Mercom Report: Q3 2018 Global Digital Health VC Funding Hits Record $3.1 Billion

Mercom Capital Group recently released its report on global digital health financing and investment for the third quarter of 2018 (with data as of September 30, 2018). The report covers consumer-centric and patient-centric technologies and sub-technologies, including social health, mobile health (mHealth), telemedicine, personal health, ratings and shopping, health information management, revenue cycle management, service providers, and security. VCBeat (WeChat ID: vcbeat) promptly compiled the key highlights of the report.

Mercom’s report indicates that as of September 2018, global venture capital (VC) investment in digital health reached a record high of 556 deals totaling $8 billion. This figure surpassed the full-year 2017 total of $7.2 billion and represented a 46% year-on-year increase compared to the 586 deals worth $5.5 billion recorded through September 2017. In the third quarter of 2018, global digital health VC financing transactions totaled 173 deals amounting to $3.1 billion, setting a new quarterly record. Although this marked a slight decline in deal volume from the 196 transactions recorded in the second quarter of 2018, which totaled $2.4 billion, the average deal size increased.

Since 2010, digital health companies have completed 4,006 venture capital financing deals totaling approximately $34 billion. Total corporate funding (including venture capital, debt financing, and public market financing) reached $3.5 billion in the third quarter of 2018, a decrease of $900 million from $4.4 billion in the second quarter of 2018. Other key highlights from Mercom’s report include:

1. In the third quarter of 2018, clinic-centric healthcare companies closed 62 deals and raised a total of $1.3 billion in financing, accounting for 40% of the total venture capital financing in Q3 2018. In contrast, there were 58 deals with a total transaction value of $702 million in the second quarter of 2018. Consumer-centric healthcare companies completed 111 transactions and raised $1.9 billion in the first quarter of 2018, while the number of financing transactions reached 138 with a total amount of $1.7 billion in the second quarter of 2018.

2. The sectors with the most financing transactions in 2018 and their respective funding amounts were as follows: Data Analytics, $1.8 billion; Telemedicine, $1.1 billion; Mobile Health Software (mHealth App), $1.0 billion; Mobile Wireless, $728 million; Clinical Decision Support, $655 million; Wearable Devices, $457 million; and Wellness, $318 million.

3. The sectors with the highest financing in the third quarter of 2018 and their respective funding amounts were as follows: Data Analytics, $889 million; Mobile Health Software (mHealth App), $504 million; Mobile Wireless, $456 million; Telemedicine, $374 million; Wearable Devices, $149 million; Social Health Networks, $148 million; and Health, $117 million.

4. Companies with the highest single venture capital transaction amounts include: 23andMe ($300 million), American Well ($291 million), Butterfly Health Network ($250 million), Heartflow ($240 million), Helix ($200 million), and SomaLogic ($200 million).

5. There were 1,132 investors in digital health in 2018.

6. There were 172 digital health M&A transactions in 2018, compared with 146 in 2017. Among them, there were 56 M&A transactions in the third quarter of 2018 (9 deals were not publicly disclosed), a decrease of 12 from the 68 M&A transactions in the second quarter (including 13 undisclosed deals).

7. The largest single M&A transactions by value include: Platinum Equity’s acquisition of LifeScan for $2.1 billion, Roche’s acquisition of Flatiron Health for $1.9 billion, Inovalon’s acquisition of ABILITY Network for $1.2 billion, Veritas Capital’s acquisition of GE’s Healthcare IT division for $1 billion, and Best Buy’s acquisition of GreatCall for $800 million.

Raj Prabhu, CEO of Mercom Capital Group, stated, “This is the first time we have seen digital health raise more than $3 billion in funding in a single quarter. To date, total financing in the digital health sector in 2018 has already surpassed the full-year total for 2017 ($7.2 billion) and is on track to reach $10 billion. These record-breaking investments are driving further development across the digital health landscape—from research grants to market access for major technology and healthcare companies (including numerous intellectual property filings and FDA approvals)—demonstrating the immense and unstoppable potential of the digital health industry.”

Compared with data released by globally renowned digital health platforms StartUp Health, Rock Health, and Mercom, VCBeat covers a broader range of global digital health investment and financing events, providing more comprehensive statistics. The former three offer incomplete coverage of Chinese companies, whereas VCBeat’s statistical scope encompasses the entire global digital health sector.

Comparison of VCBeat’s Statistics with Those from StartUp Health, Rock Health, and Mercom