Two trends stood out in our analysis of private digital health investments in the first quarter of 2018: bigger deals and more investment in companies targeting the regulated portion of the health care market.
As the digital health sector matures, Rock Health reports that investors seem more comfortable with larger and later-stage deals. The year 2018 kicked off with seven investments of $100 million or more (megadeals), three of which were valued at $200 million or more. And while investors once shied away from companies subject to regulation by the FDA or other agencies, increased regulatory guidance appears to be boosting confidence. The three largest deals—those for $200 million or more—were all made in the diagnostics arena. In all, of the top 10 investments for the quarter, half were clinical diagnostics.
Diagnostics: The Top Value Proposition
The largest megadeal of the quarter was a $240 million Series E investment in HeartFlow. This diagnostic firm has developed a technology that reduces the need for more invasive diagnostic procedures, such as angiograms, among cardiac patients. Baillie Gifford, Wellington Management and existing investors participated in the round.
Helix, developer of a consumer-facing human genome platform, took in a $200 million Series B round that included DFJ Growth, Illumina, Kleiner Perkins, Mayo Clinic Ventures, Sutter Hill Ventures and Warburg Pincus.
SomaLogic also received a $200 million investment in the first quarter. The company is the developer of a proteomic technology that can identify small protein changes that can provide early diagnosis of disease states. iCarbonX, Madryn Asset Management and Nan Fung Group participated in this private equity round.
Tempus is a precision medicine company that uses a machine learning health care data analytics platform to enable physicians to deliver personalized care to cancer patients. Kinship Trust Company, NEA, Revolution Growth and T. Rowe Price all participated in the Series D Round that raised $80 million and brought the Chicago company to unicorn status.
Genetron Health also develops precision medicine products targeting cancer patients that include risk assessment, early screening, molecular pathology diagnosis, medication guidance and prognosis monitoring. It received a Series C investment for $61 million. Shenshang Xingye Fund, V Star Capital and the Zhongjin Kangrui Medical Industrial Fund participated in the round.
Rounding out the megadeals for the quarter was Oscar. The online health insurance network received a late-stage investment for $165 million. 8VC, CapitalG, Fidelity Investments, Founders Fund, General Catalyst Partners, Khosla Ventures, Thrive Capital and Verily Life Sciences participated in the round.
PointClickCare, developer of Saas cloud-based Electronic Health Record software, took in a $146 million private equity investment from Dragoneer Investment Group.
And rounding out the $100-million-plus investment rounds for the first quarter was a Series D investment in Collective Health, provider of a cloud-based self-insurance platform. Founders Fund, GV, Maverick Ventures, Mubadala Development Company, NEA and Sun Life Financial participated in the $110 million round.
As the digital health industry matures, we should expect that large, late-stage investments will become more routine. And as investors and companies gain experience working with clinical, regulated applications, such deals should also become more common as well.
Originally posted on Fenwick's Life Sciences Legal Insights blog on May 1, 2018.