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:

StartUp Health (page 14)
1. Patient/consumer experience ($2.8 bn)
2. Wellness ($1 bn)
3. Personalized health/quantified self ($769 million)
4. Medical device ($713 million)
5. Workflow ($593 million)
6. Big data/analytics ($562 million)
7. Population health ($436 million)
8. Clinical decision support ($332 million)
9. Research ($280 million)
10. E-commerce ($277 million)

Rock Health
1. Genomics and sequencing ($410 million)–primarily from Human Longevity’s $220M Series B
2. Analytics and big data ($341 million)
3. Wearables and biosensing ($312 million)
4. Telemedicine ($287 million)
5. Digital medical devices ($268 million)
6. Population health management ($198 million)

What is similar:

  • The concentration of major investors. Rock Health counts five US ‘whales’ and StartUp Health 10 (page 22), with agreement on GE Ventures, Khosla Ventures, Andreessen Horowitz.
  • Most deals are still seed and Series A, with less of a gap to Series B (slide 15). But it remains a difficult bridge to cross to C+ rounds.

Do not miss near the end of the Rock Health report their analysis of digital health company performance in public markets. Three digital health companies had IPOs totaling $250 million: Nant Health (Patrick Soon-Shiong’s holding company), Tabula Rasa HealthCare, and iRhythm. 2016 was also a mixed picture for healthcare already gone public. Rock Health has a helpful chart with winners and losers in their current share value, with iRhythm being the champ in share gain and Fitbit being the biggest loser. Only one has a unicorn market cap over $10 bn: IMS Health.

In this Editor’s opinion, it reflects an uncertain year in healthcare, with the ups-and-downs of the US election, uncertainty of what the new President will do (the negativity is overblown in this Editor’s opinion) and something called maturity. Rock Health counted $6.8 bn in M&A activity over 136 deals, 9 percent over 2015, with 10 companies selling for $100M+. A popular category was companies that sell to hospitals, a surer market than most.

More analysis: Many deals in Mobihealthnews’ excellent roundup reflect that maturity: consolidation, refocusing and capability additions, with a few depressing notes:

Updated: Healthways’ drastic repositioning and exit from ‘total population health’ and employee wellness programs presaged their rebranding today as Tivity Health, which designs fitness and health improvement programs for adults 50+, marketed primarily through fitness centers. Announced today at the JP Morgan Healthcare Conference. Release.

More views to follow on 2017.

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