Last September, we noted that payers and providers were expected to become increasingly active digital health strategic investors given their challenges to improve margins and outcomes.
While there were only three investments by payer/providers in the second half of 2016, we saw a notable uptick in investment activity in the first quarter of 2017, when 10 such deals closed. The Q1 2017 total also surpassed Q1 2016 which saw seven payer/provider deals, according to our analysis of PitchBook data. Of the ten investment rounds in early 2017, payers and providers served as the lead investor in about half of the deals. Only three of these investment rounds, however, exceeded $10 million.
As might be expected, most of the investments were in platform or productivity software plays, part of a long-term trend in digital health investing underscoring the strategic need for payers and providers to improve efficiency. The exceptions include BlueCross BlueShield Venture Partners’ investment in Hygieia, a diabetes insulin guidance system that includes a device and software component. The other was Mayo Clinic Ventures’ investment in AliveCor, the smartphone-based EKG maker.
Notable investors, according to PitchBook, include:
BlueCross BlueShield Venture Partners
- Led a Series B round for higi, a cloud-based, HIPAA-compliant software platform that collects health care data across devices. The size of the round was not disclosed.
- Participated in a $9 million Series A round for Solera, a provider of a SaaS platform that supports a national network of community organizations and digital providers of chronic disease prevention programs. Other investors in the round included Sandbox Industries and SJF Ventures.
- Led a late stage investment for an undisclosed amount in Hygieia through Blue Cross Blue Shield of Michigan. Hygieia provides diabetes insulin guidance through a combination of a glucose meter, cloud-based technology and a team of health care professionals.
Mayo Clinic Ventures
- Led a $30 million Series D round with strategic investor Omron Healthcare in smartphone EKG company AliveCor.
- Participated in a $13.81 million Series A investment in Vitruvian Networks, a developer of software for scaling and digital services for cell and gene therapies. Other investors in the round included Draper Fisher Jurvetson and GE Ventures.
- Participated in an $8 million Series B investment with Chengwei Capital for Sensely, a developer of a virtual nurse patient engagement platform. Other investors included Augsburg Investment, Bioved Ventures, CG Health Ventures, Fenox Venture Capital and Stanford StartX.
Kaiser Permanente Ventures
- Participated in a $7 million late-stage investment in Ingenious Med, a developer of a cloud-based practice performance management platform. Ascension Ventures, Heritage Group and North Bridge Growth Equity also participated in the investment round.
Mercy Health Foundation
- Sole sourced a $10 million Series C investment in Kyruus, a platform provider to help match patients and health care providers.
Tufts Associated Health Plans
- Participated in a $4.9 million Series A round for ConsejoSano, a Spanish language health care platform. The round was led by 7wire Ventures and included Acumen Fund, Impact Engine, Oxeon Partners, TOTAL Impact Capital and Wanxiang Healthcare Investments.
University of Pennsylvania Health System
- Participated in a $1 million Seed Round for Keriton, provider of breast milk management and analytics software for neonatal intensive care units. The lead investor in the round was BioAdvance, and other investors included 37 Angels, AmeriHealth, Ben Franklin Technology Partners of Southeastern Pennsylvania, Dorm Room Fund, Dreamit Ventures, Steve Barsh, and Wharton School of the University of Pennsylvania Endowment.
In March, Grand Rapids-based Spectrum Health announced the launch of a new $100 million fund, Spectrum Health Ventures. Notably though, no new investments were generated in Q1 2017 by some of the most prolific payer/provider investors of 2016, including the University of Pittsburgh Medical Center, Partners HealthCare Innovation or Intermountain Healthcare.
As a result of this increased Q1 activity, we are likely to see more, not less, investment activity from payer and provider strategic investors in the months to come.
Originally published on Fenwick's Life Sciences Legal Insights blog on June 1, 2017.