Digital health funding shatters records with $6.3B in 1st half of 2020

Dive Brief:

  • Digital health received $6.3 billion in funding in the first half of 2020, shattering all previous funding records, according to a new report from research firm Mercom Capital Group. The amount is a 24% increase from the first half of 2019.
  • Telehealth, perhaps unsurprisingly, received the most money as the COVID-19 pandemic drove unprecedented virtual care adoption, with $1.7 billion in funds.
  • However, the pace of funding slowed in the second quarter with $2.8 billion across 161 deals, a 23% decrease compared to the first quarter and an 11% dip year over year.

Dive Insight:

Digital health is one of the few industries that’s actually benefited from the novel coronavirus, which largely ground the economy to a halt earlier this year. Though investors and analysts initially worried the pandemic would lower access to capital in the sector amid roiling financial markets, some are now expecting 2020 to set records for number of deals, deal size and overall funding as regulatory and reimbursement barriers to digital health fall.

The first half of the year already did, reports now show, though analysts warn rising COVID-19 cases in the U.S. don’t bode well for the country’s economic recovery, and could have negative effects on the trend.

Digital health companies have now raised $50 billion in venture funding over more than 5,000 deals over the past decade, according to Mercom.

Rebecca Pifer/Healthcare Dive, data from Mercom Capital Group

“Seen as a solution to many of the health challenges resulting from the COVID-19 pandemic, several digital health technologies and services have gone mainstream. Investors have noticed the potential, and Telehealth has been the biggest beneficiary,” Mercom CEO Raj Prabhu said in a statement on the data.

The slowing momentum in March and April didn’t affect telehealth, an industry that’s seen unprecedented growth as patients turn to digital solutions for their healthcare needs to avoid potential virus transmission in hospitals and doctor’s offices.

There’s a lot of room for growth. According to McKinsey, up to $250 billion of healthcare spend could be digitized — roughly a fifth of all estimated Medicare, Medicaid and commercial outpatient, office and home health spending for 2020. In comparison, the sum annual revenues of all U.S. telehealth businesses were estimated at $3 billion before the pandemic.

And investors are taking notice: Virtual care companies received $962 million across 50 deals in the second quarter, compared to $930 million raised in 35 deals in the first. That’s a 42% year-over-year increase, Mercom found.

Telehealth company Amwell, which is reportedly exploring an IPO for later this year, had the third-largest funding round in the first half of the year with $194 million in a Series C round, bringing its total funding to $711 million.

Other top recipients include Swedish telehealth player KRY, which raised $155 million, and real-world evidence for precision oncology company Concerto HealthAI, which raised $150 million.

There were 83 mergers and acquisitions among digital health companies in the first half of the year, compared to 91 in the first half of last year. Mobile health apps were involved in the most deals with 10 transactions, followed by data analytics and practice management tools with nine each. In the biggest deal, medical genetics company Invitae purchased genomics analysis company Archer for $1.4 billion.

Telehealth players only had eight transactions, which included New York-based vendor Teladoc buying provider telehealth business InTouch Health for $600 million. That deal closed earlier this month.

A record 921 investors participated in the first half of the year, the largest number since 2010. More than half (488) participated in deals in the second quarter, led by Optum Ventures, a venture fund launched by healthcare behemoth UnitedHealth Group in 2017.

Leave a Reply

Your email address will not be published. Required fields are marked *