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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

Digital health fundraising ticked upward in the first quarter, with $1 billion raised, per a report from Digital Health New York, Aaron writes.

Why it matters: The numbers offer a surprising bright spot amid macroeconomic challenges and the collapse of Silicon Valley Bank.

By the numbers: Per the report, 29 companies raised $1 billion in Q1 2023.

That's 60% higher than Q4 of last year, which saw about $620 million raised, and on par with the second quarter of 2022, which saw $1.1 billion raised.

Late-stage funding (defined as Series B and beyond) comprised 38%, while early-stage (pre-seed, seed and Series A) made up the vast majority at 62%.

Also: Pharmaceutical tech took almost a quarter of that funding, closely followed by provider enablement technology.

Zoom in: Clinical trial transformation was the big winner, with clinical trial recruitment company Paradigm taking home $203 million, followed by fertility, with fertility benefits manager Kindbody raising $100 million.

Meanwhile, biotech company Paratus Sciences raised $100 million, while and value-based care enablers Vytalize Health and Pearl Health raised $100 million and $75 million, respectively.

These five companies made up 53% of total funding this quarter.

What they're saying: "Innovators are shifting their attention from focusing primarily on growth to also finding ways to bridge longer funding cycles," says Deloitte health tech leader Peter Micca in the report.

"However, 2022 investments were still approximately 30 percent higher than 2020, and more than doubled from 2019," he continues.

"With rising medical costs and demographics shifting toward more Medicare enrollment, we are at an inflection point for healthcare sustainability and access," says Michael Kopko, CEO of Pearl Health.

"Primary care is under-appreciated and underresourced in the US," he says. "We have an opportunity to contribute to a primary care renaissance through new value-based payment models and innovative technology."

📈 1 big thing: Q1 funding ticks up

A computer keyboard and mouse attached to a medical case.

Amazon CEO Andy Jassy sees the company's multi-pronged health care efforts as having a similar potential payoff as AWS, he writes in his second annual shareholder letter.

Why it's the BFD: The tech giant is setting the foundation to become a powerful health entity with tentacles in nearly every facet of the care ecosystem, Erin writes.

What he's saying: Although "further from [Amazon's] core businesses," Jassy sees Amazon's health care efforts as having the potential to pay off in the same way AWS has.

"In 2003, AWS would have been a classic example. In 2023, Amazon Health Care [is a] potential analogue," he writes.

Zoom in: Amazon took its first health care steps in pharmacy, which Jassy notes "felt less like a major departure from e-commerce," temporarily dipped its toes in primary care with Amazon Care, and eventually decided on a buy-not-build strategy in the space with One Medical.

"Going forward, we strongly believe that One Medical and Amazon will continue to innovate together to change what primary care will look like for customers," Jassy writes.

Between the lines: Taken together, Amazon's health care pushes could eventually be game-changing, analysts and health care leaders tell Axios.

In addition to the plays above, Amazon has the Halo for fitness monitoring, the Alexa for voice-based commands, a diagnostics division, a powerful cloud presence with AWS, and a retail (or potential food-as-medicine) presence in Whole Foods.

"Amazon’s customer-centric model has the potential to reinvent the patient experience by putting the patient at the center of their journey to drive value-based and quality care at every touchpoint," Forrester researchers and contributors note in a recent report.

The company also has access to approximately 44% of U.S. residents through Prime, per a recent Trilliant Health report. (In comparison, the largest health system in the country, HCA, serves just 1% of people in the U.S.)

"No health system can match Amazon — or Walmart’s — scale in terms of the next interaction," Trilliant CEO Hal Andrews previously told Axios.

The other side: Amazon's wide-ranging moves mirror Elon Musk's attempt to transform tech, yet it remains unclear when the sum of its parts will let the e-commerce giant become a health juggernaut.

While some of its pushes, such as its One Medical acquisition, are big and bold, others, such as RxPass and Amazon Clinic, are less robust.

Both RxPass and Amazon Clinic appear mostly equipped to expand Amazon’s presence as a care provider for the relatively wealthy and well-off.

RxPass isn't available to people who use Medicare and Medicaid and are likely to need affordable medications most, while Amazon Clinic is a cash-pay, virtual care business aimed at common ailments that largely affect the worried well. Like RxPass, it cannot be paid for using Medicare or Medicaid.

The bottom line: Amazon is making big moves to become a health care "powerhouse," BTIG analyst David Larsen has written, but per Jassy's own examples, that process could take two years or two decades.

2. The BFD: Amazon letter offers glimpse at health efforts 

Illustration of an Amazon envelope hanging from a saline hook.

Epic Sciences, a San Diego-based novel diagnostics company raised $24m in Series G funding co-led by Deerfield Management and Arsenal Capital Partners with support from company shareholders including Blue Ox Healthcare Partners, Domain Ventures and Labcorp. https://www.epicsciences.com/

Scan.com, a diagnostic imaging startup with offices in Atlanta and London, raised $12m in Series A funding co-led by Aviva, YZR Capital, Oxford Capital, Triple Point and Simplyhealth with participation from Forefront Venture Partners. https://axios.link/41Ar5x8

BPOC closed its first continuation vehicle, a $425m transaction co-led by investment funds affiliated with Apollo S3, Blackstone Strategic Partners and Five Arrows. https://www.bpoc.com/

Wellington Management closed Wellington Biomedical Innovation II fund at $476m in commitments. https://www.wellington.com/en-us/institutional

Temasek is paying around $2b for a majority stake in the Indian hospital chain Manipal Health Enterprises. https://axios.link/41fPnwp

https://www.wellington.com/en-us/institutional

3. Deals o' the day

Octave named former Included Health VP of HR Tricia Sickmann chief people officer.

UiPath named former Olive AI product manager Rohit Bachal senior sales engineer.

Global Medical Response named former Vistria Group senior operating partner Nick Loporcaro CEO.

HSBC named former SVB China joint venture board member Katherine Andersen head of life science and health care.

Frontline Ventures named former Expa principal George Radford principal.

Kalderos named former Olive AI implementation product manager Kim Le technical operations manager.

CareHive Health named former 23andMe medical director Kimberly Noel adviser.

HSBC named former SVB director Brandon Clark SVP.

Patient Square Capital promoted former managing director Justin Sabet-Peyman to partner.

4. It's Personnel

🔺The end of faking it in Silicon Valley — NYT

🍐 Pear Therapeutics dreamt of huge revenues and ‘commercial scale.’ It never came close — STAT

💸 HSBC is moving to fill a big gap left by SVB's collapse — Endpoints News

5. Your daily dose

Illustration of a hand holding an eyedropper that has spelled out "daily dose" in liquid.

🐶  Aaron starting today is fostering three-year-old Tonka, a pure-bred Rottweiler, for the next two weeks.

🫶🏻 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece. Please ask your colleagues, friends and family to sign up.

April 17, 2023

📈 1 big thing: Q1 funding ticks up