It’s been a frenetic couple of weeks between Consumer Electronics Show and J.P. Morgan Healthcare conference so now it’s time to take a broader look at what investors took away from them. The latter conference has certainly evolved since its start as Hambrecht & Quist.
Serial entrepreneur West Shell III, founder and CEO of Conversa Health who could recall attending in its early days, said the conference used to be dominated by public companies. In recent years it’s evolved to attract much more diverse private biotech and health IT companies at all stages of development and investors with a similar range of strategies.
It looks like it will be a quiet year for health IT IPOs but convergence between life sciences and IT is gaining momentum, particularly as companies such as Proteus Digital Health begins to see health system partners make their technology available to patients.
When Investment Rhymes with Canada
Canada has a proud history of achievement in the areas of science and technology, and the field of biomanufacturing and life sciences is no exception.
Adam Goulburn, a partner at Lux Capital, met the physician who would be his wife at the J.P. Morgan Healthcare Conference a few years back. Wonder how often that happens? An Australian, Goulburn was a Postdoctoral Fellow in neuroscience at Weill Cornell Medical College before he became an investor at Lux.
“Early stage investors are wary,” he said. “It feels like most have pressed pause and are in hold mode.” He noted that although digital health companies have enjoyed a larger presence than ever before at the conference, they have lost some of their lustre.
On the life sciences side, Goulburn said “liquid biopsies are hot with most thinking that we’re just scratching the surface of clinical and consumer genomics.”
Jack Young heads up the Qualcomm Life fund at Qualcomm Ventures and is a general partner with dRx Capital
To illustrate just how much digital health companies have become part of the JP Morgan Healthcare Conference, companies like Omada Health were even hosting their own parties, according to Young. He predicts digital health IPOs, which were the source of buzz around JP Morgan last year, will come back in 2017. But convergence will be the big story this year. dRx Capital is a collaboration between Qualcomm and Novartis and other pharmaceutical partners to invest in “beyond the pill” technologies that will help pharma companies quantify the effectiveness of their medications and support patients on them.
Last year, dRx only made two investments because competition has been fierce. Young said he expects that to change in 2016. “We’re hoping for four to six deals this year.” More pharmaceutical companies are building digital health teams and things like wearable therapeutics will be of interest as well as companies that can improve clinical trial recruitment, such as Science 37 and GoBalto.
Young sees more corporate venture investors coming into play this year because the way he sees it, health systems and payers haven’t really been succeeded at consistently developing new companies themselves. “Innovation in-house is impossible. If you are a healthcare system, you can’t innovate in-house.”
He also noted that some had observed an interesting trend at the conference: Investors from China meeting with healthcare companies from China.
Skip Fleshman, Asset Management Ventures partner, said one of the biggest challenges with succeeding with digital health investments is that there’s a lot of naivete among traditional VCs.
“I think the payers have a good perspective but the providers sometimes let internal politics drive investment decisions. I wouldn’t take a provider investment as validation.”
He noted that Rock Health data suggested that 100 venture capital firms made digital health investments last year, but most of them only made one.
A managing director with a corporate venture group said it considers itself a value-based care investor, not a digital health investor. He said the buzz at the J.P. Morgan conference was around companies that are changing care delivery and optimizing the site of care, and helping optimize payment delivery through the use of predictive analytics and enabling bundled payments.
On the subject of what he expects to see decline, he said the company has passed on a lot of what it sees as overvalued, cash-burning companies.
“A lot like Icarus, they fly too close to the sun….We see a lot of those companies going out to raise this year facing significant downrounds…We see lot of companies coming out with point solutions that are not big enough to be impactful.” He added that he expects these companies to either shut down or consolidate.
Photo: Flickr user Peasap
