Mercom Capital Group has released its annual report on funding, and merger and acquisition (M&A) activity for the Healthcare IT / Digital Health sector in 2017. Unlike reports released by other organizations like Rock Health and StartUp Health, Mercom’s report covers Digital Health deals of all sizes across the globe; it has found that VC funding in the space has hit the record-breaking $7.2 billion figure, raised in 778 deals. This, according to Mercom, was a 42 percent increase from the previous record set in 2016 of $5.1 billion in 622 deals. Total corporate funding for Healthcare IT companies — including debt and public market financing — climbed to $8.2 billion in 2017, a 47 percent increase from the $5.6 billion raised in 2016.
Digital health companies in the United States raised $4.9 billion in 2017 with the remaining $2.3 billion coming from other countries.
Since 2010, the sector has accumulated $26 billion in VC funding in 3,450 deals and almost $8.6 billion in debt and public market financing (including IPOs), bringing the cumulative funding total for the sector to $34.3 billion.
“Venture capital funding into Digital Health spiked after plateauing the last couple of years,” Raj Prabhu, CEO and Co-Founder of Mercom Capital Group, said in a statement. “Artificial intelligence and Data Analytics companies had a breakout year with over a billion dollars raised.”
Consumer-centric companies brought in $4.2 billion in 514 deals in 2017, up 21 percent from $3.5 billion raised in 437 deals in 2016. Practice-centric companies raised close to $3 billion in 264 deals in 2017, almost twice the $1.6 billion raised in 185 deals in 2016.
The top funded areas in 2017 included: Data Analytics with $1.1 billion, mHealth Apps with $759 million, Patient Engagement Solutions with $708 million, Telemedicine with $624 million, Appointment Booking with $516 million, and Clinical Decision Support with $514 million.
Categories that saw substantial year-over-year (YoY) funding growth were Data Analytics, Patient Engagement, Clinical Decision Support, and Appointment Booking companies. What’s interesting is that Data Analytics was the top funded category for the first time, largely driven by the $419 million that went into Artificial Intelligence-based analytics. Together with predictive analytics, these two categories made up almost $500 million in funding.
The top VC funding rounds in 2017 raised money for: Outcome Health with $500 million, Modernizing Medicine with $231 million, Hudong Feng Technology with $200 million, WuXi NextCode with $165 million, PatientPoint with $140 million, Alignment Healthcare with $115 million, Annoroad with $105 million, and PatientsLikeMe with $100 million.
VC investor participation went up in 2017, with the total number of participating investors (including accelerators and incubators) increasing to 1,288 from 1,115 investors in 2016. The most active VC investors in 2017 were F-Prime Capital Partners and Sequoia Capital with nine deals each, followed by Matrix Capital Partners with eight deals, and GE Ventures, Khosla Ventures, and Flare Capital Partners with seven deals each. Accelerator and incubator funding activity slipped to 58 deals in 2017 from 83 deals logged in 2016.
Forty-three countries had Digital Health VC funding deals in 2017 compared to 34 in 2016. Also, there were 203 M&A transactions during the year, similar to the 205 transactions in 2016. Plus, 13 companies have participated in multiple transactions in 2017, and 4 public companies were acquired or merged in 2017.
Data Analytics companies were involved in the most M&A transactions in 2017 with 21 deals, followed by Practice Management Solution companies with 19 transactions, mHealth App companies with 17, and Telemedicine companies with 16 transactions.
The top five disclosed M&A transactions in 2017 included: Internet Brands’ acquisition of WebMD for $2.8 billion, Optum’s $1.3 billion acquisition of the Advisory Board Company, McKesson’s acquisition of CoverMyMeds for $1.1 billion, Konica Minolta’s acquisition of Ambry Genetics Corporation for $1 billion, and Navicure’s acquisition of ZirMed for ~$750 million.
No IPOs were announced in 2017 whereas there were four IPOs that raised a combined $234 million in 2016.