Healthcare investments hit $3.8 billion in the second quarter of 2017, marking a spike in these deals and a milestone for the healthcare industry in general, according to StartUp Health’s half year report. The trend of fewer deals but with larger rounds continued, the report noted, with $6.5 billion raised for 306 deals. Examples included healthcare education and advertising business Outcome Health ($600 million) and Guardant Health ($360 million).
StartUp Health’s reports have highlighted a growing number of life science companies among the digital health businesses it spotlights. The argument for inclusion is that businesses like Freenome have a substantial software component even if the core business is diagnostics or drug development.
Two investors that embrace this hybrid approach to healthcare investment also topped the category for investment volume — Alphabet’s investment arm, GV, and Khosla Ventures with seven deals apiece.
GV led or took part in healthcare investments from Series A to C with investments in Aledade to ZappRx.
Aledade’s software is designed to support accountable care organizations. Cofounded by Farzad Mostashari, a former National Coordinator for Health IT, the business closed a $20 million Series B round with participation from GV. The investor also led a $25 million round for a health IT business ZappRx, which is trying to make it easier for providers to expedite specialty prescription orders.
Clover Health, a care coordination business that provides Medicare Advantage insurance and benefits to New Jersey residents raised $130 million to help scale its business to three more states.
The vc’s investments also covered the life science companies with some pretty large ambitions. GV led a Series C round for Science 37, a healthcare business that wants to transform clinical trials to make them more flexible and correspond with patients’ professional needs in addition to the FDA’s.
In the first quarter, GV took part in Freenome’s $65 million Series A. Freenome is equal parts biology and software. It uses liquid biopsies and machine learning to determine which biological signatures are most relevant to early detection of certain cancers and autoimmune diseases. The goal is to impact patient outcomes, to prevent the onset of a disease altogether.
Magenta Therapeutics, a biotech developing therapies that involve transplanting stem cells to cure disease raised a $50 million Series B round led by GV. Fulcrum Therapeutics, which is developing small molecule therapies for fragile X syndrome and facioscapulohumeral muscular dystrophy. The idea is to use these therapies to impact gene behavior for genetic diseases.
Khosla Ventures also made some big bets on life sciences companies. eGenesis wants to harness CRISPR technology or xenotransplantation — cross-species transplantation —to produce human transplantable cells, tissues and organs grown in pigs to deal with the shortage of suitable organs for transplants. It raised $38 million in March. Khosla also led a $24.5 million Two Pore Guys, a biotech business developing a handheld diagnostic enlisting nanopore technology —to detect chemicals with high sensitivity. Guardant Health raised $360 million to sequence tumor DNA from one million cancer patients over five years with the goal of early cancer detection.
Digital health investments from Khosla included MD Algorithms which produced MDAcne, a mobile app developed by dermatologists for which users to take selfies and questionnaires to identify customized skin treatments. Twine Health, which tweaked its business model, and Catalia Health also got some Khosla love.
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