Healthcare investments continued to grow at a record-breaking pace, according to a new report by CBInsights. In the first quarter of 2021, healthcare companies around the world raised a total of $31.6 billion, up from the previous quarter’s height of $25.5 billion. The number of deals also increased from 1,429 to 1,551.
As with last year, much of the increase in activity was driven by large funding rounds of more than $100 million. A total of 96 companies raised these “mega-rounds” in the first quarter.
Some of the biggest deals included:
- LEO Pharma, a Denmark-based biopharma company that makes dermatology products, raised $535 million when private equity firm Nordic Capital bought a minority stake in the company.
- ElevateBio, a Massachusetts-based firm working with researchers to spin up new cell and gene therapy companies, raised $525 million.
- EQRx, a biotech firm looking to make cheaper cancer drugs, raised $500 million just one year after its founding.
- Ro, a direct-to-consumer health startup that had been rumored to be the target of a SPAC deal, instead raised $500 million
- Miaoshou Doctor, a platform based in China for doctors and patients to communicate, raised $466 million.
Investors continued to pour more funds into healthcare technology companies, ranging from telehealth startups to firms touting AI for drug discovery. According to CBInsights, telehealth companies raised a record of $4.2 billion in the first quarter, minting six new “unicorns,” or startups valued over $1 billion.
Funding for healthcare AI companies also reached a new record of $2.5 billion for the quarter, and investment in health IT companies doubled to $1.8 billion, with notable investments in Komodo, Innovaccer and Clarify.
Finally, investments in mental health startups continued to increase, with companies raising a total of $852 million, including Lyra, Modern Health and Ginger.
Even as the good times continued to roll for some startups, investors at a MedCity INVEST panel cautioned against burning through too much cash if a startup raised more than needed, especially as the rise of special-purpose acquisition companies (SPACs) changes the dynamics of exits.
Several healthcare startups, especially consumer-facing ones, have announced plans to go public through these “blank-check” companies, including 23&Me, Talkspace, Sharecare and Owlet.
Others are still taking the traditional route public. Two IPOs last quarter included insurance startups Oscar, which went public in early March, and Alignment Healthcare, which went public later that month. But they’ve seen different receptions from the public market. Oscar’s stock has declined about 35% since it went public, while Alignment’s has increased by nearly 60%.
More mergers are also expected in digital health, as companies compete to win over employers as a covered benefit. Some notable ones included healthcare navigation company Grand Rounds’ acquisition of Doctor on Demand, Cigna’s purchase of telehealth company MDLive, and Microsoft’s recent $19.7 billion purchase of speech-recognition company Nuance.