Fenwick’s eighth annual Digital Health Investor Summit took place against the backdrop of strong and increasingly diverse investment markets, a focus on clinical validation of digital health tools, and a healthcare system that is shifting to prioritize wellness and disease prevention rather than treating diseases only after they have developed.

Speakers included Rock Health’s Bill Evans and Goldman Sachs’s Peter van der Goes, who shared the digital health investment outlook for 2020, and Rock Health’s Megan Zweig, who discussed developments in digital health therapeutics with Antoun Nabhan of Pear Therapeutics and Jenna Carl of Big Health. My colleague Dawn Belt moderated a panel on wellness and remote patient monitoring with TRIPP’s Nanea Reeves and Forward’s Adrian Aoun. To finish the day, Fenwick’s Ian Goldstein chatted with Bill Taranto about startup enterprise partnerships in the digital health space.

Mega-Rounds Drive Topline Total

Bill Evans, CEO and managing director of Rock Health, kicked off the summit by presenting hot-off-the-presses data on private digital health investment over the third quarter. He reported that investment in the third quarter totaled $1.3 billion, bringing the year-to-date total to $5.4 billion. That puts the sector on pace to bring in about $7.5 billion in 2019, which is just below last year’s record-setting total of $8.1 billion, but still well ahead of 2016 and 2017.

Evans noted that mega-rounds were still the norm through the third quarter, and those deals continue to drive the topline total. The average deal size so far in 2019 has been $20.9 million, down only slightly from $21.7 million in 2018.

Nine companies have closed deals valued at more than $100 million so far in 2019, including three for $200 million or more and one for $300 million (a growth round for Gympass, an employee fitness platform).

Evans reported that through the end of the third quarter in 2019, 262 digital health companies raised more than $2 million.

Digital Health Funding 2011- H1 2019

IPOs Make a Comeback

On the public side, Goldman Sachs’ Peter van der Goes highlighted the triumphant return of the digital health IPO. After a public offering drought over the last two years, 2019 has already seen four digital health IPOs—a large number for the industry—and van der Goes anticipates a few more will be made by the end of the year due to high market demand.

Evans and van der Goes both underscored the difference between the digital health and tech sectors. As van der Goes put it, four IPOs is good, but small when compared to tech, which had 24 in the same period. But Evans noted that investors are coming to understand that digital health companies have a longer incubation period compared to pure tech companies. A more educated investor base will make it easier for digital health companies to access capital through either public or private markets.

According to van der Goes, the diversity of the companies that have gone public this year signals that investors are pursuing strong companies rather than chasing trending technologies. The class of 2019 includes: Health Catalyst (a data analytics company), Change Healthcare (a healthcare technology company), Livongo (a chronic disease management platform) and Phreesia (a patient intake platform). He noted that these companies also vary significantly in terms of revenues, revenue growth, profitability and ownership.

Van der Goes also noted that there has been some volatility in the performance of the latest crop of IPOs, owing to macro market conditions. Nevertheless, van der Goes does not expect the post-IPO performance of these companies to put any downward pressure on demand.

On the M&A side, van der Goes reported a robust year, with the value of M&A activity in 2019 totaling $25.6 billion so far. That compares favorably to an average of $16.5 billion a year from 2015 through 2018. The number of deals (valued at more than $1 billion) also increased significantly to nine in 2019 from an average of five from 2015 through 2018.

Van der Goes also noted that strategic acquirers in the digital health space have come from diverse sectors including not only healthcare services and pharmaceuticals, but also industrial conglomerates and financial technology. He also highlighted the role that private equity capital is playing in digital health M&A and the diversity of these deals, which include classic acquisitions, minority investments and scale/growth equity.

Industry Trends to Watch

Digital Therapeutics

In his presentation, Rock Health’s Evans reported that behavioral health has eclipsed cardiovascular and oncology to rank as the top-funded clinical indication in the first half of 2019. So, it was fitting that our first fireside chat focused on two behavioral health companies. Rock Health’s Megan Zweig talked with Pear Therapeutics’ Antoun Nabhan and Big Health’s Jenna Carl about trends in digital therapeutics.

Nabhan and Carl explained that there is no one-size-fits-all market pathway for digital therapeutics companies. Pear Therapeutics—which discovers, develops and delivers software-based therapeutics—goes to market through the traditional channel of driving prescriptions through physicians. Meanwhile, Big Health, developer of the Sleepio app, markets to large employers who want to increase the productivity and well-being of their employees.

How did the two companies choose their respective approaches to the market? Carl said Big Health’s largest customer is a self-funded employer health plan, so it was a natural fit for the digital therapeutics company to continue to work through employers and avoid dealing with a fragmented health insurance market in the U.S.

On the other hand, Nabhan, who had previously worked in the medical technology sector, said he feels working with physicians provides companies like Pear Therapeutics with a well-defined pathway to patients and payers.

Regardless of market strategy, both Nabhan and Carl agree that clinical data validation is critical to the success of any digital therapeutic. As Nabhan put it, clinical evidence has been crucial in “getting over the hype cycle.” Both agree that clinical data validation will become more important in the coming years.

Wellness and Remote Patient Monitoring

Fenwick’s Dawn Belt moderated a session on wellness and remote patient monitoring with guest panelists Nanea Reeves of TRIPP and Adrian Aoun of Forward.

Reeves and Aoun anticipate remote monitoring will play a key role in changing the way we look at healthcare by encouraging providers and patients to focus on wellness and prevention rather than curative medicine. For example, Aoun says, access to “tons of data” generated on each patient through monitoring will allow providers to better manage patients with chronic conditions or provide an early-warning system for patients with health risks.

Reeves noted that wellness and remote patient monitoring tools are being adapted by the biohacker community, which she thinks is a natural fit. In 20 years, biohacking will be “medicine,” as remote patient monitoring and an emphasis on wellness will be at the center of healthcare services, Reeves said.

A Startup-Enterprise Partnership Case Study

To finish off the day, Fenwick’s Ian Goldstein chatted with Bill Taranto of Merck’s Global Health Innovation Fund (GHI) about how healthtech startups can work with large enterprises.

Taranto highlighted GHI’s investment in Livongo, one of the digital health companies that completed an IPO this year, as a case study. GHI’s investment priorities have shifted to align with Merck’s increasing focus on cancer and diabetes. The investment was a natural fit because Livongo’s focus on diabetes monitoring and detection complemented Merck’s therapeutic priorities.

The lesson? Keep the criteria for investment straightforward: Identify a problem in healthcare, then look for companies that offer a solution to that problem.

What’s Next?

In the short-term, expect to see one or two more digital health IPOs before the end of the year and eight to 10 more in 2020. As Peter van der Goes put it, despite current market volatility, digital health offers a good opportunity for investors who “want to find ways to put money into ventures that take costs out of the [healthcare] system in ways that biotech and medtech don’t.”

In emerging technologies, clinical data validation will become more important for digital therapeutics in the coming years and remote patient monitoring will play a crucial role in transforming traditional healthcare systems. Finally, as tech and healthcare giants make plays in the digital health sector, expect to see more healthtech startups partner with large enterprises to target specific healthcare problems.

Industry leaders anticipate that the use of artificial intelligence in medical imaging will have a substantial clinical impact, ushering in an opportunity to significantly improve decision support in medical image interpretation. In this post, we cover a variety of promising medical imaging applications for AI and machine learning—including diagnosing cancer and brain aneurysms—as well as recent regulatory developments.

Metrics Climb

CB Insights reports that healthcare-related AI investment totaled $1.44 billion in the first half of 2019, putting investment in the space on track to surpass the prior year, in which investment reached $2.5 billion. Much of the attention to date has surrounded applications in medical imaging or radiology.

VC-backed deals and financing to healthcare AI startups, Q1'18 - Q2'19 ($M)


The National Center for Biologic Information (NCBI) reports that publications covering AI in radiology have steeply increased in recent years. Between 2016 and 2017, the number of articles published on the topic ranged from 700 to 800. That’s compared to 100 to 150 articles published between 2007 and 2008. In addition, more than half of recent articles focused on applications related to magnetic resonance imaging (MRI) or computed tomography (CT). And January saw the launch of a peer-reviewed journal devoted to AI in medical imaging: Radiology: Artificial IntelligenceContinue Reading AI in Medical Imaging: Exploring the Frontier of Healthcare Applications


Rock Health reported that $4.2 billion was invested in digital health companies during the first half of 2019. This places the sector on pace to exceed 2018’s record total annual investment of $8.2 billion.

Strong and Steady with No Signs of Froth

This steady growth should put to rest, at least for the time being, concerns that emerged at the end of last year about a digital health investment bubble. Rock Health provides a detailed “bubble analysis” in its midyear report, but in short the venture fund concludes that the space is not experiencing a bubble thanks to sound business fundamentals, a strong base of repeat investors and the lack of fraud or misuse of funds.

Rock Health also notes that the $4.2 billion in investment was spread over 180 deals. About a third of the money invested went toward megadeals—deals of $100 million or more.

Continue Reading Q2 2019: Big Deals in China, Drones and the Return of the Digital Health IPO

Insights from Mary Meeker’s 2019 Internet Trends Report

In the latest edition of the Internet Trends report, Mary Meeker highlights the growing digitization of the healthcare sector, framing that growth squarely in the context of a U.S. healthcare system that—in some cases—has room for further innovation to better meet consumers’ demands or expectations.

Meeker, founder of Bond Capital (and former Kleiner Perkins Caufield & Byers general partner), launches the report’s healthcare section with an overview of a system that has the highest expenditures on healthcare as a percentage of GDP among other nations in the Organisation for Economic Co-operation and Development. Adding in the high number of uninsured individuals, high administrative costs and outcomes that are worse than other developed countries, Meeker makes the case that the digitization of U.S. healthcare is driven by consumer demand for better alternatives.

LSLI Photo 1

Continue Reading US Health Consumers Demand More: Can Tech Save Us?


In our 2018 year-end review of life sciences and tech IPOs (co-authored by my colleagues James Evans and Rob Freedman), we noted that life sciences offerings totaled 67 raising an average of $133 million while there were 45 technology deals raising an average of more than $380 million, not including Spotify, whose unique direct listing process did not raise capital. We were curious to see if those trends would continue in 2019, so we took a look at the numbers year to date.

2019 Deal Size

Through the end of May 2019, there were 27 life sciences offerings that raised $2.3 billion. On average, life sciences IPOs grossed $86 million. The largest deal so far was Gossamer Bio’s initial public offering that garnered $276 million. The smallest offering was $5 million raised by Guardion Health Services.

On the technology side, there have been 11 IPOs through May raising an impressive $14 billion. However, that total includes the outsized offerings from Uber and Lyft which took in $8.1 billion and $2.34 billion respectively, lifting the average offering to $1.3 billion. Omitting the two rideshare companies, the value of the average tech offering drops to $416.7 million. After Uber and Lyft, the next largest tech offering was Pinterest at $1.4 billion.

Continue Reading Life Sciences IPOs Haven’t Slowed in 2019


The business of animal health has traditionally been dominated by the animal health divisions of big pharma companies. But with Pfizer’s 2013 spin-off of its animal health business, now known as Zoetis, the sector has been undergoing fundamental changes that create new opportunities for investors and innovators.

The success of the Zoetis $2.2 billion IPO, at the time the largest since Facebook, helped inspire the spin-off of Eli Lilly’s animal health business, Elanco, last September, which surged 41 percent on its debut. And, late last year, Bayer announced its intention to leave the animal health business.

In addition to the spin-offs, or in part because of them, there has been substantial consolidation in the animal health space. In 2014, the company that became Elanco acquired Novartis Animal Health. Two years ago, Boehringer Ingelheim acquired Merial, Sanofi’s animal health business, making it, at the time, the second-largest animal health company in the world.

Continue Reading Divestitures and Consolidation in Animal Health Market Present Opportunities to Investors, Innovators


In its Q1 2019 digital health funding report Rock Health noted that investment in digital health companies leveled off in the first quarter after a record-setting 2018. At $986 million, investment in the first three months of the year was down 21 percent from the fourth quarter of 2018, when it hit $1.2 billion

But the leveling off in funding is more likely linked to an overall decrease in venture investment than to any weakness in the fundamentals of the digital health sector.

The PwC/CB Insights MoneyTree Report Q1 2019 states that global venture funding dropped 22 percent in the first quarter over the last quarter of 2018—from $67 billion in Q4 to $52.2 billion in Q1. U.S. venture investment overall dropped even more in Q1, from $38.7 billion to $24.6, or 36 percent. As a result, digital health venture investment is either even with or outperforming the market as a whole.

Continue Reading Digital Health Investment Levels Off and Unicorns Emerge


With 58 U.S. biopharma IPOs in 2018, the biotech industry entered the new year with confidence. By all appearances, the longest and largest biotech IPO window in history was not going to close anytime soon. But it was biotech dealmaking that took center stage at the annual J.P. Morgan Healthcare Conference at the beginning of 2019.

On the opening day of the annual confab in San Francisco, Bristol-Myers Squibb and Eli Lilly and Company both announced blockbuster deals — strengthening the case that M&A would likely be the exit of choice. Many IPO candidates may be reluctant to pursue a public offering, given lingering political and market uncertainty in the first part of the year.

After announcing Lilly’s deal to acquire Loxo Oncology, David Ricks, the company’s chairman and CEO, assured analysts that he expects there will be an increase in M&A activity in the year to come. Lilly’s CFO and SVP Joshua Smiley, added that the company could continue doing deals throughout the year. (Fenwick represented Loxo Oncology in the $8 billion deal)

Continue Reading Which Way to the Exits for Biotech?


No matter who is doing the counting, 2018 was an off-the-charts year for venture investment in digital health. Here’s a sampling of the tallies:

  • Our good friends at Rock Health put the total investment at $8.1 billion – an impressive 42 percent increase over 2017’s total of $5.7 billion.
  • The PwC/CB Insights MoneyTree Report posted an even higher total of $8.6 billion up from $7.1 posted in 2017.
  • StartUp Health reported $14.6 billion in global investment in digital health, up nearly 150 percent from 2017’s total of $6 billion (cited by MobiHealthNews).

And it’s not only that more money is going into the sector, it’s going into larger deals. Rock Health reports that the average deal size has grown to $21.9 million. That’s up from $15.9 million in 2017 and $13.6 million in 2016.

Continue Reading The Year of the Megadeal and a Hot Digital Health Market in China


The impact of artificial intelligence, or more specifically machine learning, is being felt in every industry sector, but perhaps nowhere more so than in healthcare, where AI funding hit historic highs in 2018, according to CB Insights.

The term AI is commonly used by the media and others to describe a computer-generated solution that is as good, or better than, a solution that could have been produced by a human. That often includes digital health tools that use algorithms programmed by researchers and clinicians. Machine learning is a subset of AI that uses neural networks to simulate or even expand on the level of data analysis that human minds are able to achieve. Deep learning is where software learns to recognize patterns. And these tools are already transforming diagnostic imaging.

The Scope

CB Insights reports that since 2013, $4.3 billion in private equity has been invested in healthcare AI startups across 576 deals. That’s more than AI startups in any other industry have taken in.

In a way, healthcare and AI are almost made for each other. The healthcare sector produces tons of data, but most of it is not being leveraged to provide the kind of insights it potentially could. The hope is that AI will be able to sort through this mountain of information to provide novel insights to improve the treatment or enable the prevention of disease.

In this post, we have rounded up some of the most promising applications for AI/ML in healthcare and examples of companies that are making it happen.

Continue Reading How AI is Transforming Healthcare: Diagnostics, R&D and Therapeutics