Digital health M&A ground to halt in Q1 amid US shutdown
M&A (mergers and acquisitions) in digital health almost ground to a halt in Q1 this year, according to new figures from analysts Mercom Capital, which also showed a dip in venture capital investment.
Figures from Mercom showed M&A worth just $326 million in Q1 2019, and although the company gave no indication about the reason it’s likely caused by a knock-on effect of the US government shutdown and other policies.
The figure is tiny compared with the $4.1 billion of M&A seen in Q1 2018, suggesting that the market may have been suppressed by the political turmoil at the start of the year.
This also affected biotech IPOs, which were put on hold until the government and its agencies began operating again in mid-January.
While the US government was closed amid a funding row for 35 days in December and January over president Trump’s Mexican border wall, operations of antitrust regulators, the US Securities and Exchange Commission, and Committee on Foreign Investment in the US (CFIUS) reviews were affected.
The CFIUS has also been cracking down on investments from China – another possible cause for the slowdown.
Voalte’s $195m acquisition of Hill-Rom was the largest digital health M&A transaction in the quarter, according to Mercom.
VC funding down
Digital health firms raised $2 billion in funding from venture capitalists in the first quarter of 2019 – but the figure is considerably lower than last year’s.
It remains to be seen whether VC funding for digital health projects has peaked, after the figures compiled by Mercom showed investment fell by $500,000 compared with Q1 last year.
The number of VC-backed deals was also down, falling from 187 in Q1 2018, to 149 in Q1 2019.
However investment last year peaked in Q3 in what was considered to be a bumper year, and it’s too early to say whether the latest figures will turn into a downward trend.
VC investment in digital health in the latest Q1 is well up on the final quarter of 2018, which saw the sector raise only $1.4 billion in 142 deals.
Mercom’s analysts noted that the largest digital health deal was the $170 million raised by France’s Doctolib, which attracted investment from General Atlantic with participation from Bpifrance, Kernel, and Accel.
The investment transformed Doctolib into a privately-held “unicorn” worth more than $1 billion, joining an elite group including fitness cycle firm Peloton and the genetic testing firm 23andMe.
The company will use the investment to double its staff to 1,500 people in three years and grow its video consultation service.
Other noteworthy investment rounds identified by Merco include $100m Series F by Health Catalyst from investors led by OrbiMed, Calm.com’s $88m Series B funding round led by TPG Growth, Taimei Medical Technology’s $80m Series E round led by Tiger Global Management, and a $77m round by Sophia Genetics led by General Investment Management.
Broken down by sector, health information management led the way with $815m and 59 deals, followed by sectors including mobile health ($540 million, 49 deals), Telehealth ($270 million, 22 deals), Scheduling, Rating and Shopping ($212 million, four deals) and Service Providers ($101 million, four deals).
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