In 2019, the U.S. digital health care sector recorded, according to Rock Health, investments of $7.5 billion, slightly less than the 2018 record of $8.1 billion.
Babylon Health, from the United Kingdom, was the company that received the largest investment in 2019, over $500 million. Next came Ginkgo Bioworks, a bioengineering company that designs microbes, which received $300 million. The launch of the Capsule digital pharmacy raised $200 million.
Geoffrey Starr, partner of VC digital health specialists, Cooley, told delegates at the CES Digital Health Summit in Las Vegas on January 7 that the market for investment in digital health has grown phenomenally.
“There are now 18 digital health unicorns (start-ups worth more than a billion dollars) in the United States, and they have significantly increased the IPO (IPO) and M&A (mergers and acquisitions),” Starr said.
“One-third of all U.S. health investments now goes into digital health technology,” he added. “In 2012, only a handful of companies raised $50 million or more. By 2019, they had exploded, and many were acquired, or had cash injections.”
“We are also seeing an increase in the average value of operations, around $20 million; we are seeing very broad financing cycles and investors are participating more at all stages to climb rapidly”.
After a period when, in particular, few companies in the digital health sector were able to participate in IPOs, there were nine IPOs in the digital health sector in 2019, which gave companies access to capital markets and provided some investors with exits.
The nine IPOs were:
- Change healthcare – a business transaction specialist
- Phreesia – self-service platform for patient acceptance
- Livongo – digital health management
- 10x genomics – specialist in biotechnological research on gene sequencing
- Freenome – startup for the genetic diagnosis of cancer through AI
- Peleton – fitness bike company for social fitness
- Healthcatalyst – provider of data analysis technology
- Progyny – fertility specialist
- Smile – correspondence orthodontic devices.
Digital therapies are another key area that will grow in the coming years. Livongo, with $408.5 million, was the largest IPO of 2019.
IPOs continue in these early days of 2020. One Medical, a chain of primary care clinics based on a “technology-based model” and which raised funds from Google Parent Alphabet, has just applied to the Nasdaq, an American stock exchange.
In 2019 there were over 100 M&A transactions. The biggest of these was the acquisition of Fitbit by Google for $2 billion.
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