Healthcare investments soared in 2017, and biotechnology was by far the most invested-in group at $13.8 billion as reported by AngelMD. 2018 is on track to exceed 2017. The MoneyTree Report from PricewaterhouseCoopers and CB Insights said $10.6 billion was invested in health-care deals in the first half of 2018.
Health insurers have been starting venture-capital arms to find new ideas to improve their business and generate financial returns. The biggest health insurer, United Health Group, said its Optum unit created a venture arm with $250 million in funds. Humana, Kaiser Permanente, a BCBS group of insurers and Cigna Crop have all launched venture funds or units to invest in healthcare startups.
Health insurers have some significant competition.
Since 2012 the top ten tech corporates in the US, Apple, Alphabet, Microsoft, Amazon, Facebook, GE, Oracle, Intel, Cisco and IBM, have participated in 209 healthcare financing deals and have spent a total of $4.7 billion on 25 healthcare acquisitions. Top tech companies have participated in 27 funding rounds in 2018 so far – already equal to the total number of deals seen in 2014. With this run rate, 2018 is on track to reach 41 deals, slightly below the peak of 45 in 2017.
Google and GE are the most active investors in healthcare startups but while GE announced plans to divest its healthcare assets in June of 2018, it has continued to make healthcare investments out of its GE ventures investment arm. This divestiture of GE’s does partially account for the decline in investments in medical devices and equipment in 2018 as GE participated in 21 of 37 medical device investments since 2012.
Google has participated in 14 of the 15 largest healthcare raises in 2018 that included big tech companies. Oscar Health Insurance, a technology focused health insurance company founded in 2012, garnered $165M from Google and $375M from Alphabet. Google also remains active in the biotechnology space participating in 30 of the 36 deals since 2012. With only a 10% chance of FDA approval for Phase 1 Drugs this sub-sector is relatively risky.
Apple has focused more on building out its internal healthcare services HealthKit, CareKit and ResearchKit. It acquired sleep monitor company Beddit in May of 2017 and personal health data platform, Gliimpse, in 2016.
Some of this interest by the tech giants in health care was fueled by the rise in wellness apps and at-home or on-the-go wellness monitoring. But it has moved beyond that into a variety of health care areas. Health insurers should have the inside track on investing in this area with their in-depth industry expertise, but competing with the most well-funded companies in America for investment opportunities will be a challenge.