In this era of Virtual and Hybrid care, the combination of Telehealth reimbursement, the ability for providers to practice nationwide and public’s acceptance to see their provider outside a standard hospital setting will solidify Virtual and Hybrid care as normal modalities of care.
COVID-19 has accelerated adoption and growth of Virtual and Hybrid care models, with 2020 on track to attract a record $16B, far outpacing the $12.1B+ raised in 2019. The pandemic has contributed to a renewed interest in alternative care, allowing this subsector to surge ahead of others. The positive sentiment around virtual care also translated to the public markets, with some of these companies up +100% since the start of the year. We can see details on the Healthtech investments and Alternative care growth and what we can expect going forward.
HealthTech Investments in the US, Europe and China
In 2020 it is projected that there is $16B+ funding in Global HealthTech. There were an astounding 14 $100M+ mega-rounds. Looking at Q4 2020, we predict that private venture-based companies may raise between $3.5B & $4.0B with 3-4 $100M+mega-rounds. This year, the US accounts for approximately 82% of global funding. While US and European funding trend upwards since 2017, China's funding is expected to decline by 62%, due to investor’s concern over high valuations and lack of notable presence in China.
Alternative Care Dominates 2020 with $4B+Raised, 38% of Total
Alternative care providing primary or special care outside of hospital or private practice has raised a total of $10.5B. The Provider Operations which increases efficiency & accuracy of provider-provider, provider-patient interactions have raised about $7.9B. The Insurance sector which develops models for privately insured, Medical and/or populations raised $3.1B. Clinical Trial Enablement which provides solutions to accelerate drug discovery and the digitalization of clinical trials has raised $3.6B.
Also it has other sectors contributing to the system such as Healthcare Navigation, Wellness & Education, Medical Management. Since 2019, 15 healthcare companies have achieved the coveted $1B+post-money private valuation. It is predicted that there will be 10-15 more Unicorns in the next 12-18 months. Also 60% of the five US venture-backed healthcare IPOs in 2020 have had a $1B+ pre-money valuation at IPO.
Hybrid and Virtual Care Models Spur Growth in 2020
Alternative Care(AC) is projected to see $5.6B in total funding for 2020. Historically, companies have skewed either toward providing virtual or in-person care. However, due to widespread adoption of Telehealth during the COVID-19 pandemic, in-person companies are adopting Virtual care, creating a Hybrid care model. Hybrid care is said to be more valuable than Virtual care in later stages. Hence the Alternative Care companies have started to integrate primary care and speciality care. To date 29 platform care companies have been identified, of which two-thirds are focusing on Virtual care.
Virtual Care Drives Public Market Performance
A global healthtech index was created to track the public market performance of private, venture-backed healthtech companies post-IPO. This index only considers venture-backed companies that went public on their local exchange and raised at least $25M in proceeds since 2015. Global M&A declines, but tech may drive future deal activity - 2020 is projected to have a total of 67 global private M&A healthtech deals, a roughly 13% decline from 2019 and 2018.
25% of Drug Discovery Companies Develop In-House
Q3 2020 was clinical trial enablement’s (CTE) highest-funded quarter to date, with $832M across 20 deals. XtalPi’s (drug discovery platform) $319M Series C round accounts for 38% of the total. Of the 47 drug discovery platform companies that have raised since 2018, 25% are using their computational platforms to develop their own drug pipelines. These companies have achieved a median post-valuation about 1.5x higher at later stages than purely computational drug discovery companies ($150M vs. $104M).
As for public markets, there will be more top-tier companies considering a public offering over a private M&A to achieve liquidity, sure to the strong post-IPO performance of the companies over various subsectors. In the corporates, we can see the technology and Biopharmaceutical companies more to use tech-enabled products and services to diagnose and treat patients, resulting in competition against one another for investments and acquisitions. Further there will be regulations reduced, where the barriers in how technology can be leveraged within healthcare will be changed.