As the COVID-19 pandemic is raising more awareness of health and wellness, digital health has become an increasingly popular topic among investors, stakeholders and the general public.
In this article, you will learn:
What digital health is and what it covers;
6 categories of digital health under an established framework from health authorities;
Our analysis and insights on 11 investment trends that fall into the categories, which uses data from Pitchbook with Runway’s own search criteria.
Let’s dive in…
Digital Health: Categories & Trends [2020 Research]
Table of Contents
Definition of digital health
What is digital health?
Digital health is an umbrella term to cover a range of solutions that uses digital technologies to address health needs, “encompassing eHealth (which includes mHealth), as well as emerging areas, such as the use of advanced computing sciences in ‘big data’, genomics and artificial intelligence.” (source: World Health Organization WHO).
6 categories of digital health
Five categories of digital health have been defined by the United States Food and Drug Administration (FDA):
“The broad scope of digital health includes categories such as mobile health (mHealth), health information technology (IT), wearable devices, telehealth and telemedicine, and personalized medicine.”
A sixth category i.e. digital therapeutics was added by the Digital Therapeutics Alliance (DTA).
The DTA global non-profit trade association engaged in the evidence-driven advancement of digital therapeutics.
The framework of the six categories made by FDA and DTA is probably the best existing way to understand the landscape of digital health.
However, it has not been adopted by market reports or analysis except for Pitchbook, which partially followed but referred “digital health” narrowly to mHealth and put digital therapeutics under mHealth rather than a separate category.
Figure 1. Six categories of digital health. (Figure source: Digital Therapeutics Alliance)
11 driving forces for digital health (Pitchbook)
A number of factors are driving the growth of digital health.
Pitchbook’s Q2 2020 research report on Retail Health and Wellness Tech identifies 11 growth factors, which should apply to digital health in general:
Population increase coupled with lack of medical providers
Growing elderly population and increased life expectancy
Expanding cost of traditional healthcare
Consumer and provider demand for healthcare flexibility
Digital economy opens door to telehealth, personalized solutions and fitness applications
Doctors focusing more on preventive care and healthy lifestyles
Increased consumer health awareness and healthy eating index
Growth of social media
Advancements in AI and Big Data
Consumer wellness startups partnering with corporations
COVID-19 pandemic crisis
Digital health investment trends by category
This article covers global investment in companies in each category and in many cases subcategory from the year 2010 to 2020 year-to-date (YTD, as of October 11th, 2020).
We recognize that certain companies encompass several of the six categories.
a solution which is supported by mobile devices and serve the purpose of virtual visits or remote patient monitoring may fall under both telehealth and mHealth categories;
a solution that relies on both tailor-made wearable devices and apps running on off-the-shelf handheld mobile devices may fall under mHealth and wearable devices categories;
a solution that falls under one or more of the telehealth, mHealth, and wearable devices categories may also be under digital therapeutics category if the solution has clinical evidence and real-world outcomes.
In such cases, the company would be included under all categories.
1. Mobile health (mHealth)
mHealth is “…medical and public health practice supported by mobile devices…” (source: The Global Observatory for eHealth (GOe) of WHO), where mobile devices refer to “commercial off-the-shelf computing platforms, with or without wireless connectivity, that are handheld in nature”. (source: FDA).
Under the framework shown in Figure 1, three subcategories are included:
1.1. mHealth: Wellness and fitness tracking, and nutrition mobile apps
The market is mature with 742 companies.
Investment deals grew by 15X from 2010 to 2016 (204 deals) then declined. Invested capital peaked in 2015 and in 2019 at around US $2.46 billion. 2020 is likely to see a sharp decline in both, as YTD data show US $508 million invested among 91 deals.
This is likely partly due to the COVID-19 impact on VC investments (refer to this article), and partly due to the space maturing – entering market adoption and the result generation phase.
Figure 2. Investment trend of mHealth: Wellness and fitness tracking, and nutrition mobile apps. Large deals include Fitbit’s US $732 million initial public offering (IPO) in 2015, Under Armour’s US $475 million acquisition of MyFitnessPal in 2015, Alphabet’s US $2.1 billion acquisition of Fitbit in 2019. Data source: Pitchbook.
1.2. mHealth: Consumer health information mobile apps
The market has been rapidly growing since 2018 with 417 companies included.
Investment deals grew by 8X between 2010 and 2020 YTD (25 deals).
Invested capital peaked at US $289 million in 2018, then declined to US $146 million in 2019, and US $187 million in 2020 YTD. Most of the deals have been under US $10 million.
Figure 3. Investment trend of mHealth: Consumer health information mobile apps. Exceptional deals include Red Ventures’ acquisition of Healthline Media in 2019, Sema4’s US $123 million series A in 2018, US $127 million series B in 2019 and US $121 million series C in 2020. Data source: Pitchbook.
1.3. mHealth: Medication adherence mobile apps
The market is maturing with 61 companies.
Investment deals grew by 20X from 2010 to 2017 (23 deals) then declined.
Invested capital peaked in 2020 YTD at US $169 million in 12 deals. 2020 is likely to maintain deal count as 2019 but with more capital investment.
Figure 4. Investment trend of mHealth: Medication adherence mobile apps. The most funded company in this subcategory is ClouDr. (Zhiyun Health), which raised US $100 million in 2019 and US $143 million in 2020. Other notable companies include Medisafe (US $21.5 million raised) and medAdvisor. Data source: Pitchbook.
2. Health Information Technology (Health IT)
Health IT involves the processing, storage, and exchange of health information in an electronic environment (source: U.S. Department of Health and Human Services (HHS)).
Two subcategories are included:
2.1. Health IT: Electronic health record systems
The market is in steady growth with 1,242 companies included.
Investment deals grew by 4X between 2010 and 2020 YTD (204 deals).
Invested capital has increased rapidly since 2016 and peaked in 2019 at US $7.3 billion. The year of 2020 will see an increase in deal count but likely a decrease in invested capital.
Figure 5. Investment trend of Health IT: Electronic medical record systems. Recent large deals include McKesson’s US $1.3 billion acquisition of CoverMyMeds in 2017, Roche’s US $1.9 billion acquisition of Flatiron in 2018, ResMed’s US $750 million acquisition of MatrixCare in 2018, Global Payments’ US $707 million acquisition of AdvancedMD in 2018, Athenahealth’s US $5.6 billion limited buy-out (LBO) in 2019, and NexTech’s US $520 million LBO in 2019. Data source: Pitchbook.
2.2. Health IT: Electronic prescribing and pharmacy automation
The market is in steady growth with 337 companies.
Investment deals grew by 4X from 2010 to 2020 YTD (50 deals).
Invested capital peaked in 2013 and 2017 at US $700-900 million. 2020 will see an increase in both deal numbers and invested capital over 2019.
Figure 6. Investment trend of Health IT: Electronic prescribing and pharmacy automation. Recent large deals include 111 Inc.’s US $100 million IPO in 2018, Allscripts’ US 100 million acquisition of Practice Fusion in 2018, Capsule’s US $200 million series C in 2019, eRx Network’s US $213 million LBO by Change Healthcare in 2020. Data source: Pitchbook.
3. Wearable Devices
The market is mature with 825 companies.
Investment deals grew by 15X from 2010 to 2017 (360 deals) then declined. Invested capital peaked in 2019 at US $3.09 billion. Similar to the subcategory of mHealth:
Wellness and fitness tracking, nutrition app, the 2020 YTD investment in wearable devices has declined (US $1.49 billion among 190 deals).
Figure 7. Investment trend of wearable devices. Large deals include Fitbit’s US $732 million IPO in 2015, Fossil Group’s US $260 million acquisition of Misfit in 2015, and Alphabet’s US $2.1 billion acquisition of Fitbit in 2019. Data source: Pitchbook.
Telehealth is the “delivery of health care services, where patients and providers are separated by distance. Telehealth uses ICT (information and computer technology) for the exchange of information for the diagnosis and treatment of diseases and injuries, research and evaluation, and for the continuing education of health professionals” (source: WHO).
Telehealth refers to a broader scope of remote healthcare services than telemedicine.
While telemedicine refers specifically to remote clinical services, telehealth can refer to remote non-clinical services (source: HHS).
Technologies of telehealth include videoconferencing, store-and-forward imaging, streaming media, terrestrial and wireless communications.
Two subcategories are included.
4.1. Telehealth: Remote patient monitoring
The market is maturing with 277 companies.
Investment deals grew by 8X from 2010 to 2018 (92 deals) and have since maintained steady. Invested capital peaked in 2020 YTD at US $691 million.
Figure 8. Investment trend of Telehealth: Remote patient monitoring. Recent large deals include Murata Manufacturing Company’s US $105 million acquisition of Vios Medical in 2017, PRA Health Sciences’ US $211 million acquisition of Care Innovations in 2020, and Preventice Solutions’ US $137 million series B in 2020. Data source: Pitchbook.
4.2. Telehealth: Virtual visits
The market is rapidly growing with 499 companies included.
Investment deals grew by 18X between 2010 and 2020 YTD (149 deals).
Invested capital peaked in 2020 YTD at US $2.03 billion. The pandemic has driven recent growth in both the deal number and the invested capital.
Figure 9. Investment trend of Telehealth: Virtual visits. Recent large deals include Amwell’s US $742 million IPO and its US $194 million series C in 2020, Oscar’s US $225 million and US $540 million later-stage rounds in 2020 and 2018, MDLive’s US $75 million series F in 2020, Doctor On Demand’s US $75 million series D in 2020 and US $74 million series C in 2018, Teladoc’s US $352 million acquisition of Advance Medical in 2018 and its own US 288 million secondary public offering in 2017. Data source: Pitchbook.
5. Personalized Health Care
Personalized health care is closely related to personalized medicine.
According to the FDA, personalized medicine is an innovative approach to tailoring disease prevention and treatment that takes into account differences in people’s genes, environments, and lifestyles.
Personalized healthcare is a broader term that includes not only genetics and genomics but also any other biologic information that helps predict risk for disease or how a patient will respond to treatments (source: Cleveland Clinic).
The goal is to target the right treatments to the right patients at the right time. Two subcategories are included.
5.1. Personalized health care: Predictive analytics
The market is maturing with 223 companies included.
Investment deals grew by 26X from 2010 to 2018 (105 deals) then declined.
Invested capital peaked in 2015 and 2018 at US $1.2 billion and US $645 million respectively.
2020 is likely to see maintenance of the level of the invested capital since YTD data mounted to US $438 million in 70 deals.
Figure 10. Investment trend of Personalized health care: Predictive analytics. Large deals include IBM’s US $1 billion acquisition of Merge Healthcare in 2015, Welltok’s US $88 million series E in 2018 and US $141 million series D in 2015, Centene’s US $175 million acquisition of Interpreta in 2018, and Biofourmis’ US $100 million series C in 2020. Data source: Pitchbook.
5.2. Personalized health care: Personalized medicine based on genetic markers
The market is maturing with 493 companies included. Investment deals grew vy 5X from 2010 to 2018 (149 deals), then declined to 127 deals in 2019.
Invested capital peaked in 2018 at US $2.68 billion.
In 2020 YTD, the invested capital mounted to US $1.65 billion in 100 deals. 2020 will see an increase in invested capital over 2019 with a similar level of deal count.
Figure 11. Investment trend of Personalized health care: Personalized medicine based on genetic markers. Recent large deals include Patia’s EUR 535 million LBO in 2020, Neogene Therapeutics’s US $110 million series A in 2020, Bio-Techne’s US $577 million acquisition of Exosome Diagnostics in 2018, 23andMe’s US $300 million and US $250 million later-stage rounds in 2018 and 2017, Helix’ US $200 million series B in 2018, and Tempus Labs’ US $100 million series G in 2020, US $200 million series F in 2019, US $110 million series E and US $80 million series D in 2018. Data source: Pitchbook.
6. Digital Therapeutics
Digital therapeutics emphasizes clinical evidence and real-world outcomes, which may not present side by side in other categories of digital health.
For a detailed explanation of the relationship between digital health and digital therapeutics, refer to this article.
The market is continuously growing with 133 companies, including most of the member companies of DTA. Investment deals grew by 40X from 2010 to 2019 (79 deals). Invested capital peaked in 2019 at US $1.26 billion. 2020 is likely to see a decrease in invested capital over 2019 with a similar level of deal count (US $539 million over 59 deals YTD).
Figure 12. Investment trend of digital therapeutics. Before the year of 2018, all deals were under US $80 million. A number of large deals over US $100 million emerged in 2019, including Click Therapeutics’ receipt of US $305 million of financing from Otsuka Pharmaceuticals, ResMed’s US $225 million acquisition of Propeller Health, and Health Catalyst’s US $100 million series F and US $182 million IPO. In 2020 YTD, notable deals include Headspace’s US $141 million later-stage rounds and Mindstrong’s US $100 million series C. Data source: Pitchbook.
While the space may have drawn explosive attention due to the COVID-19 pandemic, our detailed analysis has found the impact is not uniform across various categories and subcategories.
For the subcategory of mHealth: Wellness and fitness tracking, and nutrition mobile apps and the category of wearable devices, investments are continuing to decline in both deal count and capital invested, which already started before the pandemic. This shows the demand to expand adoption and evaluation of existing technological solutions.
For the subcategories of mHealth: Consumer health information mobile apps, Telehealth: Remote patient monitoring, Telehealth: Virtual visits, investments are increasing in both deal count and capital invested. This is a clear impact from shelter-in-place and physical distancing practices in the pandemic and the demand to have health information and services available to consumers in a remote fashion.
For the subcategory of mHealth: Medication adherence mobile apps, deal count is likely to decrease while capital invested has increased, signaling approaching maturity.
Written by Liyu Wang, Ph.D.
Senior Innovation Researcher at Runway Innovation Hub
Published in October 2020
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