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April 20, 2016

Healthcare IT, Big Data Investments Surge in Q1

George Leopold

Venture capitalists poured more than $1 billion into the healthcare IT sector during the first quarter of 2016 as investors look to target data analytics and telemedicine for growth.

The first three months also saw several large big data acquisitions as key players like IBM’s Watson Health unit continued their buying sprees.

Market researcher Mercom Capital Group reported that venture funding for healthcare IT and “digital health” soared 27 percent over the previous quarter during the first three months of this year. A total of 146 deals involving private equity and corporate venture capital generated quarterly investments totaling $1.4 billion, Mercom said. Investments totaled $1.1 billion in the previous quarter.

“Data analytics and telemedicine companies reached a significant milestone, each crossing $1 billion in funding raised to date” even though public health IT public companies continued to slump, Raj Prabhu, CEO and co-founder of Mercom Capital Group, noted in a statement.

While medical device makers raked in the most venture capital, $260 million, Mercom said data analytics vendors weren’t far behind at $197 million during the first quarter. The wearables and sensor markets represent the leading edge of an emerging healthcare Internet of Things.

The top investment during the period was a $175 million Series C funding in Flatiron Health, the New York-based healthcare IT company. Flatiron is primarily focused on improving cancer care by organizing oncology data. According to the web site Crunchbase, Flatiron Health has so far raised $313 million in three funding rounds.

Health Catalyst, based in Salt Lake City, raised $70 million during the first quarter to advance its technology platform used to organize and link health-related data from different systems and makes that information more widely available.

Along with surging investments, a batch of high-profile acquisitions was announced during the first quarter. Among them was IBM’s $2.6 billion deal to acquire Truven Health Analytics. The acquisition announced in February is expected to nearly double the size of IBM’s new Watson Health cognitive computing unit.

The Truven deal was the latest in a string of healthcare big data acquisitions by IBM that also included Cleveland-based healthcare intelligence cloud vendor Explorys and medical imaging management specialist Merge Healthcare. Explorys was spun off from the Cleveland Clinic in 2009.

Meanwhile, Netsmart Technologies, a Kansas-based vendor of electronic health records, closed a $950 million sale this week to investors GI Partners and Allscripts Healthcare Solutions. The deal was announced in March.

Other first-quarter deals included: device maker Halma $140 million acquisition of Centrak, a medical sensor manufacturer; and Affinity Equity Partners’ purchase last month of Medical Director for $118 million.

Mercom Capital also reported two stock offerings during the first quarter: IT specialist OneView Healthcare and Senseonics together raised $91.5 million in separate IPOs.

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