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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.”

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Continue Reading Rock Health Survey: State of Diversity Among Digital Health Startup Leaders

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.

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Continue Reading Don’t Miss Our New Video Series: Digital Health Trends Shaping 2021

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.

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Continue Reading More Consolidation, IPOs Ahead for Digital Health Companies

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.

It was the biggest year for M&A since analysts at Dealogic began tracking deals in 1995, and prompted biotech journalists to refer to 2019 as the year of the “mega-merger.”

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.

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Continue Reading Biotech & Life Sciences Trends to Consider Following JPM 2020: M&A, Venture Capital and More

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 Intelligence. …
Continue Reading AI in Medical Imaging: Exploring the Frontier of Healthcare Applications

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.

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

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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.

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

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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.

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Continue Reading Digital Health Investment Levels Off and Unicorns Emerge

Fenwick’s Sixth Annual Digital Health Investor Summit started on an upbeat note with Rock Health’s Megan Zweig sharing the venture fund’s mid-year funding report. After the uncertainty brought by the 2016 presidential election and the political drama surrounding the future of the Affordable Care Act, it would not seem surprising to see investors take…

It looks like the FDA is moving forward—and swiftly—with the digital health plan articulated in FDA Commissioner Scott Gottlieb's June blog post, previously outlined in this post. Closely tracking the commissioner’s post, the Center for Devices & Radiological Health released an action plan about its Digital Health Program and posted a notice for comment for a Software Pre-Certification Pilot Program.

The pilot program is a first step in the FDA’s reimagined digital health product oversight approach. What makes it stand out from the FDA’s prior regulatory approach is its aim "to develop a new approach toward regulating this technology – by looking first at the software developer or digital health technology developer, not the product."

Under its firm- and developer-based approach, the CDRH could "pre-certify" eligible digital health developers who "demonstrate a culture of quality and organizational excellence based on objective criteria, for example, that they can and do excel in software design, development, and validation (testing). Pre-certified developers could then qualify to be able to market their lower-risk devices without additional FDA review or with a more streamlined premarket review."

In his blog post, the FDA’s Scott Gottlieb announced that in August companies can submit a statement of interest that includes the qualities listed above and request participation in the pilot to FDAPre-CertPilot@fda.hhs.gov. The FDA’s Digital Health Team will evaluate submissions and select companies that reflect the broad range of software developers later in the month. “A critical component is that we will include small and large companies, traditional and non-traditional medtech companies, and products that range in risk,” Gottlieb said in his post. (Read more about how the CDRH is recruiting participants to the pilot program.)

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Continue Reading Digital Health Companies May Find a Faster Path to Market Under the FDA’s Digital Health Plan