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The Investments We’re Making—And Not Making—In Digital Health

January 5, 2017, 7:06 PM UTC

More digital health deals—296—were done last year than ever, though the average deal size ($13.8 million) was smaller than it was in either 2015 or 2014. Startups devoted to genomics and sequencing got the lion’s share of the investment ($410 million), followed by analytics and “big data” companies ($341 million). And of the 17 digital health concerns that have gone public since 2012, 10 are trading at above their IPO price and seven below.

All this and more I learned from Rock Health’s impressive 2016 Year End Funding Report: A reality check for digital health, compiled by Rock Health founder and industry veteran Halle Tecco (with help from colleagues). Data grazers will find plenty to chew on here. And whether you come away feeling as if this has been a standout year in venture funding or a disappointment is likely to reflect whether you’re more excited about dollars (the $4.2 billion invested in 2016 is down about $400 million from the previous year’s tally) or participation: “Four hundred and fifty-one unique investors made bets in digital health this year,” the Rock Health team reveals, of whom 237 investors put down their first stakes in the field. (I’m a participation guy, so count me as an optimist.)

But one set of statistics in the report was particularly sobering—and that’s the number of women CEOs in this burgeoning space. Just 9% of digital health companies had a female boss compared with 11% the year before. (Rock Health counts only U.S. deals and those that are worth more than $2 million, so that limits the universe a bit.)

That 9% share is better than that for the corporate giants—the Fortune 500 has but 25 women CEOs (5%)—but not much better. Given that women have long held a higher share of top management jobs in healthcare than they have in other industries (one in five hospital CEOs are women, for instance), I had thought—and hoped—that the digihealth arena would be more equitable in gender representation than the rest of the techosphere. I was wrong.

So why haven’t we done better? Klick Health’s Diljot Chhina offers some very informed perspective here—in a piece last January for who else? Rock Health.

What else is in the ether today? Sy has some fascinating news below—including one report on how insane biopharma M&A valuations have gotten. One fact: The median buyout in 2016 was 39 times sales revenue, double the level in 2015, according to an analysis by Novasecta. Hmm…did I say I was an optimist?

Clifton Leaf


Activating your medication with... light? Researchers at the University of North Carolina at Chapel Hills are working on an experimental tech that's, well, just downright cool: using long-wavelength light to activate medicines at very specific sites. The technique involves binding a drug and a phosphorescent molecule to vitamin B12 and then loading this package into red blood cells that circulate throughout the body. Since the light-sensitive molecule can better capture long-wavelength light, it can harness the energy of that light to break apart the energy bond and activate the medicine. As lead researcher David Lawrence points out, that has a lot of implications beyond just the "wow" factor. "[The] benefits could include avoiding surgery and the risk of infection, making anesthesia unnecessary and allowing people to treat themselves by shining a light on a problem area, such as an arthritic knee," he said. (Fortune)

A government subcontractor left Special Ops medical data exposed. It's hard enough for the health industry to grapple with the reality of hacking and data breaches without giving would-be cyber criminals more ammunition. That appears to be what happened at Potomac Healthcare, a Defense Department subcontractor that exposed 11 gigabytes of sensitive data (including Social Security numbers and salaries for Special Ops workers) through an unsecured remote synchronization service, according to white hat hacker Chris Vickery. "Let's hope I was the only outsider to come across this gem," said Vickery on his blog, noting that it took Potomac more than an hour and a half to fix the issue after he alerted the firm. "Let's really hope that no hostile entities found it. Loose backups sink ships." Potomac, for its part, says that it addressed the exposure in a timely manner. "Upon learning of the allegation, we immediately initiated an internal review and brought in an external forensic IT firm for additional support," the company said. (Healthcare IT News)

Your FitBit is getting a social feed. FitBit announced a slew of major software updates at the ongoing Consumer Electronics Show (CES) in Las Vegas, including a social media feed on its main app meant to keep users motivated. The company is also revamping its personalized workout recommendation service—all part of an effort to get the company's 17 million customer-strong user base to be more engaged with their fitness trackers. "The new news feed in the Fitbit app will allow users to post pictures and brag about their fitness activity to friends along with notices about sponsored fitness events and tips from the company," writes my colleague Aaron Pressman. FitBit hasn't announced any new devices as part of its CES update. (Fortune)


Another pharma vet heads into biotech. In what's becoming an increasingly popular trend, a major pharma veteran is taking his industry experience over to a biotech-focused venture capital firm. This time, it's former Novartis pharmaceuticals unit head David Epstein, who will be heading over to Cambridge, Massachusetts-based Flagship Pioneering. As the Wall Street Journal notes, pharma bigwigs like former Sanofi CEO Chris Viehbacher and former AstraZeneca chief medical officer Briggs Morrison have made similar moves into the biotech sphere, where companies tend to run leaner, take bigger risks, and get a significantly higher return on their R&D investments compared with traditional pharma companies. (Wall Street Journal)

Biopharma M&A valuations are out of control. What's a reasonable premium for acquiring a company or an asset? 25%? 30%? Well, in the world of 2016 biopharma M&A, the median payout for a deal was 39 times sales revenue, according to a new analysis by consulting firm Novasecta. Astonishingly, that's actually double the median valuation in 2015, when deals paid out 19 times revenue. There's no shortage of examples. Just consider Allergan's $1.7 billion deal for the liver disease drug maker Tobira Therapeutics, which pegged the biotech at 19 times its market value for the $50 million upfront cash component alone (and the company doesn't even have any approved products on the market). The question is: Is the trend sustainable? Or will this level of inflation keep would-be buyers on the sidelines until things cool down?

Joe Biden will have cancer drug prices in his crosshairs after leaving office. Vice President Joe Biden told the Washington Post that he will be launching a nonprofit after leaving office later this month in order to tackle a wide array of issues related to cancer, including the sky high costs of cancer treatments. “I’m going to begin a national conversation and get Congress and advocacy groups in to make sure these treatments are accessible for everyone, including these vulnerable underserved populations, and that we have a more rational way of paying for them while promoting innovation,” Biden said in an interview with the Post, adding that pharmaceutical companies are aware that their prices are unsustainable. The new organization will also concentrate on many of the issues that Biden has tackled as head of the White House's Cancer Moonshot program, including promoting data-sharing and getting more people into clinical trials. (Washington Post)


Wide-ranging panel of experts announces new peanut allergy prevention guidelines. A group of organizations including the American Academy of Pediatrics, the American Academy of Family Physicians, the American Academy of Allergy, Asthma & Immunology, have released a new set of guidelines on how to best prevent peanut allergies in children. The group's new recommendations are based on a recent gold standard trial finding that introducing peanuts into infants' diets can actually prevent them from developing an allergy, especially in children who are at the highest risk of peanut allergy (such as those with asthma, eczema, or an egg allergy). Public health officials say the guidelines are meant to provide a unified source of information for health care providers and parents. (CNN)

Obamacare repeal battle continues to be fluid, contentious. On Wednesday, the newly-inducted, GOP-controlled Senate fired the opening legislative shots of the Obamacare repeal wars, voting 51-48 on a procedural motion to start debate on a budget resolution that will then be used to dismantle the health law. Notably, the only Senator to break with his part was Republican Rand Paul, who has also previously warned against repealing the Affordable Care Act without establishing a replacement. Debate over the budget resolution began today and will stretch into next week, after which Democrats can add troublesome amendments to the bill. If it passes, various Congressional committees will then begin constructing a budget reconciliation bill that can take apart Obamacare and only require a simple majority vote to pass.


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Produced by Sy Mukherjee

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