Healthcare IT venture capital and M&A hold strong in Q3 2012
Third quarter results of a venture capital (VC) study conducted by Mercom Capital Group showed healthcare IT remaining strong for the fifth quarter in a row, and the outcome of the presidential election is not expected to change that, according to Raj Prabhu, managing partner of Mercom.
“This is private funding going into private companies, and there continues to be a strong interest and demand in the (health IT) sector with a consumer angle as health apps and social health networks are becoming popular and more mainstream,” he told Healthcare IT News following Mercom’s Monday release of the report.
[See also: Restraint replacing exuberance for venture capitalists]
Fifty-eight different investors participated in the third quarter funding rounds with First Round Capital, Great Point Partners and West Health Investment Fund participating in multiple deals, the report found.
Health information management companies received the most funding as a technology group with $101 million in 20 deals, followed by mobile health companies with $39 million in seven deals, and social health network companies with $26 million in four deals, according to Mercom.
The report showed “a healthy number” of early-stage deals. “2012 has the potential to be a billion dollar VC funding year for the sector,” Prabhu said.
Prabhu attributed the HITECH Act of 2009; Affordable Care Act and the Department of Health and Human Services’ Health Data Initiative for “getting the ball rolling” on the upward trend.
[See also: Downward trend expected to continue for life sciences VC]
“HHS started making greater amounts of usable health data available,” he said. “This has made a whole slew of applications possible, opening up possibilities for companies, consumers and communities to come up with new solutions leading the way to mobile apps, social health networks and other products.”
“Health IT touches everybody, creating a large market that has peaked the interest of investors and is likely to continue to grow,” Prabhu said.
The report showed there was continued strength in M&A activity in the sector, as well, providing investors and companies with plenty of viable exit strategies. There were 37 M&A transactions in Q3 2012, amounting to $3.2 billion, of which only ten transactions disclosed details.
According to Prabhu, the 37 M&A deals in one quarter is a strong indicator of growth in the industry. “That total has been surpassed only twice since 2010,” he said.
The top funding deal this quarter was the $25.5 million raised by Telcare, a mobile health company that uses cellular machine-to-machine technology for diabetes and other chronic illnesses, according to the report.
Other top deals included $20 million raised by Connecture, an online health insurance process automation company focused on health insurance exchanges, followed by $17 million raised by Doximity, a professional social network for physicians. Clinipace, an eClinical technology provider of real-time access to the healthcare information raised $13 million, and finally both Streamline Health Solutions, a provider of enterprise content management and business analytics solutions for healthcare organizations and SoloHealth, a healthcare technology and data analytics company, raised $12 million each, the report showed.
Among the top M&A transactions, Roper Industries acquired Sunquest Information Systems, a provider of diagnostic and laboratory software solutions to healthcare providers, for $1.4 billion. One Equity Partners acquired M*Modal, a provider of clinical documentation services and speech understanding solutions, for $1.1 billion. Science Applications International Corporation acquired maxIT Healthcare, a healthcare IT consulting firm, for $473 million. Thomas Bravo acquired Mediware Information Systems, a provider of clinical software solutions, for $195 million.
