Dive Brief:

• Healthcare equity funding smashed previous records in the first quarter of this year, hitting an all-time global high of $31.6 billion, according to a new report from CB Insights.
• Funding in the digital health sector specifically, which has seen unprecedented investor interest during COVID-19, also hit a new high of $9 billion, according to the report released Tuesday.
• Not all segments set records: Medical device companies raised $4.6 billion in the first quarter, down 23% from a peak in the fourth quarter last year, while the number of deals declined by almost 11%. Digital pathology, point of care testing and robotics firms were among those funded.

Dive Insight:

Despite the pandemic's deleterious public health and economic effects, COVID-19 has been a major catalyst for funding in the healthcare space. Global healthcare investment hit a record high last year with $80.6 billion in equity funding across more than 5,500 deals, according to previous CB Insights research.

A pivotal question now is how much investor interest will remain as the pandemic abates. As coronavirus vaccines roll out in the U.S., tamping down on new COVID-19 cases in some areas, industry is now shifting to look to the long-term effects, especially around digital health and the role of telemedicine in care delivery, experts say.

But worries about winnowing funding are unlikely to come to fruition anytime soon, if the first quarter is any indication.

In the first three months of 2021, global health funding smashed records for both funding amounts and number of deals. Overall, the deal count grew by 9% to more than 1,500 deals in the first quarter, the second-highest total in the past 12 financial periods, CB Insights found.

Telehealth companies raised a record $4.2 billion across 32 countries, the most ever recorded. Deal count increased by 10% sequentially at 139 overall, but didn't surpass a record set in the third quarter last year. Healthcare artificial intelligence players also set a new record, raising about $2.5 billion, with back-office automation and pharmaceutical R&D applications attracting major funding.

Data analytics and health services also remain key priorities, especially among incumbent payers and providers, the report noted, pointing at UnitedHealth Group's proposed $13 billion acquisition of analytics firm Change Healthcare and Cigna's snap-up of telehealth provider MDLive.

Previously niche spaces like mental and women's health saw particularly acute growth in the first quarter. Funding in the mental health sector jumped 54% sequentially to $852 million, buoyed by a number of megarounds of $100 million or more raised by late-stage mental health and wellness benefits platforms in the employer market.  

Similarly, funding for women's health companies almost doubled compared to the prior quarter, jumping to $964 million.

The health IT sector also saw growth, with funding up slightly sequentially to $1.8 billion — almost double the volume a year ago — illustrating increased investment in IT software from providers, especially in the health data, billing and social determinants of health arenas.

However, not all sectors saw rising cash levels.

Amid the decline in quarterly deal count and totals for devicemakers, robotics did lure early stage funding. Hong Kong-based Cornerstone Robotics, which focuses on rehab and surgery, raised $17 million, while U.S.-based Harmonic Robotics, which focuses on upper extremities, raised $7.4 million, the report noted.

Digital pathology company Paige raised $100 million while AI cancer diagnostics firm Ibex Medical took in $38 million. SeaSpine Holdings' snap-up of 7D Surgical, which sells an image surgical system for use in spine and cranial surgeries, for $110M was another notable deal.

Also in the first quarter, a number of healthcare companies underwent traditional IPOs, or went public via the increasingly popular route of merging with a special purpose acquisition company.

A number of consumer-focused digital health companies entered the markets via a SPAC, including telebehavioral health provider Talkspace in January; genomics giant 23andMe, virtual health platform ShareCare and health monitor developer Owlet in February; and medical transport company DocGo in March.

Funding in North America and Europe increased compared to the fourth quarter of last year, with North America's total spurred by double the number of megarounds than the previous quarter. Bucking the trend, funding in Asia actually declined slightly compared to the fourth quarter of last year, dropping 12% to $7.6 billion.

Overall, the quarter boasted a record 96 megarounds, including a $535 million funding round for Denmark-based Leo Pharma, a developer of medical dermatology products; a $525 million funding round for cell and gene therapy company ElevateBio; and $500 million apiece for Ro and biotech startup EQRx.