COVID Fueled Health Tech Investment; Can The Momentum Last? | Deloitte US has been saved
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By Peter Micca, partner, National Health Tech Practice leader, Deloitte & Touche LLP
For investors, health tech has never been hotter. Investors pumped nearly $15 billion dollars into 372 digital health care deals during the first half of 2021. That tops investments for all of 2020.1 A decade ago, digital health investments were a fraction of what they are now (fewer than 100 deals and just $1.1 billion in investments).2 As I mentioned in my January blog, many investors view the post-pandemic era as a multi-year opportunity.
Some of our clients are now beginning to ask us when (or if) interest in health tech might begin to cool down, and what might cause that to happen. We think the following two factors—along with emerging demographic and macroeconomic trends—could have a sizable impact on future investment trends:
Health care is changing, investors are watching
Deloitte’s Center for Health Solutions recently collaborated with MedTech Innovator (MTI)—a global nonprofit accelerator for medical devices, digital health technology, and diagnostic companies—to evaluate trends across the start-up landscape. We also interviewed leaders from start-ups and companies that could be strategic acquirers. Our report will be released in September. Through our data analysis and interviews, we quantified the following trends:
SPACs offer start-ups an alternative to IPOs
Start-ups need money to generate clinical evidence to show the commercial potential of a product or idea. Initial Public Offerings (IPOs) via the open market have traditionally been the most common way for start-ups to access public funding. Special purpose acquisition companies (SPACs), which offer an alternative path to IPOs, are among the biggest growth areas on Wall Street. These investment vehicles raise funds and then look to merge with one or more privately held companies. Over the past year, SPACs have grown in popularity in a wide range of sectors, including health care. In 2020, for example, close to 20 SPAC transactions were focused in the health care industry, higher than during the past four years combined, according to our recent report, SPACs find new prescription in health care. Here are two recent examples:
The COVID-19 pandemic likely accelerated investment trends that were already well underway. Health technology has moved into the mainstream and is no longer limited to niche investors. Amid economic headwinds, investors (and consumers) saw potential value in everything from telemedicine to wearable devices to artificial intelligence and health care robotics. The commitment to developing innovative products that support the whole patient journey appears to be even stronger than it was before the pandemic. Few if any health technology investors are still talking about the COVID-19 pandemic. Instead, they are focused on consumerism, health access and equity, remote patient monitoring, virtual health, and interoperability. While some factors could cause investment trends to slow, virtual and digital health are now a part of the fabric that connects consumers—and investors—to health care.
1. H1 2021 digital health funding: Another blockbuster year…in six months, Rock Health, Q2 2021
2. Q1 2021 funding report: digital health is all grown up, Rock Health Q1 2021
3. Empowering digital health stakeholders to advance health care, US FDA Digital Health Center of Excellence, July 9, 2021
4. Digital Health Software Precertification Program, US FDA Digital Health Center of Excellence, May 6, 2021
5. Software as a Medical Device, US FDA Digital Health Center of Excellence, December 4, 2018
6. HealthFlow, the leader in precision heart care, announces merger with Longview Acquisition Corp. II to become a publicly traded company, HeartFlow press release, July 15, 2021