United States: Q2 2019: Big Deals In China, Drones And The Return Of The Digital Health IPO

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.

Top Deals of Q2

In our second quarter analysis, we found five megadeals valued at a total of $945 million. Two of those deals, accounting for 37 percent of the total, were investments in Chinese companies.

Tencent Trusted Doctors, based in Beijing, operates a doctor/patient communications platform. The company received a $250 million late-stage round. Investors included Country Garden Holdings Company, Sequoia Capital and Tencent Holdings.

Collective Health, based in San Francisco, took in a $205 million Series E round. The SoftBank Vision Fund led the round in the cloud-based health-insurance platform developer. DFJ Growth, Founders Fund, GSquared, GV, Maverick Ventures, Mubadala Ventures, New Enterprise Associates, Public Sector Pension Investment Board and Sun Life Financial participated in the round.

Tempus, based in Chicago, is the developer of a healthcare data analytics platform. It received a $200 million Series F round that included Baillie Gifford, Franklin Templeton Investments, New Enterprise Associates, Novo Holdings, Revolution Group and T. Rowe Price.

Zipline International provides drone delivery services for vaccines, medicine, blood and medical supplies to hospitals and health centers. Baillie Gifford, Bright Success Capital, GV, Katalyst Ventures, Oakhouse Partners, Temasek Holdings, The Goldman Sachs Group, the Rise Fund and Toyota Tsusho participated in the $190 million Series D investment in the Half Moon Bay company.

Weimai Healthcare, based in Hangzhou, China, is the developer of a health application platform that provides appointment scheduling, chronic disease management, remote diagnosis and medical records management. Cenova Capital, IDG Capital, Matrix Partners China, Source Code Capital and Vision Capital all participated in the $100 million Series C round.

The Return of the Digital Health IPO

The second quarter ended with the long-awaited return of the digital health IPO. The three-year drought ended when Livongo filed for a public offering on the last business day of the second quarter. A number of other companies have also announced that they plan public offerings this year.

Based on the metrics for these, as well as the 10 digital health companies that have IPO'd since 2011, Rock Health also compiled a 12-month IPO Watch List in its report.

Conclusion

With the first half of the year behind us, it's clear that digital health investment has remained strong while avoiding the bubble so many feared when the year started. And with the IPO window re-opening, we are hopeful that investors will see a good return on their money and reinvest the proceeds into the next crop of transformative digital health companies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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