Investments in health technology firms increased 79% year-on-year in 2021 with mental healh and digital services being the main targets, according to analysis by Hampleton Partners.
Its Healthtech M&A Market Report found a total of $57.2bn in funding was raised in 2021, up 79% on 2020.
The firm said the pandemic uncovered inadequacies and opportunities in the world’s healthcare systems with venture and growth capital being invested in digital health companies.
In terms of mergers and acquisitions (M&A) activity across the whole healthtech sector, there were 601 acquisitions in 2021, up 13% from 2020 and up 40% from 2019. Ten healthtech deals closed at over $1bn during 2021.
The top three deals by disclosed deal value over the year were:
- $30bn Data to Decision spent on buying Mediqon, a provider of software solutions to manage and analyse data for making informed healthcare sector decisions;
- $28.3bn for Oracle to acquire Cerner Corp, a provider of healthcare practice management software;
- $19.7bn which Microsoft used to purchase Nuance Communications, a provider of AI-enabled desktop and mobile interactive voice response and automation software.
The report said investors have shown a greater appetite for investing in mental health-related technology since the onset of the pandemic, with investment in these technologies hitting $5.5bn in 2021, up 139% on 2020.
Clinical trials technology has also seen an increase in investment – up 53% from $1.8bn in 2020 to $2.7bn in 2021.
Telemedicine and digital therapeutics
David Bell, director, Hampleton Partners, said: “Though the new investment has been significantly concentrated around telemedicine due to the pandemic, venture capital is increasingly diversifying its healthtech targets, with AI-based clinical decision software and digital therapeutics being key areas.
“We also found that Europe was a hot spot for investment with funding rounds significantly exceeding the global average, with a 131% increase to $6.7bn in total investment from 2020 to 2021.
“European digital health funding now accounts for around 12% of global investment, up from 9% in 2020.”
Bell added the current backdrop has led to increasingly significant capital raising and M&A consolidation, especially as the enterprise healthtech market alone is projected to reach $1.3trn by 2025.
“We anticipate overall sector volumes to be sustained during 2022, with valuations metrics in vertical software and precision medicine and online health to retain current levels due to their increasing importance within healthcare productivity and diagnosis,” Bell added.
“Ultimately, healthtech is benefitting from adoption and digitisation during Covid. In Europe and the US, it is an increasingly important investor asset class.”