There is a dizzying amount of activity in the digital health sector. Investment continues to climb, with healthcare entrepreneurs taking a variety of approaches to address myriad pain points from chronic condition management, care coordination and access to care. In a Venrock survey of 300 healthcare industry insiders spanning health IT vendors, investors, healthcare providers and professional service folks, respondents were bullish on telemedicine and big data analytics, shared missed investment opportunities and made prognostications on which health insurance startups were attracting their support.
Here’s a roundup of some of the most interesting findings from the survey.
Investment regrets
Early stage
Is it better to regret an investment you have made than one you haven’t? Perhaps it depends on the size. Venrock asked survey participants which digital health investment opportunity do they regret missing the most. Devoted Health dominated the early stage category with 36 percent of respondents opining on missing out on investing in the Medicare Advantage insurance startup’s $62 million Series A. Of course, it should be noted here that the company was cofounded by Venrock partner Bob Kocher so that may or may not have influenced respondents. It’s also a bit self-serving to include Devoted at all in a survey done by Venrock without even mentioning the in-house connection.
Employer health plan assessment business Collective Health was second with 24 percent ruing the day they missed out on the company’s $47.5 million Series A round.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Insurance startup Bright Health’s $160 million Series B came in third with 23 percent.
Regrets: Late stage
So which late-stage companies did respondents say they regretted not investing in? Diabetes management company Livongo’s $52.5 million, Series D was at the top of the list with 38 percent followed by Clover Health, another health insurance startup aimed at the Medicare Advantage market, with 29 percent regretting missing out on its $130 million Series D round. They were followed by rounds raised by Nuna and Welltok at 17 percent each. Despite Clover’s second most favored rank in this category, in another category in which respondents were asked, “Which private companies will have the biggest good or bad news in 2018?” 61 percent of respondents said they were worried about bad news at Clover. The only negative press recently has been from CNBC, which highlighted some of the issues Clover had dating back to 2016.
Progress in healthcare
Of all the companies expected to make the most progress in healthcare, at 51 percent Amazon was easily ahead of Apple 26 percent and Google 18 percent. It’s a little surprising that Apple doesn’t gain more backing from respondents considering what it has done with the roll-out of its EHR tool to more than 40 hospitals, health systems and other businesses and Amazon has yet to achieve anything in the healthcare space.`
Who will go public?
With investment capital reasonably accessible, particularly for later stage companies, the public markets have not held much attraction for digital health companies. Asked which companies are most likely to go public, the majority picked concierge primary care business One Medical (34 percent), followed by data warehouse Health Catalyst (31 percent). Dan Burton, Health Catalyst CEO, said in 2015 it planned to go public by the end of 2016 saying it was “trying to think of 2016 as the last year we will be a private company,” but it has since backed away from that assessment, obviously. Grand Rounds, a virtual care provider focused on self-insured employers, garnered 23 percent.
Where will we see growth in the next 12 months?
Telemedicine and big data and analytics were far and away the top subsectors people expect to grow the most. Since big data analytics goes hand in hand with machine learning, that’s no surprise. Telemedicine is growing and that’s partly because employers and payers regard it as a useful way to reduce healthcare costs. It lets people see a physician from the comfort of their home and insurers have been warming up to this service. Teladoc, in particular, was singled out in this survey as the company likely to see the greatest stock appreciation, according to 46 percent of respondents.
Concern over challenges to health IT innovation
Hiring topped the list of concerns for respondents over the next 12 months by a large margin with 25 percent saying they were very concerned and 46 percent saying they were somewhat concerned. Regulatory changes came in second with 18 percent saying they were very concerned and another 45 percent said they were somewhat concerned and it’s not surprising given how chaotic Washington has been. Although the FDA has demonstrated support for digital health, from the FDA’s pre-certification program to initiating ways to map out how artificial intelligence can be assessed. Trump has proven to be a chaotic leader and perhaps that’s the source of concern.
Photo: Image Source, Getty Images
