Dive Brief:
- Following a blockbuster 2018, investment in digital health startups leveled during the first quarter to $986 million across 61 deals backed by payers and providers as well as tech and biopharma companies, according to a report this week from digital health venture fund Rock Health. Those figures represent about half as much was raised by this time last year, but are roughly in line with benchmarks from the first quarter of 2017.
- While investor action may have cooled, a handful of digital health IPOs may be in the works for 2019, which researchers note could end a dry spell for digital health startups that hasn't been broken since cardiac monitoring company iRhythm went public in late 2016.
- M&A within digital health was also a little slow in the first quarter, researchers noted, with 21 acquisitions compared to quarterly averages of 31 in recent years, with a skew toward behavioral health consolidations led by digital health companies.
Dive Insight:
The first batch of funding data from 2019 seems to align with Rock Health researcher Megan Zweig's recent assertion at HIMSS: While digital health isn't necessarily in a bubble, the $8.1 billion poured into the space in 2018 may have marked the peak of its investment cycle.
"Excluding the sharp influx of dollars in mid-2018 during digital health’s hottest summer, quarterly funding has averaged $1.4B over the past two years (Q1 2017-Q1 2019)," Rock Health researchers wrote. "This puts the $986M invested in this past quarter somewhat below recent trends."
Still, the quarter saw other milestones, like two startups hitting billion-dollar valuations: meditation app Calm as well as analytics platform provider Health Catalyst, which aims to help hospitals link siloed databases.
Health Catalyst is among the handful of digital health companies that appear to have engaged J.P. Morgan, Goldman Sachs and others in planning a 2019 IPO. McKesson-owned health IT arm Change Healthcare and chronic disease management platform Livongo are also rumored to be pursuing IPOs.
Livongo also serves as a prime example of rising interest among digital health companies in growing out behavioral health competencies, having acquired digital cognitive behavioral therapy (CBT) provider myStrength in January. Similarly, virtual behavioral healthcare platform AbleTo picked up anxiety and depression CBT tools provider Joyable last month.
"The MyStrength acquisition is Livongo's third in 18 months and representative of a trend we expect to continue — a rolling up of multiple offerings into broader solutions that benefit from a shared, platform-driven commercial channel," the researchers wrote. "This is particularly true as payers and employers look for a simplified buying process among a sea of standalone offerings."
