Digital health startups raised over $6B in equity financing in 2016, and investment into the sector is showing no signs of slowing down. Traditionally, investors in this space have been VCs such as Rock Health and Khosla Ventures or corporate tech giants such as Qualcomm and GE. But health insurers and pharmaceutical corporates are now joining the fray.
While the pharmaceutical sector does have a history of investment into digital health, such as Johnson and Johnson Innovation in Getwell Network or Merck in ImpactRx, both in 2009, such deals were few and far between. However, in the past three years, corporates including Merck, Roche, and GlaxoSmithKline have picked up the pace of digital health investment.
Below, we used CB Insights’ database to create a timeline of digital health investment activity by the top 20 pharmaceutical corporates by revenue and those corporates’ associated venture arms.
We define digital health as companies in the healthcare space that use software as a central piece of the company’s product offering, including but not limited to mobile health, telemedicine, genomics, and electronic medical records. Products like pharmaceuticals, mechanical devices, and hospital systems are excluded.
Top pharmaceutical corporates and associated investment arms:
1. Pfizer, Pfizer Venture Investments
2. Novartis, Novartis Venture Funds
3. Roche, Roche Venture Fund
4. Merck, Merck Capital Ventures, Global Health Innovation Fund
5. Sanofi, Sanofi-Genzyme Ventures
7. Johnson & Johnson, Johnson & Johnson Innovation
8. GlaxoSmithKline, SR One
10. Abbvie, Abbvie Biotech Ventures
11. Amgen, Amgen Ventures
14. Novo Nordisk, Novo Ventures
15. Eli Lilly and Company, Lilly Ventures
17. Bristol Myers Squibb
18. Takeda Pharmaceuticals, Takeda Ventures
19. Boehringer Ingelheim, Boehringer Ingelheim Venture Fund
Click on the image to enlarge. Orange lines indicate first-time acquisitions. Gray lines indicate investments. Height of company line has no correlation with deal value.
- Among the group, the top three most active investors in digital health since 2009 are Merck, GlaxoSmithKline, and Johnson & Johnson.
- Overall, top pharmaceutical corporates have markedly increased their pace of investment over the past few years. During the period of 2015-2016, top pharmaceutical corporates made the same number of deals (22) to private digital health startups as from 2010-2014.
- Merck, while participating in deals as far back as 2009, has increased its deal activity over the past 3 years. Most investments pass through their VC arm, the Global Health Innovation Fund, which has made 24 equity investments since 2009. The fund invests growth capital, typically between $5-7M, in sectors of digital health such as patient engagement, population health, and remote monitoring. Merck also invests through Merck Capital Ventures, which is round agnostic, and the corporate entity Merck & Co.
- Other corporates to have recently made multiple deals include GlaxoSmithKline, Roche, and Teva Pharmaceuticals. In particular, Roche is betting on genomics (Bina Technologies, Fabric Genomics), oncology analytics (Flatiron), and diabetes management (mySugr).
- Notably inactive pharmaceutical corporates in the digital health space include Gilead, Abbvie, Boehringer Ingelheim, and Mylan.
- There have only been three first-time acquisitions of digital health startups by top pharmaceutical corporates since 2009, likely a consequence of the very different product offerings between software startups vs. pharmaceutical giants.
- In 2012, Bayer acquired Radimetrics, a radiation dose-monitoring firm which was then combined with Bayer’s existing dose-management software, to further their patient safety goals.
- In 2014, Roche Holding acquired Bina Technologies, developers of genomic data management software, to complement their move towards precision medicine.
- And in 2015 Teva Pharmaceuticals acquired Gecko Health Innovations which develops connected devices to help manage respiratory conditions such as asthma or COPD.
- Recently, GlaxoSmithKline has increased its activity, participating in 6 deals since 2014 through their venture arm SR One. Their investments demonstrate a commitment to ensuring regulatory compliance (Avhana), prescription management (ZappRx), maternal care (Progyny), and respiratory health (Propeller Health).
- The company with the most co-investment from top pharmaceutical corporates is Grail, a cancer diagnostics spin-off from Illumina. Three of the top 20 pharmaceutical companies — Johnson & Johnson Innovation, Merck, and Bristol-Myers-Squibb — all participated in the company’s $900M Series B in March 2017.
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