TTA’s Week: CVS-Aetna,, Cerner-Lumeris, NHS news roundup, and is telemedicine really a bust?

 

 

CVS-Aetna looks likely, FCC likes telehealth, Cerner takes a bite of value-based health, and is telemedicine really a bust–or are we not thinking right? 

News roundup: FCC RPM/telehealth push, NHS EHR coding breach, unstructured data in geriatric diagnosis, Cerner-Lumeris, NHS funds social care, hospital RFID uses 
A mHealth refutation of ‘Why Telemedicine is a Bust’ (Mobiles will conquer all)
Department of Justice won’t challenge CVS-Aetna merger: report (Finally, a healthcare mega-merger that goes through)

The ‘record-breaking first half’ in funding that wasn’t. More ‘Bad Blood’. And GP at Hand’s disruption may be a good thing for UK’s GP practices, according to the RCGP chair. 

RCGP chair at The King’s Fund: destroy Babylon Health’s GP at Hand ‘amazing model’, the present financial model–or both (A whole lot of disrupting going on)
The Theranos Story, ch. 52: How Elizabeth Holmes became ‘healthcare’s most reviled’–HISTalk’s review of ‘Bad Blood’ (A Must Read)
Rock Health’s ‘Another record-breaking first half’ in digital health funding is actually–flat. (With a Soapbox Extra!) (Don’t believe the spin, dig in)

Still wondering how Atul Gawande will continue medical practice and be a CEO? Will Google be the ‘Medical Brain’ powering hospitals and clinicians? News from early stage to mature companies. 

News roundup: Paradromics; Cerner’s trials with DOD, VA; Medtronic; Babylon Health; NHS’ private data
Google’s ‘Medical Brain’ tests clinical speech recognition, patient outcome prediction, death risk (Billions of data points to a lot of outcomes)
Some more views on (and by) Atul Gawande on the JP Morgan-Berkshire-Amazon health combine (Not what you think)

The pick of a noted healthcare innovator and theoretician to head the JP Morgan Chase-Berkshire Hathaway-Amazon health leviathan induces skepticism. Theranos is back–in the courts, and its principals are facing prison time. 

The 50,000 foot pick as CEO of the JP Morgan Chase-Berkshire Hathaway-Amazon health joint venture (A great theoretician and gadfly, but not a herder of a million cats)
Instant GP, don’t even add water; Babylon Health taps into the corporate market via insurer Bupa (UK) (A budding revolution from the payer side?)
The Theranos Story, ch. 51: how Holmes wasn’t Steve Jobs despite the turtlenecks–a compare and contrast (Aping Steve Jobs won’t make you successful. But it will get you press!)
The Theranos Story, ch. 50: DOJ indicts Holmes, Balwani for fraud (updated) (What you need to know right here)

 

Following up with ‘old friends’: Babylon’s Big Deal with Samsung, VA’s Home Telehealth awards. An analysis of analogue versus digital telecare. And Theranos’ Holmes is ‘The Woman Who Came to Dinner’ and won’t leave.

Rounding up the news: Babylon’s Samsung Health UK deal, smartphone urine test debuts, a VA Home Telehealth ‘announcement’, Aging 2.0’s NY Happy Hour (Babylon’s big chance, VA HT’s worst kept secret revealed, Salford Royal trials Healthy.io)
CMS urged to further reimburse telehealth remote patient monitoring with three new CPT codes (How codes can change the profit picture of health tech)
The Theranos Story, ch. 49: CEO Holmes reportedly raising funds for a new company–and feeling like Joan of Arc (John Carreyrou’s Theranos book is just out; Elizabeth Holmes isn’t Monty Woolley and not St. Joan either)
OnePerspective: Analogue telecare is a dead horse: stop flogging it (And go digital–the perspective from the CEO of Communicare247)


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Rock Health’s ‘Another record-breaking first half’ in digital health funding is actually–flat. (With a Soapbox Extra!)

The Breathless Tone was the clue. “It’s déjà vu for digital health, with yet another record breaking half for venture funding.” It was déjà vu, but not of the good sort. This Editor hates to assume, so she checked the year-to-year numbers–and first half 2018 versus 2017 broke no records:

  • 2018:  $3.4 bn invested in 193 digital health deals 
  • 2017: $3.5 bn invested in 188 digital health companies [TTA 11 July 17]

But ‘flat’ doesn’t make for good headlines. Digging into it, there are trends we should be aware of — and Rock Health does a great job of parsing–but a certain wobbliness carried over from 2017 even though the $5.8 bn year finished 32 percent up over 2016, analyzed here [TTA 5 Apr 18]. Their projection for 2018 full year is $6.9 bn and 386 deals.

Let’s take a look at their trends:

  • “The future of healthcare startups is inextricably linked to the strategies of large, enterprise-scale healthcare players—as customers, partners, investors, and even potential acquirers.” It’s no mistake that the big news this week was Amazon acquiring tiny, chronic-conditions specializing prescription supplier PillPack after a bidding war with Walmart for an astounding $1bn, making its 32 year-0ld founder very rich indeed and gaining Amazon pharmacy licenses in 49 states. (Prediction: Walmart will be pleased it lost the war as it will find its own solutions and alliances.) 
    • Enterprise healthcare players are cautious, even by Rock Health’s admission, but the big money is going into deals that vertically integrate and complement, at least for a time–for example, Roche’s purchase of Flatiron Health. And when it doesn’t work, it tends to end in a whimper–this May’s quiet sale by Aetna of Medicity to Health Catalyst for an undisclosed sum. Back in 2011, Aetna bought it for $500 million. (Notably not included in the Rock Health analysis, even though they track Health Catalyst and the HIE/analytics sector.)
  • The market is dependent on big deals getting bigger. If you are well-developed, in the right sector, and mature (as early-stage companies go), you have a better shot at that $100 million B, D, E or Growth funding round. B rounds actually grew a bit, with seed and A rounds dipping below 50 percent for the first time since 2012. 
  • The Theranos Effect is real. Unvalidated, hyped up claims don’t get $900 million anymore. In fact, there’s real concern that there’s a reluctance to fund innovation versus integration. The wise part of this is that large fundings went to companies validating through clinical trial results, FDA clearance (or closing in on it), and CDC blessing.
  • The dabbling investor is rapidly disappearing. 62 percent of investors in first half had made prior investments in digital health including staying with companies in following rounds.
  • Digital health companies, like others, are staying private longer and avoiding public markets. Exits remain on par with 2017 at 60. Speculation is that Health Catalyst and Grand Rounds are the next IPOs, but there hasn’t been one since iRhythm in October 2016. The Digital Health public company index is showing a lot less pink these days as well, which may be an encouraging sign.
  • Behavioral health is finally getting its due. “Behavioral health startups received more funding this half than in any prior six-month period, with a cumulative $273M for 15 unique companies (nearly double the $137M closed in H1 2016, the previous record half for funding of behavioral health companies). Of these 15 companies, more than half have a virtual or on-demand component.”

Keep in mind that Rock Health tracks deals over $2 million in value from venture capital, excluding government and grant funding. They omit non-US deals, even if heavily US funded. 

Their projection for 2018 full year is $6.9 bn and 386 deals. Will their projection pan out? Only the full year will tell!

A Soapbox Extra!

Rock Health, like most Left Coast companies, believes that Vinod Khosla is a semi-deity. This Editor happens to not be convinced, based on predictions that won’t pan out, like machines replacing 80 percent of doctors; making statements such as VCs have less sexual harassment than other areas, and even banning surfers off his beach. He was at a Rock Health forum recently and made this eye-rolling (at least to this Editor) statement:

Is there one area in the last 30 years where the initial innovation was driven by an institution of any sort? I couldn’t think of a single area where innovation—large innovation—came from a big institution. Retailing wasn’t disrupted by Walmart, it was by Amazon. Media wasn’t changed by CBS or NBC, it was by YouTube and Twitter. Cars weren’t transformed by Volkswagen and GM—and people said you can’t do cars in startups—but then came Tesla.

Other than making a point that Clayton Christensen made a decade or more ago, the real nugget to be gained here is that formerly innovative companies that get big don’t grow innovation (though 3M tends to be an exception, and Motorola didn’t do too badly with the cell phone). They can buy it–and always have. 

Go back a few more decades and all of these companies were disrupters–and bought out (or bankrupted) other disrupters. CBS and NBC transformed entertainment through popularizing radio and then TV. VW created the small car market in the US and saved the German auto industry. GM innovated both horizontally (acquiring car companies, starting other brands) and integrated vertically (buying DELCO which created the first truly workable self-starting ignition system in 1912).

YouTube? Bought by innovator Google. Twitter? Waiting, wanting to be bought. Innovation? Khosla is off the beam again. Without Walmart, there would be no Amazon–and Amazon’s total lifetime profit fits nicely into one year of Walmart’s. Tesla is not innovative–it is a hyped up version of electric car technology in a styled package that occasionally blows up and remains on the borderline of financial disaster. (Model 3, where art thou?)

I’d argue that Geisinger, Mayo Clinic, and Intermountain Healthcare have been pretty innovative over the last 30 years. Mr. Khosla, read Mr. Christensen again!

The Theranos Story, ch. 48: down to 24 employees in a last ditch before bankruptcy

click to enlargeThe ground is next. Theranos is down to its last two dozen employees or less, in a bid to buy a few more months of time before bankruptcy, according to a breaking report in the Wall Street Journal.

The announcement was made by Elizabeth Holmes Tuesday to approximately 125 remaining employees at its downscale Newark, California headquarters. (This Editor wonders if she wore a black turtleneck.) Interestingly, Ms. Holmes remains CEO after settling civil charges with the Securities and Exchange Commission (SEC) while a criminal investigation continues out of the US Attorney’s office in San Francisco. 

The WSJ article from the estimable John Carreyrou (who deserves an old-school Pulitzer Prize for his investigative reporting) recaps Theranos’ fall for those who need it. But…there’s more. Theranos received only $65 million of $100 million promised in their last (ditch) funding from Fortress Investment Group late last year, revealed by Ms. Holmes in an investor email this past Tuesday. The remainder is contingent on Theranos achieving an FDA Zika blood test approval using their miniLab. She stated that this test is still having problems and appealed to investors for yet more funding. The layoffs were designed to keep their cash reserve over $3 million until the end of July, below which Fortress is entitled to seize Theranos’ assets and liquidate them. This, as we have previously noted, is Fortress’ specialty–as now fan dancing is Ms. Holmes’.

According to Mr. Carreyrou’s sources, Ms. Holmes is still living large in basic black. “Until Tuesday, Ms. Holmes still had two personal assistants and two security guards who drove her around in a black Cadillac Escalade SUV, according to the people familiar with the matter.” This Editor wonders what happened after Tuesday. Public transit? A used car for a few thousand?

Theranos and the $900 million in lost investment may have also put a wet blanket on 2017 health tech funding, based on what we’ve learned in Rock Health’s report [TTA 5 Apr]. Other companies with real advances and promise may be paying the price for Theranos’ hype and fakery.

Our 47 past chapters and other Theranos mentions are for your perusal in our pages here

2017’s transition in digital health funding: is it maturity or a reconsideration?

Rock Health’s topline for 2017 digital health funding is impressively upbeat, casting it as “the end of the beginning in digital health, the start of a new era with new challenges”. Digging into it, there is a continued slowing that Rock Health itself predicted back in their 3rd Quarter report [TTA 3 Oct 17]. It seems that the big did get bigger, but if you weren’t on the train in 2016 or prior, 2017 wasn’t the year you left the station. Their findings bear this out, keeping in mind that their tracking is for US companies with deals over $2 million in value, which excludes much of the action from young and international companies:

  • No digital health IPOs this year, in a weak year in general for IPOs
  • For the companies already in public markets, they outperformed the S&P 500 31 percent to 19 percent
  • Average deals hit an all-time high of $16.7M ($5.8 bn over 345 deals) 
  • Big money went to better-developed, more mature companies like Outcome Health and Peloton exercise equipment at $500 million and $325 million. Rock Health duly notes Outcome Health’s troubles since. (To this Editor, Peloton is not a digital health company despite its glitzy overlay of video and exercise community.)  
  • Seven $100 million + mega-deals front-loaded in the first half of the year. Second half’s sole big deal was genetic testing and data marketer 23andme. The dominant category of business? Consumer health information represented by Outcome, 23andme, PatientPoint, PatientsLikeMe, and ShareCare, most with a B2B2C model.
  • Looking at deals by stage, not surprisingly the funding at D and later rounds soared to an average size of $74 million (from 2016’s $46 million). Seed and A rounds’ average funding at $7 million, while the majority, hasn’t varied much since 2011. Series B funding was also flat at $17 million on average.
  • Exits continued to be weak, indicating the reality of healthcare investing being long haul. M&A deals declined for the second straight year to 119–18 percent fewer than 2016 and 36 percent fewer than 2015

Also Modern Healthcare.

This Editor’s opinion? One damper on 2017 was the $900 million credulously blown on Theranos. Call it the Theranos Effect.

As usual we will look at StartUp Health‘s always numerically bigger report after release, but this Editor’s bet is that it won’t be ‘crazy’ like earlier in 2017. 

StartUp Health’s Q3 is an even crazier $9bn YTD

And you thought Q2 was ‘crazy’? There’s no cooling in StartUp Health’s reported digital health funding activity in Q3, which at $9bn is already past 2016’s $8.1bn and is poised to cross the $10bn bar by end of year.

  • Q3 charted $2.5bn in funding, less than Q2 ($3.8bn) but above Q3 2016 ($2.2bn).
  • Series C and D deals led the funding charge at 15 percent of deals, with Series D on average $113 million. It’s an indicator of market maturity, though A rounds were still in the lead at 35 percent and 21 percent in Series B.
  • Deals are bigger than ever at an average $18 million versus $14 million in 2016
  • Half the deals they tracked were in personalized health and patient/consumer experience, a distinct difference from Rock Health’s shift to B2B. Population health held its own.
  • They tracked more mega-deals YTD due to broader category and ex-US. Rock Health’s lead this quarter of 23andMe was only #6 on the list, surpassed by Auris, Peloton, Guardant Health, Outcome Health, and Grail.
  • The Bay Area leads for deals substantially YTD, with NYC, Boston, and Chicago combined still trailing

Remember that StartUp Health takes a wider sample than Rock Health [TTA 3 Oct], tracking over 500 international company deals, including those below $2 million as well as both service and biotech/diagnostic companies. StartUp Health on Slideshare.

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.

AARP/Rock Health 2017 Aging in Place $50K Challenge–deadline 2 Oct!

One week to go! The 2017 Aging in Place Challenge, sponsored by the AARP Foundation and Rock Health, is calling for digital health companies to improve the lives of vulnerable seniors (their words, not this Editor’s) and reduce unnecessary healthcare utilization for older Americans. The Challenge is interested in four areas:

  • Reducing hospital readmissions
  • Avoiding penalties from providers
  • Providing post-acute care assistance
  • Increasing overall patient satisfaction

Another requirement: competitors should have “a good handle on product-market-fit and an ARR (annual recurring revenue) of at least $100K.”

Apply now through 2 October, with the top five finalists to be announced on November 6. The pitch event will be at Rock Health in San Francisco during the week of December 11th with one winner selected. More information and application link here.

UDG Healthcare buys American, adds Vynamic, Cambridge BioMarketing for up to $67 million

Consultancy acquisitions the latest trend–who’s next? Dublin’s UDG Healthcare acquired Philadelphia-based healthcare consultancy Vynamic last week, then topped it on Monday with marketing/communications company Cambridge BioMarketing. Cambridge has an unusual specialty–campaigns for orphan and specialty drugs and treatments with clients from small to large pharma and biotech. Vynamic, an industry management consultancy, provides services from strategic planning to process design and systems implementation.

This follows on the reveal earlier this month in Bloomberg of the potential sale of The Advisory Board’s healthcare practice to UnitedHealthcare. Last week, this Editor mentioned Evolent Health in Rock Health’s record-breaking review of first half 2017 funding. It turns out that publicly traded Evolent is partly owned by The Advisory Board, with a share valued at $170 million, and reportedly had been seeking funding to itself purchase The Advisory Board, now considered unlikely (BizJournals). What will happen to this share isn’t known.

The Vynamic acquisition is structured as an initial purchase price of $22 million with an additional consideration of up to $10 million payable over the next three years, based on the usual achievement of agreed profit targets, for a total of $32 million (€27.8 million). Irish Times Vynamic will join UDG’s Ashfield Division. Release For Cambridge, it’s a similar arrangement of $30 million (€26m) paid up front, with the potential for an additional $5 million (€4.3m) paid over the next 12 months, again dependent on achieving financial targets. RTE.ieRelease

“Crazy”: StartUp Health’s 2nd Q digital health funding breaks record

As predicted, a torrid start to the year. StartUp Health‘s 2nd quarter and first half funding estimate shattered records–$6.5 billion first half, $3.8 billion 2nd quarter compared to $8 bn and 500+ deals in full year 2016. StartUp Health takes a wider sample than Rock Health, tracking over 300 international company deals, including those below $2 million, in service and biotech/diagnostic companies. A change from last year is that there are more Series A than seed deals, concentrating on workflow, big data/analytics, wellness, medical device, and personalized health-Quantified Self companies. Series B deals are well-populated, but there is still a long bridge to C and above. San Francisco and the Bay Area continue to substantially lead in deals made, with Chicago at 39 percent and New York at 25 percent of deal value. They also trumpet the success of their funding family. Watch the video below or download the free report here.

Q1 digital health investment: two perspectives from StartUp Health and Rock Health

StartUp Health’s and Rock Health’s investment/M&A roundups from Q1 2017 have just hit the deck. Before we dig into them, let’s start with the differences in methodology:

  • Rock Health tracks deals only over $2 million in value; StartUp Health seems to have no minimum or maximum; the latter includes early stage deals at a lower value.
  • StartUp Health gathers in international deals at all levels, whereas Rock Health includes only US-funded ventures.
  • Rock Health omits healthcare services companies (citing Forward, Oscar), biotech/diagnostic companies (GRAIL, Theranos), and software companies not solely focused on healthcare (Zenefits)
  • StartUp Health defines ‘digital health’ differently than Rock Health, with categories of ‘patient/consumer experience’, ‘wellness’, ‘personalized health/quantified self’, and ‘research’

StartUp Health is ‘over the moon’, breathlessly (appropriately as the home of the 25-year Health Moonshot) with Q1 trending, seeing the biggest investment quarter since 2010 at $2.5 bn. Topping up this number was GRAIL, which is developing a blood test for early cancer detection, with a massive Series B at $914 million. Far behind it in the $85-110 million range were (in descending order) Alignment Healthcare (population health), PatientsLikeMe (patient/consumer experience), Nuna (big data/analytics), and PointClickCare (EHR). Population health, patient/consumer experience, and research top their investment activity. Most deals are still seed and Series A (59 percent), but that is down five points from full year 2016; Series B’s share is up three points to 25 percent. But it remains a difficult bridge to cross to C+ rounds.

Rock Health splits the difference and calls it ‘business as usual’, surprised that there hasn’t been a tailspin. Its Q1 sandwiches between 2016 and 2015, well above 2015 but trending 23 percent below Q1 2016. Their biggest deals include the aforementioned Alignment, PatientsLikeMe and Nuna, omitting GRAIL and PointClickCare. Their top three investment categories are analytics/big data, care coordination, and telemedicine (over $50 million). Rock Health tracked almost 20 M&A, noting that many transactions are now ex-California. They also uniquely track public company performance. Here in 2016 is where Readers first noted weakness in NantHealth, but Fitbit and Castlight Health also had miserable quarters. Teladoc, Evolent Health (consulting), and Care.com had a good winter as well. Let’s see what Q2 brings.

Was 2016 a great or off year for digital health funding, M&A, IPOs? (updated)

It depends on the study you read and how jaundiced your view is. If you believe the StartUp Health Insights 2016 ‘Health Moonshots’ report, 2016 digital health funding has hit a zenith of $8.18 bn (up 38 percent from 2015), with 500 companies enjoying funding from over 900 individual investors. Yet over at fellow funder Rock Health, the forecast is far more circumspect. They tracked only half the funding–$4.2 bn in funding–with 296 deals and 451 investors, down from the $4.6 bn over 276 deals in 2015.

There are significant differences in methodology. Rock Health tracks deals only over $2 million in value, while StartUp Health seems to have no minimum or maximum; the latter includes early stage deals at a lower value (their cross-section of ~$1 million deals has 15). StartUp Health gathers in international deals at all levels (pages 11-12),  whereas Rock Health only includes US-funded ventures. Another observation is that StartUp Health defines ‘digital health’ differently than Rock Health, most notably in ‘patient/consumer experience’, ‘wellness’ and ‘personalized health’. This can be seen by comparing their top 10 categories and total funding: (more…)

The growth of telehealth, and the confusion of terminology (US)

Becker’s Health IT and CIO Review has written up a US-centric review of recent advances in telehealth and telemedicine but kicks it off with the confusion level between the two terms. Internationally, and in these pages, they are separate terms; telehealth referring primarily to vital signs remote monitoring, and telemedicine the ‘virtual visit’ between doctor and patient, between two clinical sites, or ‘store and forward’ asynchronous exchange (e.g. teleradiology). Somehow, in US usage, they have been conflated or made interchangeable, with the American Telemedicine Association (ATA) admitting to same, and American Well simply ‘just doing it’ in relabeling what they provide. On top of it, the two are incorporating elements of each into the other. Examples: TytoCare vital signs measurement/recording into American Well’s video visit; Care Innovations Health Harmony also providing video capability.

Of particular interest to our international readers would be the high rate of US growth in telemedicine utilization from 7 to 22 percent (Rock Health survey). Teladoc, the largest and publicly traded provider, passed the milestone of 100,000 monthly visits in November and the ATA estimates 1.25 million from all providers for 2016 (Teladoc release). Other US competitors include the aforementioned American Well, MDLive, and Doctor on Demand, the latter two also selling direct to consumer. They also compete against doctor-on-house call services like Pager and Heal. Reimbursement remains an issue both privately and publicly (Medicare and Medicaid) on a state-by-state level, with telehealth experiencing significant difficulties, as well as internet access, speed, and usage by older adults.

Rock Health announces its Top 50 in digital health (US)

This Editor observes that digital health is at the state of maturity (so to speak) where entities assemble a Top 50 list and host a dinner to pass out awards. Rock Health, Fenwick & West, Goldman Sachs and Square 1 Bank cast a wide net from investment to startups in their just-released list. (Of course there will be a glitzy dinner, soon, at the kickoff of the JP Morgan Healthcare Conference, 9 – 12 January 2017 in San Francisco. Want an invite?)

Of great delight is an award to John Carreyrou of the Wall Street Journal as Reporter of the Year for his investigative work on Theranos. Other highlights are Validic (clinical/wellness data integrator) as Fastest Growing Company, Evolent Health for Best Performing IPO and BSX Technologies‘ LVL hydration monitor as Crowdfunding Hero (having raised $1.1 million when goal was $50,000). Rock Health website

What is increasingly curious to this Editor is that digital health companies, in nearly all cases, aren’t crossing borders and oceans. Every one seems to stick and be unique to its own country of origin, creatures of their own unique petri dish.

Also in other Rock Health news, having evolved a position as a venture fund/business support provider, they have added to their list of prominent partners kidney care and medical group operator DaVita. Rock Health release.

StartUp Health’s midyear report: digital health investment breaks record

The StartUp Health accelerator/investment organization continues with its quarterly analyses of health tech funding. (Rock Health may be at ‘last call’: TTA 11 May) Key points:

  • International investment reached $3.9 bn, a record.
  • There are 7,600 global startups in digital health.

But some things remain the same:

  • Most funding deals go to Series A companies, with seed rounds equal in number but not amount (33 and 32 percent, under $100 million and $400 million respectively).
  • Later stage companies still don’t have ‘legs’. Subsequent rounds after Series B (18 percent) continue to be weak (apparent since the beginning of these tracking reports). Series B now accounts for 18 percent of deals, $600 million in funding. Series C through E drop off precipitously from $400 to well below $100 million.
  • Median on rounds haven’t moved much: $3.9 million Series A and seed, $17 million in B/C, $21 million D and after.
    • Given the regulatory environment and the wisdom of going slow in health tech (poster child–Theranos), this also points to a disconnect between the Silicon Valley mentality of ‘make it quick and exit’ and reality.
  • IPOs have been a mixed picture, with most fluctuating in price and market cap, few making it to their IPO price.
  • International deals range from League in Toronto, Early Sense in Tel Aviv and Ping An Good Doctor in Shanghai, the last of which at $500 million beat the $400 million funding of payer Oscar for top funding honors.

And there are new darlings: patient/consumer experience, wellness, personalized health/Quantified Self (!), big data, workflow and clinical decision support.

An interesting addendum to the report is the 50+Market, which includes companies which are relevant to 50+ needs and those which focus on it. Interestingly, half of investment is residing here and skews heavily towards Series B and later stage companies. StartUp Health page (download). The report for viewing only is on Slideshare.

Is the clock at the funding pub pointing to ‘last call’? (Updated)

click to enlargeAnd we were having such a good time! UPDATED Having ridden a few hype curves (in health tech and out–remember airline deregulation?) and with the bruises to prove it, this Editor believes that she can spot a Cracking Market at forty paces. The hands on the clock appear to be near closing time, even as we party on. After all, DTC telehealth is forecast to be $25 bn in the US by 2025 (GrandView Research), if we make it that far!

Where are the sharp noises coming from?

  • The continuing fail of unicorns like Theranos [TTA 4 May and prior], now resorting to bullying the Wall Street Journal and negotiating with the alphabet (SEC, DOJ, FDA, CMS…), and the troubles of Zenefits. 
  • Another notable unicorn, the doctor booking site ZocDoc, being called out at last on their customer churn, low margins, and high customer acquisition costs. (As well as an irritant to doctors and office managers) New York Business Journal
  • Extremely high and perhaps insane rounds of funding to young companies with a lot of competition or a questionable niche. Higi is an odd little kiosk + consumer engagement program located in primarily Rite Aid drugstores–odd enough to score $40 million in its first venture round. (Ed. note: I shop at Rite Aid–and have never seen one.)This is after the failure of HealthSpot Station, which burned through approximately $43 million through its entire short but showy life. The low-cost, largely exchange plan insurer Oscar Health raised $400 million this February  ($727 million total) while UnitedHealth and others are dropping money-losing plans in most states. Over 50 percent of exchange co-ops went out of business in 2015, leaving doctors, health systems and patients holding their baggage. Again, low margins, high cost and high customer acquisition costs.
  • We’ve previously noted that funders are seeking ‘validation in similarity’–that a few targeted niches are piling up funding, such as doctor appointment setting, sleep trackers and wellness engagement [TTA 30 Dec 15]
  • Tunstall’s continuing difficulty in a sale or additional financing, which influence the UK and EU markets.
  • NEW More patent fights with the aim of draining or knocking out competition. We’re presently seeing it with American Well litigating Teladoc over patent infringement starting last year, which is only now (March) reaching court. It didn’t stop Teladoc’s IPO, but it publicly revealed the cost: $5 million in previously unplanned lobbying and legal costs, which include their fight with the Texas Medical Board on practicing telemedicine–which is beneficial for the entire industry. (But I would not want to be the one in the legal department explaining this budget line.) Politico, scroll down. But these lawsuits have unintended consequences–just ask the no-longer-extant Bosch Healthcare about the price of losing one. (more…)

Rock Health: 1st Q funding deals up nearly 50%, approaches $1bn (US)

click to enlargeFunding’s up, but the digital darlings have changed. The stock market and tech sector may have been uncertain kicking off 2016, but digital health wasn’t. Rock Health’s first report for 2016 exudes optimism. Compared to the same quarter in 2015, funding increased nearly 50 percent to $981.3 million, the highest amount since 2011. But the devil may be in the details:

  • Five deals accounted for 56 percent of the volume (in descending order: Flatiron Health (clinical intel for cancer care), Jawbone, HealthLine (consumer health info), Health Catalyst (data warehousing) and Higi, an odd little kiosk + consumer engagement program nationally placed in Rite Aid stores–odd enough to gain $40 million in its first venture round
  • Seed and Series A raises were still well over half–54 percent, over the 50 percent in 2015
  • Later stage deals (Series D and above) shrank to 13 percent in 2016 from 35 percent
  • Top categories also demonstrated the fickleness of funding favorites. Only two categories in the top six were carry-overs from 2015: wearables (driven by Jawbone) and consumer engagement. New favorites: analytics/big data, population health management, consumer health information and EHR/clinical workflow.
  • There were no venture-backed IPOs in the quarter, and public company performance was down (9 percent y/y)

The new picture favors what to do with the data–finding trends and putting them to use both consumer and clinical sides. And exits were popular as well: 187 was the Rock Health count, with fitness wear Asics‘ acquisition of the Runkeeper fitness wearable and provider One Medical acquiring the Rise app. Will the trend continue in 2nd quarter? Stay tuned….Rock Health Q1 Update