BackDigital Health VC funding reaches $7.2 billion in 2019, says report
Digital health firms raised $2 billion in 156 deals compared with $3.1 billion in 173 deals in Q3 2018, a 35% declineTotal corporate funding in the first nine months in 2019 fell 19% with $8.9 billion compared with $11 billion a year ago
PremiumGlobal Venture Capital (VC) funding, including venture capital, private equity, and corporate venture capital, for digital health companies in the first 9 months of 2019 fell 10% year-on-year (YoY) with funds worth $7.2 billion raised for 474 deals compared with $8 billion for 556 deals in the same period last year, according to communications and research firm Mercom Capital Group's report. The report details funding and mergers and acquisitions (M&A) activity for digital health (Healthcare Information Technology) sector for the third quarter (Q3) and first nine months (9M) of 2019.
In other findings, digital health companies raised $2 billion in 156 deals compared with $3.1 billion in 173 deals in Q3 2018, a 35% decline, while they received about $42 billion in VC funding in 4,622 deals, according to Mercom.
Total corporate funding (including VC, public market, and debt financing) in the first nine months in 2019 declined 19% with $8.9 billion compared with $11 billion in 9M 2018. Total corporate funding in Q3 2019 was down slightly with $3.4 billion compared to $3.6 billion Q3 2018.
“After a strong Q2, funding and M&A activity slowed in the third quarter and financial activity is lagging compared the same period of last year. The performance of the much anticipated four digital health IPOs at the end of Q3 has been disappointing and the fate of future IPOs may depend on how well these companies fare," said Raj Prabhu, CEO of Mercom Capital Group. “Large deals continued to dominate with six companies raising half of all the funding in the third quarter."
The top funded categories in 9M 2019 were - telemedicine with $1.5 billion, analytics with $1.3 billion, and mHealth Apps with $1 billion. Other digital health categories that received substantial funding were - healthcare service bookings $487 million, mobile wireless $437 million, and clinical decision support with $425 million.
Top funded categories in Q3 2019 were: telemedicine with $651 million, mhealth apps with $391 million, analytics with $201 million, mobile wireless with $173 million, healthcare service booking with $151 million, clinical decision support with $138 million, and practice management solutions with $119 million.
The top digital health VC deals in 9M 2019 included: $550 million raised by Babylon, followed by $250 million raised by Tencent Trusted Doctors, and $205 raised by Collective Health. Capsule and Tempus brought in $200 million each.
According to the report, digital health VC funding deals came out of 21 different countries in Q3 2019.
Digital health debt and public market financing in 9M 2019 was down 40% with $1.7 billion in 18 deals compared with $2.9 billion raised in 18 deals in 9M 2018.
There were four Digital Health IPOs in Q3 2019 in the US, that together raised $1.2 billion - Change Healthcare raised $557 million, followed by Livongo Health with $335 million, Health Catalyst with $182 million, and Phreesia $167 million.
In 9M 2019, there were 125 Digital Health M&A transactions compared to 172 transactions in 9M 2018. M&A activity in Q3 2019 was also down, with 34 M&A transactions compared to the 56 M&A transactions in Q3 2018.
mHealth App companies were involved in the most M&A deals in 9M 2019 with 21 transactions, followed by Analytics and Practice Management Solutions with 12 and 10 transactions respectively. Clinical Decision Support and Telemedicine companies each had nine transactions. Consulting and Health Information Exchange companies each had six transactions.
Top M&A transactions in 9M 2019 included: French company Dassault Systemes’ acquisition of Medidata for an enterprise value of $5.8 billion. The EQT VIII Fund (EQT) and Canada Pension Plan Investment Board (CPPIB) acquired Waystar for $2.7 billion, followed by Golden Gate Capital, which acquired a controlling stake in Ensemble Health Partners for $1.2 billion. Baring Private Equity Asia acquired CitiusTech for more than $1 billion, Nordic Capital acquired ArisGlobal for $700 million, JPMorgan Chase acquired InstaMed for $500 million, and Thomas H. Lee Partners (THL) acquired Nextech Systems for $500 million.
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