014-2016, and that Rock Health tracks only US deals over $2 million in value from venture capital, excluding government and grant funding. Rock Health’s report concentrates on deal sizes, trends, and types of companies. Here’s what this Editor found to be interesting:

Here’s what this Editor found to be interesting:

  • Number of deals is at a record: 268 digital health funding deals across 261 companies. In 2016, 240 digital health venture deals had closed by the end of Q3 in 2016.
  • Few mega-deals this quarter: The only ones are 23andMe with a $250 million round in September followed by cancer data company Tempus’ $70M Series C round. Average deal size dropped to $14.6 million. The cooling is great enough for Rock Health to predict that there may not be any IPOs this year–23andMe was considered the leading candidate but instead went for another round.
  • 16 percent of companies funded in Q3 are led by women CEOs, up from 11 percent. Of course, this is influenced by 23andMe’s founder/CEO Anne Wojcicki. But almost more importantly, there’s been a breakthrough in that women’s and reproductive health companies continue to gain funding traction, and most are led by women.
  • The two top categories for funding through Q3 are consumer: health information and personal health and tracking tools.
  • Yet companies are shifting to a B2B business model from B2C, with 23andMe in the lead targeting drug discovery via the Genentech deal they have had for a long time. 61 percent of digital health startups that Rock Health tracks converted from B2C to B2B. No surprise to this Editor as consumer adoption is a slow and costly road.
  • Exits are also cooling down as long-cycle reality hits. The ‘nine-inning ball game’ stated by an investor is, given healthcare’s long cycles, regulation, and slow adoption, is more like 15. 
  • Some recovery in public companies making money in earnings per share (EPS). Teladoc‘s recovered, while NantHealth continues in the doldrums. (Perhaps it’s Cher suing Patrick Soon-Shiong?)

Awaiting StartUp Health‘s always numerically bigger report, but this Editor’s bet is that it won’t be ‘crazy’ like Q2 [TTA 15 July]. Rock Health Q3 report.

Another Theranos on boil? Patrick Soon-Shiong’s companies and the NantHealth Foundation (update)

Billionaire Patrick Soon-Shiong‘s drive to take down cancer through vaccines, genomics, software, and related health tech is one of the key missions of his NantHealth group and also the Foundation. Both fund research efforts such as Cancer Breakthroughs 2020, which is supported by former Vice President Joseph Biden. Reportedly, the well-wired Dr Soon-Shiong wooed President Trump for a role in his new Administration, one that has not materialized. In February, we noted his appearance at HIMSS17 promoting his cancer vaccine which was approved by FDA to advance to later clinical trials, and also unveiled Nant AI and the Nant Cloud–but also an article published in Stat that gazed through the NantHealth veil and found little to compliment, including the trademark infringement suit brought by the MD Anderson Cancer Center in Texas.

Apparent self-dealing among various NantHealth companies and investors, which started to be unwrapped in Stat, is now further investigated in a long POLITICO article. The report looks at transactions among the Chan Soon-Shiong NantHealth Foundation, the NantHealth companies, and other non-profits controlled by Dr Soon-Shiong, then at charitable donations to universities and hospitals that in turn support his research and other companies. Three citations in the article will attract the Reader’s notice (Editor’s emphasis):

Of the nearly $59.6 million in foundation expenditures between its founding in 2010 and 2015, the most recent year for which records are available, over 70 percent have gone to Soon-Shiong-affiliated not-for-profits and for-profits, along with entities that do business with his for-profit firms.

The foundation contributed $3 million out of a total of $12 million donated by Soon-Shiong-controlled entities to a University of Utah program to map the genomes of 1,000 state residents. University officials say they let Soon-Shiong’s entities write the grant specifications. The specifications gave a major advantage to his for-profit firms, which got the $10 million gene-mapping contract.

Soon-Shiong-controlled charities gave a total of $15 million — including $10 million from the NantHealth Foundation — to a fund that benefited Phoenix Children’s Hospital, which concluded a pair of deals with Soon-Shiong’s for-profit companies for many millions of dollars.

It’s dizzying, certainly by design. If true, it appears that Dr Soon-Shiong’s favorite charities happen to be his own businesses, which raise all sorts of ethical and legal questions. The investigation also calls into question not only these dealings but also the Foundation’s tax-exempt and additional special status as a medical research organization. Will the IRS come calling? How Washington’s favorite cancer fighter helps himself    Also Healthcare IT News, which delightfully called them ‘funding indiscretions’.

Updated. A canary in the coal mine is the NantHealth (NASDAQ: NH) share price, which has crashed from a 52-week high of $21 to a current value of $4.32. To clarify, it has been in precipitous decline since January, and not just from this report. There is trouble in Culver City. A quick look over at Yahoo!Finance news items now reveal a brace of law firms offering class action lawsuits to shareholders who believe they have suffered losses due to “materially false and misleading statements”, now updated for the above information.

American Telemedicine Association (ATA) 2015

2-5 May 2015, Los Angeles Convention Center, 1201 S Figueroa Street, Los Angeles, California 

ATA’s annual meeting for 2015 connects like-minded telemedicine, telehealth, mHealth professionals and entrepreneurs from around the globe. With over 6,000 attendees, 13 educational tracks and the largest telemedicine trade show in the world, the ATA meeting is a premier forum to learn and network, featuring:

For more information and to register, see our special link here. Telehealth & Telecare Aware is pleased to be again an official media partner of this year’s ATA. 

BlackBerry’s investment: what’s in it for NantHealth

This week’s news of BlackBerry Ltd’s minority investment in the Dr. Patrick Soon-Shiong eight-company combine called NantHealth has generally focused on BlackBerry. Across the board, BlackBerry is depicted as the party badly needing a raison d’être. Down for the count in both retail and enterprise mobile phone markets it dominated for years, BB’s six-months-in-the-saddle CEO is now going back to those same enterprises singing the wonders of their QNX operating system and upcoming BBM Protected communication platform to highly regulated verticals which need max security: healthcare, finance, law enforcement, government. Although FierceCMO inaccurately reported that BlackBerry was acquiring NantHealth (Reuters/WSJ reports to contrary), it’s generated yawns from former tea-leaf readers such as ZDNet as yet another flail of the Berry as it sinks beneath the waves. Add to this the bewilderingly written CNBC ‘Commentary’ under BlackBerry CEO John Chen’s byline–who should fire the ghostwriter for inept generation of blue smoke and mirrors–and you wonder why the very smart Dr. Soon-Shiong even desires the association with a company most consider the equivalent of silent movies. It is certainly not for the investment money, which the doctor has more than most countries–an expenditure carefully considered at BlackBerry, undoubtedly. 

Cui bono? NantHealth first, BlackBerry second is your Editor’s contrarian bet. Consider these three factors:

  1. Way down the column in most coverage is that BlackBerry and NantHealth are developing a healthcare smartphoneIt will be optimized for 3D images and CT scans but fully usable as a normal smartphone. Release date: late 2014-early 2015 (Reuters). (more…)

Voice-enabled devices–pointer to the future?

LA billionaire and healthcare investor par excellence Patrick Soon-Shiong (his NantHealth raised $31 million earlier this year and owns Vitality, eviti, iSirona, iCOS) has just made a sizable $8 million investment in Fluential, which is developing a voice interface and speech-optimized recognition software for digital health, wellness, and weight management, to run on anything mobile including wearables, and to be released in the spring of 2014. If this works (and better than Siri), it has major implications across the board in the future shape of both consumer and clinical health tech, especially for older adults and those with mobility concerns. Mobihealthnews.