VC Funding In Healthcare IT Comes In At $1.2B In Q2 2015, Reports Mercom Capital Group

Capital raised through IPOs outpaces VC funding

Mercom Capital Group, llc, a global communications and research firm, released its report on funding and mergers and acquisitions (M&A) activity for the Healthcare Information Technology (IT) Digital Health sector for the second quarter of 2015. Mercom’s comprehensive report covers deals of all sizes across the globe.

Healthcare IT VC Funding Q2 2014 - Q2 2015

Venture capital (VC) funding, including private equity and corporate venture capital, in the Health IT / Digital Health sector increased 53 percent QoQ, coming in at $1.2B in 138 deals compared to $784M in 142 deals in Q1 2015, but was down nearly 30 percent compared to the same quarter of last year. Debt and public market financing in the sector rose to $1.6B in eight deals including four IPOs, bringing the total corporate funding raised in the sector for Q2 2015 to $2.8B.

VC funding has reached almost $2B in the first half of 2015 compared to $2.6B during the same period in 2014.

“In the Healthcare IT sector, companies raised more money through IPOs than venture capital this quarter,” commented Raj Prabhu, CEO and Co-Founder of Mercom Capital Group. “Growth in public market financing is an encouraging sign for companies in this sector as it opens up another avenue for funding and an exit path for investors. That said, out of 14 IPOs since 2012, six have decreased in value over their IPO price as of the end of last quarter.

Healthcare practice-centric companies raised $473M in 41 deals compared to $347M in 44 deals in Q1 2015. The areas that received the most funding under this category were Clinical Decision Support companies with $206M, followed by Data Analytics companies with $91M, Electronic Health Record (EHR) companies with $26M and Practice Management Solutions companies with $20M.

Consumer-centric companies raised $724M in 97 deals this quarter compared to $437M in 98 deals in Q1 2015. Mobile Health companies brought in $214M in 37 deals compared to $282M in 56 deals last quarter, with mHealth Apps receiving $106M, compared to the $220M raised in Q1 2015. Personal Health/Wellness companies raised $209M in 20 deals followed by Telehealth companies which raised $152M in 18 deals. Rating & Comparison Shopping companies raised $149M in 20 deals.

“This quarter Telehealth, Personal Health/Wellness, and Rating and Comparison Shopping companies all had their best fundraising quarter, while funding into Mobile Health and Apps dropped,” further commented Prabhu.

There were 39 early-stage deals under $2M, including six accelerator/incubator deals. Accelerator deals have continued to slow down over the last three quarters.

Top VC funding deals in Q1 2015 were the $200M raised by NantHealth, a cloud-based healthcare IT company delivering care through a single integrated clinical platform; the $92M raised by Virgin Pulse, a developer of an online employee wellness and engagement platform; the $50M each secured by Doctor on Demand, a telemedicine platform that enables video consultation with a licensed U.S. physician via mobile apps, and MDLIVE, a provider of virtual telehealth consultations with U.S. board-certified physicians and licensed therapists through a HIPAA-compliant cloud-based platform.

Healthcare IT Top VC Deals in Q2 2015

A total of 271 including two accelerators/incubators participated in Healthcare IT deals this quarter, 29 of which participated in multiple rounds. The investors with the highest number of funding deals this quarter included Venrock with five, followed by 500 Startups, Cambia Health Solutions, Khosla Ventures, Qualcomm Ventures, Rock Health, Slow Ventures and Tencent Holdings with three each.

Globally, U.S. companies raised greater than $1B in 111 deals. Fourteen other countries: Canada, Chile, China, Finland, Germany, India, Indonesia, Israel, the Netherlands, Poland, Singapore, Sweden, Switzerland and the UK recorded deals this quarter. In the United States, 37 deals came out of California, followed by New York which recorded 13 deals, Massachusetts with 11 deals and Florida with six deals.

Announced debt and public market financing in Health IT rose to $1.6B in eight deals this quarter compared to $975M in seven deals in Q1 2015. There were four IPOs which together accounted for $1.4B. There were a number of large IPOs in the second quarter, led by wearable device maker Fitbit’s $841.2M offering; Press Ganey Associates, a provider of patient satisfaction surveys and advisory services to health care providers, raised $256M; Evolent Health, a population health management company, raised $225M and MINDBODY, a provider of scheduling and business management software for health and wellness companies, raised $100.1M.

There were 53 M&A transactions (eight disclosed) in the Health IT sector this quarter compared to 56 transactions (14 disclosed) in Q1 2015. Practice-focused companies accounted for the greatest number of M&A transactions with 43 of the 53, while consumer-centric companies had 10 transactions. Twenty-seven HIM companies were acquired this quarter followed by nine Service Providers, six Revenue Cycle Management companies and four Telehealth companies.

The largest disclosed M&A transaction was the $500M acquisition of Virtual Radiologic Corporation (vRad), a provider of teleradiology and telemedicine services, by MEDNAX. This was followed by the $140M acquisition of Acclaris, a provider of SaaS-based technology and services for consumer-driven health care and reimbursement accounts, by Towers Watson.

Top 5 Disclosed Healthcare IT M&A Transactions in Q2 2015

The Citadel Group acquired PJA Solutions, a provider of laboratory information systems software products for diagnostic laboratories and clinical applications in public hospitals and related sectors, for $45M. Teladoc acquired Stat Health Services, a provider of telemedicine services for non-emergency health conditions, for $30.5M and Arcadia Healthcare Solutions acquired Sage Technologies, a provider of management and analytics software for managed-care businesses and accountable care organizations, for $28M.

There were a total of 516 companies and investors covered in this comprehensive report.

To learn more about the report, visit: http://store.mercom.mercomcapital.com/product/q2-2015-healthcare-it-digital-health-funding-and-ma-report/

About Mercom Capital Group
Mercom Capital Group, llc, is a global communications and consulting firm focused on healthcare information technology (HIT), cleantech and financial communications. Mercom delivers highly respected industry market intelligence reports covering Health IT/Digital Health, Solar Energy, Wind Energy and Smart Grid. Our reports provide timely industry happenings and ahead-of-the-curve analysis specifically for C-level decision making. Mercom’s consulting division advises companies on new market entry, custom market intelligence and overall strategic decision-making. Mercom’s communications division helps companies and financial institutions build powerful relationships with media, analysts, government decision-makers, local communities and strategic partners. For more information, visit http://www.mercomcapital.com.