In the first half of 2018, 15 behavioral health startups brought in $273 million in funding, which is higher than in any other six-month period, according to a new report from Rock Health. It’s also almost double the $137 million behavioral health companies secured in the first half of 2016.
Over half of the 15 companies have a virtual or on-demand component. For instance, Lyra Health scooped up $45 million in May. Through its offerings, the startup works with companies to provide their employees with mental healthcare. Its online platform matches individuals to avenues for support, such as therapy, coaching programs and self-care apps.
Behavioral Health, Interoperability and eConsent: Meeting the Demands of CMS Final Rule Compliance
In a webinar on April 16 at 1pm ET, Aneesh Chopra will moderate a discussion with executives from DocuSign, Velatura, and behavioral health providers on eConsent, health information exchange and compliance with the CMS Final Rule on interoperability.
The behavioral health sector wasn’t the only one setting records. Rock Health found that H1 2018 was another record first half, with $3.4 billion invested in 193 deals.
If funding continues at this pace, Rock Health expects 2018 will surpass 2017 in terms of dollars raised and the number of deals. In 2017, 352 deals brought in a total of $5.6 billion.
The average deal size from January 1 through June 30 this year was $17.9 million. A few companies have already raked in mega-rounds. Collective Health secured $110 million in February, and Livongo raised $105 million in April.
It’s not all mega-deals. The earlier stage deals are getting larger from year to year, too. The average seed deal size during H1 this year was $5 million, compared to $4 million in 2017. And the average Series A round hit $10 million during H1 2018, versus $8 million last year.
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.
From the investing side, Rock Health noted that VCs are remaining committed to digital health. Already in 2018, 219 entities were repeat investors and 136 were new investors. This compares to 284 repeats and 272 newbies in 2017. To put it another way, about 62 percent of investors thus far in 2018 had already taken part in at least one digital health deal since 2011, versus 51 percent of investors last year.
Despite a few high-profile acquisitions (like Roche buying Flatiron Health and Amazon nabbing PillPack), the M&A outlook is a bit bleak. There have only been 60 disclosed digital health acquisitions thus far this year, according to the report. This number has been falling since 2015, when there were 189 deals. In 2016 there were 146 acquisitions, and by last year there were only 120. Additionally, the report notes that there hasn’t been a digital health initial public offering since 2016.
Overall, Rock Health believes this trend will continue. “It is likely many startups — rather than going public — will find their assets to be more valued by a healthcare incumbent, another larger digital health company, or a non-traditional player moving into the healthcare space,” the report reads.
Correction: An earlier version of this story mischaracterized Lyra Health’s work by stating it assisted PCPs. The article has been updated to properly reflect what the company does.
Photo: bayhayalet, Getty Images
