At Fenwick’s recent Digital Health Investor Summit, Bill Evans—CEO and managing director of Rock Health—noted to attendees that private investment in digital health showed signs of leveling off in the third quarter of 2019. As of November 8, 2019, the year-to-date total through the third quarter is $5.5 billion, putting the sector on track to raise $7.3 billion this year, slightly below 2018’s high watermark of $8.3 billion. He also noted that megadeals, those valued at $100 million or more, continue to drive the topline and are clustered in the later stage.

Half of the 10 largest deals in the third quarter were valued at $100 million or more. The quarter’s largest deal clocked in at an impressive $550 million, and all but two of the deals were classified as late stage, according to our analysis of PitchBook data.

The largest deals also reflect the key digital health trends that Evans outlined at the summit, including the growth of behavioral health, women’s health and direct-to-consumer prescription services.

Megadeals of Q3 2019

The largest funding round of the third quarter was Babylon Health’s $550 million Series C financing. The London-based company is the developer of AI-based applications that connect users to medical advice, physician appointments and prescriptions. Investors in the C round included Kinnevik, Munich Re Ventures, Saudi Arabia’s Public Investment Fund and Vostok New Ventures.

Capsule, an online pharmacy currently operating in New York, took in a Series C round valued at $200 million. TVC was the lead investor in the round that also included Glade Brook Capital Partners and Thrive Capital.

Sema4 is a health information company that aims to improve the diagnosis, treatment and prevention of disease through deep data analysis. The company’s Series B round, which according to Pitchbook was for $127 million and included investors such as Blackstone Valley Group, Connecticut Innovations, Decheng Capital, Oak HC/FT and Section 32.

Beta Bionics, the developer of an automated bionic pancreas, commanded two $63 million rounds this year—a Series B in January and Series B2 in July—bringing the total Series B funding to $126 million.

Calm, a leading app for meditation and sleep, received $27 million from Lightspeed Venture Partners and other investors in additional Series B funding, according to an announcement by Lightspeed partner Nicole Quinn.

Rounding out the quarter’s megadeals is a Series B round for $100 million that went to VillageMD, a provider of healthcare management services targeting primary care providers. Kinnevik led the round and Adams Street Partners, Oak HC/FT and Town Hall Ventures also participated in the round.

Other Top Deals of Q3 2019

GOQii, developer of an online fitness platform that offers virtual fitness coaching, received $60 million in a Series C round. Investors in the deal were not disclosed.

Tel Aviv-based Healthy.io received a $60 million Series C round led by Corner Ventures. The medtech startup is the developer of a mobile urinalysis application to help users perform home-based urine tests. Aleph, Ansonia Holdings Singapore, Joy Capital Ventures and Samsung NEXT Ventures also participated in the round.

Lenskart operates an online optical marketplace that offers prescription eyewear, branded contact lenses, sunglasses and accessories. The $55 million Series F round was provided by Kedaara Capital.

Nurx, the health tech company providing convenient and affordable care for sensitive health needs, took in a Series C round for $52 million led by Kleiner Perkins and Union Square Ventures. Other investors included Dreamers VC, Lowercase Capital, Reproductive Health Investors Alliance and Y Combinator, as well as TriplePoint Capital for equity and debt.

Cala Health received a Series C investment for $50 million. The company is the developer of neuromodulation therapies to treat chronic disease non-invasively through body-worn electronics. Action Potential Venture Capital, Baird Capital, dRx Capital, GV, Johnson & Johnson Innovation – JJDC, LifeSci Venture Partners, Lightstone Ventures, Lux Capital Management, Medical Technology Venture Partners, Novartis, StartUp Health and TriVentures all participated in the round.

More Digital Health IPOs

In our post on the second quarter of 2019, we highlighted the return of the digital health IPO and predicted the momentum would continue. The market didn’t disappoint. Through the end of the third quarter, five digital health companies have gone public this year. They include Livongo, a chronic disease management platform; Health Catalyst, a data analytics company; Phreesia, a patient intake platform; Change Healthcare, a healthtech company; and Peloton, the world’s largest interactive fitness platform.

Conclusion

Private investment in digital health is on pace to level off for the year after jumping more than 40 percent between 2017 and 2018. But big deals are still a big deal as investors shore up maturing companies – perhaps in anticipation of an IPO or acquisition.

Originally published November 25, 2019 on Fenwick's Life Sciences Legal Insights blog.

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