Even with the COVID-19 vaccine rollout beginning to accelerate, for the majority of companies—those that aren’t taking the ‘virtual-only workforce’ leap—transitioning employees safely back into an office setting, even on a part-time basis, likely won’t happen for many months. However, there are steps companies should be taking now to prepare, and Fenwick has several resources
In prior years, it was almost a foregone conclusion that promising digital health startups would be acquired by other companies before having the opportunity to debut on the public markets. However, that changed in 2019, which was declared the “year of the digital health IPO.”
The trend continued in 2020, even as the U.S. economy…
Digital health companies and investors had a remarkable 2020, as fundraising totals broke records and deal volume significantly outpaced previous years. Moreover, the increase in investment activity has triggered more exit opportunities, from IPOs to M&A deals.
Among the most notable digital health transactions in 2020 was the $18.5 billion merger of telemedicine pioneer Teladoc Health and chronic disease management company Livongo. The deal made waves across the industry not just because of its price tag, but what the merger indicates about the future direction of virtual care.
In the third installment of our video series, “Digital Health Trends Shaping 2021,” I continued our virtual sit down with my good friend Megan Zweig, Rock Health’s chief operating officer, to discuss the significance of the Teladoc-Livongo deal and our healthcare system’s transition to telemedicine 2.0.
In essence, “telemedicine 2.0” involves ongoing patient engagement that is supported by analytics, which helps providers seamlessly integrate virtual care with patients’ day-to-day lives.
To shed light on the state of diversity in the digital health startup ecosystem, Rock Health launched a new Diversity in Digital Health initiative. The project builds on Rock Health’s annual research into gender equity and now also includes analysis of the racial and ethnic makeup of startup leaders within the sector.
“This year, we specifically wanted to look at—when we start to think about the digital health teams building product, what does their composition look like in terms of race, ethnicity, gender [and] sexual orientation?” Rock Health Chief Operating Officer Megan Zweig told us. “So, we put out a more expansive survey.”
From the COVID-19 pandemic to a historic U.S. presidential election, 2020 will be remembered as the year the world turned upside down. It has also been an unprecedented year for digital health investors and companies in the sector, which have risen to meet the surge in demand for virtual care.
2020 was declared the largest funding year on record before the fourth quarter even began. It has also been a banner year for megadeals, mega mergers and IPOs, as well as a time of healthy deal flow for early-stage companies. This was also the year that investors learned to trust company founders they could not meet in person, as shelter-at-home orders moved many important pitch meetings to Zoom or Microsoft Teams.
Many of the investment and other trends we have seen accelerate this year will continue to have an impact as we approach 2021.
In the first video of our series, “Digital Health Trends Shaping 2021,” I sat down (virtually, of course) with my good friend Megan Zweig, Rock Health’s chief operating officer, to discuss 2020 investment trends and the investment outlook for 2021. In the video, Megan noted that Rock Health analysts and investors are still bullish on digital health, as Q4 continues the robust dealmaking trend that made headlines at the end of Q3.
View the video here and read key takeaways from my talk with Megan further down.
When investors survey the digital health sector today, they see nearly every number trending upward.
There is more deal volume than VCs have seen in past years, with the third quarter of 2020 outpacing anything they’ve seen in the past by double-digit percentages. There are more veteran healthcare investors making bets in digital health, and there are more newcomers with little to no prior healthcare experience jumping in with both feet.
Investment activity by corporates and strategics is up, and appetites for digital health offerings among public-market investors are increasing.
Mature digital health companies are reporting higher revenue, and offering more proof points that their technologies are improving patients’ lives. These companies are raising more funding than they may have done in the past, and at higher valuations. And there are more exit opportunities for these high-quality companies than there were a year ago.
Investors, company founders, policy experts and healthcare professionals at the Rock Health Summit talked about the digital health sector from their point of view. And the word “more” was used consistently.
Virtual healthcare staked out exciting new ground with the recently announced $18.5 billion merger of telemedicine pioneer Teladoc Health and chronic disease management company Livongo.
The deal illustrates the growing appetite among public-market investors for innovative healthcare solutions. Analysts at Rock Health likened the deal to a “starter pistol” that signals the beginning of a race—in this case, a race toward consolidation in a red-hot sector that has been maturing rapidly since the pandemic opened up a need for new models of healthcare delivery. At the same time, the initial public offering window is also wide open this year for privately held digital health companies.
Whether you invest in startups or publicly traded digital health companies, one thing is certain: the coming months and years will be active and fast-paced as established leaders team up to dominate markets and startups race toward liquidity events.
Venture investors are pleased to see digital health companies continue to transform the healthcare system despite unprecedented challenges brought by the COVID-19 pandemic.
Funding for digital health startups broke records in the first half of 2020 as adoption of telemedicine and other remote programs spiked to meet the sudden surge in demand. But the future of digital health will be determined not just by consumers, technology developers and investors. Government agencies, insurers and public-market investors will also wield considerable influence, and investors are expecting more regulatory scrutiny from these stakeholders going forward.
This was a key takeaway from a July 30 virtual event held by Rock Health, “Unprecedented Funding in an Unprecedented Time,” where I joined Steve Kraus of Bessemer Venture Partners, Liz Rockett of Kaiser Permanente Ventures and Bill Evans of Rock Health for an in-depth discussion about the road ahead for digital health.
The spread of COVID-19 has created a defining moment for the digital health sector, as many products and services once considered “nice-to-haves” have transformed into necessities. Venture investors and company founders may be operating remotely but they are still hard at work, and the deal flow in the second quarter of 2020 reflects that.
The first quarter of 2020 was a record-breaker, with billions of dollars raised by digital health startups across hundreds of deals. But with social distancing efforts keeping people homebound, more than two out of three digital health investors surveyed by Rock Health at the end of the first quarter said they expected a slowdown ahead. Analysts at CB Insights echoed that prediction in early June, saying U.S.-based digital health startups would likely see a financing drop in the second quarter even as the numbers tick upward for startups based in other countries.
And yet, there has been no shortage of notable deals in the second quarter, especially for companies that, as Bond Capital’s Mary Meeker says in her special COVID-19 trends report, “decentralize medicine away from hospitals and empower patients as consumers.”
Here’s a look at just a few of them:
The annual gathering of life sciences executives and investors in San Francisco that many now call “JPM Week” recently concluded, marking the J.P. Morgan Healthcare Conference’s 38th year.
The Big Story of 2019 & 2020 Outlook: M&A
The one-week confab centered on the Westin St. Francis Hotel in Union Square is thought to set the stage for life sciences investing for the coming 12 months. Last year, that certainly proved to be the case when Bristol-Myers Squibb’s acquisition of Celgene—announced at the beginning of the J.P. Morgan Healthcare Conference—set the stage for a surge of M&A activity that exceeded $340 billion in value by the end of 2019.
While no transactions reaching the size of the $74 billion Celgene deal were unveiled during this year’s conference, Barron’s reported that some significant deals have been announced including Dermira’s $1.1 billion acquisition by Lilly.
EY expects M&A activity to maintain record, or near record levels in 2020 based on data from their Global Capital Confidence Barometer. They report that 52 percent of life sciences executives said their company plans to actively pursue M&A activity in the coming 12 months, and that 68 percent are expecting the M&A market to be even more lively in 2020.