VC funding in healthcare IT surpasses $1.2 billion in Q2 2015

Cumulative global funding for ventures in digital health and healthcare information technology (HIT) surpassed the billion-dollar mark in the second quarter of 2015, according to Mercom Capital Group's latest market report.

The report covers mergers and acquisitions M&A and takes into account deals of all sizes, including private equity and corporate venture capital raised by digital healthcare start-ups and companies across the globe.

VC funding in the digital health sector witnessed an impressive 53 per cent increase in the second quarter of 2015 over the first, with 138 deals netting $US1.2 billion, compared to $784 million raised through 142 deals in the previous quarter.

Debt and public market financing in the digital health sector has increased to $1.6 billion, with capital being raised in eight big market deals, including four IPOs, taking the aggregated corporate funding in health IT to $2.8 billion in Q2 2015.

Mercom Capital Group CEO Raj Prabhu said more money had flowed through IPOs than venture capital in this quarter, which he said was an encouraging sign as it opens up a new avenue for raising funding and an exit path for investors.

"However, out of the 14 IPOs since 2012, six IPOs have decreased in valuation," Mr Prabhu said.

From a year-on-year perspective, VC funding for digital health almost reached the $2 billion mark in the first half of 2015, compared to $2.6 billion raised during the same period in 2014.

The report shows there has been a sharp increase in funds raised by both patient-centric companies and consumer-centric companies, with patient-centric companies raising $473 million in 41 deals compared to $347 million in 44 deals in Q1 2015 and consumer-centric companies raising $724 million in 97 deals compared to $437 million in 98 deals in Q1 2015.

The areas that received the highest investment include mobile health companies ($214 million), followed by clinical decision systems ($206 million), personal health/wellness companies ($209 million), telehealth companies ($152 million), data analytics firms ($91 million), and electronic health record companies ($26 million).

A total of 271 investors including two accelerators/incubators participated in healthcare IT deals this year, with the highest number of funding deals closed by Venrock, followed by 500 Startups, Cambia Health Solutions, Qualcomm Ventures, Khosla Ventures, Rock Health, Slow Ventures and Tencent Holdings.

Globally, US companies raised more than $1 billion in 111 deals, with other transactions spanning across European nations like Finland, Germany, Netherlands and Asian countries like China, India and Singapore.

As far as mergers and acquisitions are concerned, there were 53 M&A transactions (eight disclosed) in the health IT sector in the following quarter, compared to 56 transactions (14 disclosed) in Q1 2015. Practice-focused companies accounted for 43 of the total M&A transactions with, while consumer-centric companies had 10 transactions.

Out of the top five M&A transactions in Q2 2015, four US-based companies bagged a net total of $698.5 million, with acquisition of Virtual Radiologic Corporation (vRad), a provider of teleradiology and telemedicine services being the largest disclosed M&A transaction at $500 million.

Australian firm PJA Solutions, which specialises in laboratory information systems, was the only Australian company to make it to the top five following its $45 million acquisition by the Citadel group.

Posted in Asia Pacific Health IT

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