After a very active and lucrative Q1 and Q2, funding for digital health companies has cooled a bit in Q3, according to the latest Rock Health report. The raises came in at a total of $1.3 billion this last quarter, down from the roughly $2 billion seen in Q1 and Q2.
Additionally, the report points to three major trends this quarter: more mega deals over $100 million, companies exiting via IPOs and the rise of behavioral health and femtech products.
After a few frigid years without any digital health IPOs, 2019 has turned a corner. So far five digital health companies have gone public, according to the report.
However, results have been lukewarm now that these digital health companies are in the public arena, the Rock Health researchers wrote.
“Early public market performance for these IPOs has been mixed,” Sean Day, a researcher at Rock Health and author of the report, wrote in the document. “As of October 1, Health Catalyst is trading about 20% below its closing price on the first day of trading after increasing more than 20% in the weeks following its public offering. Livongo’s share price fell following its first earnings report as losses were greater than analysts expected, despite 156% revenue growth that beat Wall Street estimates. Phreesia and Change Healthcare have largely traded within +/- 10% of their offering price. And Peloton’s stock price dipped after the company went public on September 26, which some took as a sign that 2019’s hot IPO market is cooling off for the moment.”
Rock Health also reported that digital behavior health companies accounted for 8% the total funding this quarter. Behavioral health companies have also seen an increase in the size of their deals to $26 million, up a staggering 73% from 2018.
Women’s health companies have also seen significant rises in funding as well. Rock Health reports that funding for women’s health companies increased by 812% from 2014 to 2018.
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