Private money, acquisitions rule Digital Healthcare sector

(Reuters)
As per the research firm Mercom Capital Group, the venture capital (VC) funding in the sector stood at $1.4 billion in the first quarter of 2016 as against $784 million in the same quarter of 2015.

Global venture capital (VC) funding in the Digital Healthcare or Healthcare IT sector has seen a sharp 74% jump in the first quarter (January-March) of 2016 as against the same period of last year. The mergers and acquisitions (M&A) activity in the sector, too, saw a record number of transactions.

According to Mercom Capital Group, the VC funding in the sector stood at $1.4 billion (Rs 9,314 crore) in the first quarter of 2016 as against $784 million (Rs 5,216 crore) in the same quarter of 2015.

The deals under review have ranged from 142, last year, to 146 in the current calendar. Mercom Capital said that companies dealing with ‘wearable sensors’ have received nearly $250 million (Rs 1,664 crore) VC funding in Q1 of 2016 followed by data analytics at $200 million (Rs 1,331 crore).

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Top six venture capital (VC) deals in Q1 2016:

1. Flatiron Health- $175 million (nearly Rs 1,164.23 crore)

2. Jawbone- $165 million (nearly Rs 1,097.70 crore)

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3. Healthline Media (formerly YourDoctor.com)- $95 million (nearly Rs 632.01 crore)

4. Health Catalyst- $70 million (nearly Rs 465.7 crore)

5. InviCRO- $46 million (nearly Rs 306.03 crore)

6. Higi- $40 million (nearly Rs 266.11 crore)

Even on a quarter-on-quarter basis, i.e. from the fourth quarter of last year, the VC funding in Digital Healthcare sector has increased 27%, from $1.1 billion (nearly Rs 7,318 crore).

Under the ambit of Digital Healthcare, Mercom said that the companies that are ‘practice-focused’ companies; primarily into health information management, revenue cycle management, service providers and security, raised $569 million (nearly Rs 3,785.41 crore) in 49 deals during the first quarter of this year.

Among the ‘practice-focused’ companies, a majority of funding went to Health Information Management (HIM) companies with $529 million (nearly Rs 3,519.30 crore) in 40 deals, it noted.

The companies in ‘Service Providers’ vertical raised nearly $25 million (approximate Rs 166.32 crore) in three deals whereas ‘Revenue Cycle Management’ firms raised $10.4 million (approximate Rs 69.2 crore) in five deals.

Of all the ‘practice-focused’ technologies, the least funding went to ‘Security’ companies, raising $5 million (nearly Rs 33.3 crore) in one deal, cited Mercom.

Within ‘consumer-centric’ technologies companies, mainly dealing with social health, mobile health, telehealth, personal health, rating and shopping, raised $796 million (nearly Rs 5,295.6 crore) in 97 deals during the given three months.

Of the ‘consumer-focused’ technology, ‘Mobile Health’ category brought in the most funding with $407 million (nearly Rs 2,707.7 crore) in 55 deals, it said.

It was followed by funding in Telehealth companies with $191 million (nearly Rs 1,270.7 crore) in 21 deals. Personal Health companies brought in funding of $153 million (nearly Rs 1,017.9 crore) in 12 deals.


Mergers & Acquisitions (M&As)

"With 58 transactions, the first quarter (Q1) of 2016 had the highest number of M&A transactions recorded in a single quarter," Mercom noted.

Mercom said that 'practice-focused' companies dominated M&A activity during the quarter accounting for 36 of the total 58 transactions.

Health Information Management (HIM) firms recorded 25 M&A transactions in Q1 of 2016 while Revenue Cycle Management companies clocked seven transactions during the period.

The 'consumer-focused' companies have witnessed 22 M&A transactions whereas Mobile Health companies lead the category with 10 deals.


Top five Healthcare IT M&A transactions in Q1 2016

1. MedAssets acquired by Pamplona Capital Management for $2,750 million (nearly Rs 1,8295.1 crore)

2. Truven Health Analytics by IBM for $2,600 million (nearly Rs 17,297.2 crore)

3. Netsmart by Allscripts and GI Partners for $950 million (nearly Rs 6,320.11 crore)

4. Centrak by Halma for $140 million (nearly Rs 931.4 crore)

5. Medical Director by Affinity Equity Partners for $118.6 million (nearly Rs 789.1 crore)