VC funds HIT to the tune of $293M in Q2

By Erin McCann
03:59 PM

A Mercom report released Monday highlighted merger and acquisition activity within the healthcare IT sector -- and pegged second quarter venture capital funding at $293 million for the industry.

The study, published by Mercom Capital Group, a global communications and consulting firm, cited 28 health IT venture capital deals occurring over the second quarter of 2012. Officials noted that both the total amount and the number of deals were at their highest levels since 2010.   

“The strong uptrend that started in Q2 2011 has continued for four quarters in a row,” said Raj Prabhu, managing partner at Mercom. “Also significant is the continued strong M&A activity in the sector, providing investors and companies with viable exit strategies.”

[See also: Venture capital starts return to IT.]

Sixty-one different investors participated in these funding rounds with Founders Fund and Venrock participating in multiple deals, officials said.

In Q2 2012, health information management companies received the most funding as a technology group, with $247 million in 19 deals, followed by telemedicine companies with $19 million in three deals and personal health record companies reaching $16 million in four deals.

Moreover, report officials cite only two new funds in Q2 that centered their efforts on health IT. Wayzata, Minn.-based Lemhi Ventures launched a $150 million venture fund available to new technologies companies that aim to address drawbacks present in the current healthcare system.

Minneapolis, Minn.-based ABILITY Network and Greenwood Village, Colo.-based Recondo Technologies are among several of the companies in which Lemhi Ventures has invested.

The NY-based Pallwoda Group has also announced a health technology fund in an undisclosed amount for Q2. Officials say the group will focus on companies addressing issues pertaining to cost transparencies and remote patient monitoring. 

Top venture capital HIT funding deals
According to the report, the top VC funding deal this quarter was the $100 million raised by Castlight Health, a provider of healthcare Web and mobile-based transparency solutions that enable comparisons of doctors, hospitals and medical procedures based on price and quality. 

Garnering second place, raising $34 million, was Practice Fusion, a developer of free web-based EMR technology. Tying for third and both raising $30 million was Valence Health, a provider of clinical integration, data collection and analysis software and Liaison Technologies, a provider of cloud-based integration and data management solutions.  

Other "honorable mention" deals include the $14 million each raised by Carena (a provider of healthcare services 24 hours a day via phone, secure video, and the traditional house calls) and Awarepoint Corporation (which develops real-time location system (RTLS) solutions for healthcare). The average VC deal size in Q2 was $10.5 million, according to report findings. 

[See also: Venture capitalists see healthcare IT as good bet.]

Top HIT merger and acquisition transactions
There were 39 merger and acquistion transactions in Q2 2012 amounting to $2.9 billion, according to the report, of which only seven transactions disclosed details. 

Top M&A transactions included Thomson Reuters’ HIT business, acquired by Veritas Capital for $1.25 billion; Decision Resource Group, a health information company acquired by Piramal Healthcare Limited for $635 million; and Extend Health, a private medicare insurance exchange acquired by Towers Watson for $435 million.

In Q2, HIM companies accounted for 17 M&A transactions followed by 11 transactions for revenue cycle management companies.

“Most mergers and acquisitions were strategic in nature but private equity firms were very active this quarter and were involved in five M&A transactions,” said Prabhu.

For a complete list of Q2 2012 transactions in the Healthcare IT sector, click here