Print“We are seeing significant momentum in terms of private venture capital funding flowing into the HIT sector, and a robust M&A; environment is providing investors and the industry with liquidity and viable exit options, says Raj Prabhu of Mercom.”
Venture funding for health information technology businesses reached $184 million during the first quarter of 2012, rising 16 percent from the fourth quarter of 2011, according to a new report by Mercom Capital Group, a healthcare and clean technology communications firm.
The financings were completed in 27 deals, the highest number Mercom has recorded since it began tracking the sector in 2010, and included a total of 46 different venture investors. The average deal size was $6.8 million.
”We are seeing significant momentum in terms of private venture capital funding flowing into the HIT sector, and a robust M&A environment is providing investors and the industry with liquidity and viable exit options,” says Raj Prabhu, Mercom’s managing partner.
Health information management companies secured the lion's share of the $184 million total, accounting for $103 million of the total in 15 deals. Austin-based Kinnser Software, a provider of clinical support software to home health companies, was the biggest of these investments with a $40 million series A round from Insight Venture Partners. Other major financings in the sub-sector included a $22 million investment in the Indianapolis-based health insurance web portal provider Healthx by Frontier Capital and a $14 million investment in Atlanta-based Sharecare by Galen Partners and TomorrowVentures made in January. The media conglomerate Hearst acquired Sharecare in March for an undisclosed price.
Personal health record companies captured the next largest pool of funding, with $32 million in four deals, according to Mercom.
Since the first quarter of 2010, M&A transactions have outpaced VC funding transactions by almost two to one, with 98 VC funding deals and 223 M&A transactions, says Mercom. Just three M&A transactions in Mercom's survey disclosed deal values during the first quarter. They were Verisk Analytics' $349 million acquisition of the medical record aggregation and analysis specialist MediConnect Global; Nuance Healthcare's purchase of the transcription and clinical documentation company Transcend Services; and DexCom's $4.5 million all stock purchase of SweetSpot Diabetes Care, a cloud-based platform for uploading and processing diabetes care data. SweetSpot stands to earn $4 million more if it meets certain performance milestones.
Just one company in the sector completed an IPO in the first quarter: Greenway Medical Technologies, which sells electronic medical records systems. The results so far have been positive, with the company achieving a recent share price of more than $15 per share after having debuted on the NYSE for just $10 per share. With excitement in the technology sector rising in anticipation of the pending Facebook IPO and the much more direct impact of the 2015 deadline for hospitals to adopt "meaningful use" of health information technologies nearing, fervor for health IT companies, especially those involved in the processing and interpretation of health records, is likely to grow.
April 19, 2012
http://www.burrillreport.com/article-health_it_deals_hot_in_q1.html
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