Artificial intelligence (AI) has helped the med-tech industry in numerous ways. From genomics, to screening, to diagnostics, AI has made things easier for clinicians.
And that has caught the eye of investors. According to Mercom Capital Group LLC, as a whole, digital health venture capital funding in the second quarter 2019 jumped from the previous quarter ($3.1 billion raised in 169 deals vs. $2 billion raised in 149 deals).
"There is continued momentum for funding in the digital health space," Raj Prabhu CEO of Mercom Capital Group, a global communications and research firm, told BioWorld MedTech. "There were three large deals of over $200 million in the first half of this year that put funding totals slightly ahead of last year."
Of note, telemedicine proved a popular area, as the reimbursement is clearer than in other areas. "Future revenue potential and the market size is easier to forecast. We expect this trend to continue as more states reimburse a wide range of telemedicine services with lower restrictions," Prabhu explained.
Still, one sector seeing good growth is AI. The group's report noted that health care analytics companies concentrating on predictive analytics, machine learning and AI had a healthy first half of 2019, raking in $1.1 billion.
In particular, medical imaging companies that use AI saw a strong second quarter, according to the Mercom report, Digital Health Funding and M&A: 2019 First Half Report. It called out three companies in the imaging space – which brought in $68 million in six deals in the second quarter of 2019 vs. five companies that raised $14 million the first quarter of the year – as examples.
One company that has led the trend is Aidoc Ltd., of Tel Aviv, Israel. This spring, Aidoc scooped up $27 million in a series B round led by Square Peg Capital. (See BioWorld MedTech, April 22, 2019.) For its part, Aidoc has experienced a number of wins this year. As an example, it reported in May that it had gained the FDA's nod for its pulmonary embolism product in its suite of AI-based workflow orchestration solutions. (See BioWorld MedTech, May 17, 2019.)
And just this month, Aidoc saw a win in Australia, with Global Diagnostics Australia, a subsidiary of the Integral Diagnostics Group, revealing that it had adopted AI applications into its radiology workflow. It incorporated Aidoc's algorithms into its care management pathway, with an eye toward expediting patient diagnosis and treatment for several head, neck and chest conditions.
Also seeing a good quarter, according to the report, was Icometrix, a provider of AI-enabled medical imaging solutions, which raised $18 million in a round led by Forestay Capital, with participation from Optum Ventures and existing investor Capricorn Venture Partners.
The company, which has a presence in Chicago and Leuven, Belgium, has developed I6cobrain software, which is both FDA cleared and has the CE mark. It extracts information from brain MRI and CT scans of patients with neurological disorders – such as multiple sclerosis, Alzheimer's disease and dementia, and traumatic brain injury.
Also highlighted was Enlitic, a developer of AI-enabled algorithms to streamline medical imaging workflows for radiologists, that raised $15 million in a series B. It aims to streamline medical imaging workflows for radiologists while enhancing its AI product portfolio, augmenting its engineering and data scientist teams and focusing on regulatory approval for clinical use in the U.S., Australia, Japan, Europe, Canada and Brazil.
Prabhu went on to explain that there were more investors in the second quarter this year vs. the same period last year. "About 50 investors participated in multiple deals this year during the second quarter compared to approximately 30 last year in the same quarter. Other than VCs investing in multiple deals, we also are seeing investments from a diverse group of companies, including venture arms of pharma, tech, insurance, financial services, among others."
And AI has done spectacularly well across all industries. Financing stood at $4.9 billion for the second quarter. As the PwC/CB Insights Moneytree Report for Q2 2019 highlighted, that figure dwarfed previous number and was up from $2.7 billion in the first quarter. Of the top five deals, one was in the health care/biotechnology space – Tempus Inc., of Chicago, which saw a $200 million series F. (See BioWorld MedTech, July 12, 2019.)
Citing statistics from Rock Health, PwC analysts in a report titled Top health industry issues of 2019: The New Health Economy comes of age, noted that VC funding for digital health startups exceeded $6.9 billion in 2018, an increase of 230% from five years ago.
Prabhu also sees digital health as continuing to grow bigger worldwide, naming China, India, Canada, and the U.K. as countries that are very active. "Sweden, Israel, Australia and Germany are also seeing VC deals in this sector increase."
The report also noted that digital health VC funding in the U.S. was concentrated in California and New York. With that said, several states are catching up, such as Massachusetts, Texas, Illinois, Pennsylvania and Florida, Prabhu said.
While VC investment is hot, M&A has dipped. Prabhu said the area is relatively new, and many of the companies lack both the revenues and revenue models to make them attractive acquisition targets. "While these technologies are cool, companies have to figure out how their products plug into health practices and help increase efficiency or save costs."
Of note, mobile health companies reported nine transactions in the second quarter and telehealth companies with four, personal health companies with three and social health companies with one transaction.
Looking at the money
There has been range of financing sizes in 2019, according to data generated from Cortellis. For example, the year started out strong for Swiss big-data company Sophia Genetics, which raised $77 million in fresh funding. The series E was earmarked to accelerate the adoption of the Sophia (artificial intelligence) platform in hospitals globally, with a specific focus on the U.S.
According to the company, Sophia AI is democratizing data-driven medicine worldwide, helping clinical experts make sense of genomics and radiomics data. It already is used daily by oncologists, geneticists, pathologists and radiologists in almost 1,000 health care facilities in 82 countries.
"It has helped us build an even stronger team in the U.S. We are growing with committed talents and new offices for our Boston headquarters," Tarik Dlala, VP marketing at Sophia Genetics, told BioWorld MedTech earlier this month when asked how the funding subsequently has helped the company.
Among the new talent attracted to the company is Troy Cox. In July, the company reported that Cox, who previously served as CEO of Foundation Medicine Inc., had become a board member.
The company also is concentrating on crafting partnerships with pharma companies. For example, earlier this month, the company revealed that it was partnering with ADC Therapeutics SA, an oncology drug discovery and development company that specializes in the development of antibody drug conjugates (ADCs). ADC is evaluating the target candidate ADCT-402 in a phase II clinical trial in patients with relapsed or refractory diffuse large B-cell lymphoma.
When asked about other partnerships, Dlala said those are certain. "Sophia Genetics can further support the optimization of drug development by leveraging Sophia advanced technology and the global expertise gathered within the community."
For its part, Healthjoy, a Chicago-based company focused on simplifying health care simple through AI-powered guidance, raised $12.5 million in series B financing led by U.S. Venture Partners. Also participating were Epic Ventures and existing investors Chicago Ventures, Sidekick Ventures, as well as co-founders.
The company reported good news in June with the launch of Healthjoy EAP. This Employee Assistance Program (EAP) offers 24/7 year-round support for employees to address personal and professional issues. It is a fully integrated service within the Healthjoy mobile app.
Also scooping up more funds in a series B was Notable Labs, of Foster City, Calif. It reported a $40 million series B round in July co-led by B Capital Group and Lifeforce Capital. This round brings Notable's total funding to more than $55 million. The company said its approach can help predict which types of patients are most likely to respond to a drug in as little as five days.
Series A deals
A number of series A financings have come down the road this year, including Xealth Inc., of Seattle, which closed a round financing with an additional $3 million from new investors Atrium Health, Cleveland Clinic and Memorialcare Innovation Fund. The proceeds, which now total $14 million, will go toward further developing and deploying the company's digital prescribing and analytics platform. The company is aiming to help health systems organize and utilize digital health tools to optimize workflow, patient engagement and financial results.
Meanwhile, Dotlab, of San Francisco, scooped up $10 million in series A funding, with Coopersurgical, a unit of The Cooper Companies serving as lead. (See BioWorld MedTech, July 5, 2019.) It's concentrating on an interesting area, demonstrating AI's reach – namely, a noninvasive diagnostic test for endometriosis by combining biomarkers with machine learning. That's a step forward from the clinical standard for endometriosis, i.e., laparoscopic surgery under general anesthesia.
Also taking in $10 million was Palo Alto, Calif.-based startup Symphonyrm to help accelerate its growing investment in its AI algorithms and consumer relationship management platform. (See BioWorld MedTech, May 20, 2019.) Symphonyrm aims to help health systems change how they acquire, engage and retain patients by generating data-driven, prioritized next best actions for every stakeholder in the health care process.
In May, Ablacon Inc. reported the raise of a healthy $21.5 million series A financing led by Ajax Health. (See BioWorld MedTech, May 2, 2019.) The Wheat Ridge, Colo.-based company plans to use the new funds to develop its technology pipeline and finance clinical trials of its Electrographic Flow system, which uses AI and machine learning to map and analyze electric signals in the heart and identify the sources of atrial fibrillation. Subsequently, the company entered a $10 million venture debt facility with Western Technology Investment. The debt is accompanied by a $2 million equity investment in the company. This financing is earmarked for Ablacon's first multicenter, randomized clinical trial of Ablamap, an advanced mapping system for patients with atrial fibrillation.
Columbus, Ohio-based Deep Lens Inc., which is using AI to help in clinical trial recruitment, reported that it has closed a $14 million series A financing, led by Northpond Ventures. (See BioWorld MedTech, April 15, 2019.)
Fifth Eye Inc., of Ann Arbor, Mich., reported an $11.5 million series A investment led by Arboretum Ventures and Cultivation Capital. (See BioWorld MedTech, April 3, 2019.) The financing was earmarked in part for snagging FDA clearance of Fifth Eye's first product, the Analytic for Hemodynamic Instability.
Sherlock Biosciences reported the close of its series A round, with a total investment of over $31 million from Northpond Ventures, Baidu Ventures, the Open Philanthropy Project, and other investors. The additional funds bring Sherlock's total committed capital to $49 million, which includes a $17.5 million non-dilutive grant from the Open Philanthropy Project. (See BioWorld MedTech, March 25, 2019.)
For its part, Pr3vent Inc., of Palo Alto, Calif., said it closed a series A financing led by In Focus Capital Partners in February. The funds followed an October 2018 seed round, and will be used to further develop the company's AI offerings in the ophthalmic space. "Pr3vent's unique mission is to protect vision for every newborn, and ours remains the only AI capable of universal screening of newborns at scale," Jochen Kumm, Pr3vent CEO, told BioWorld MedTech earlier this month whether any other company was working in this space. "Screening for abnormality is different from diagnosis – it is comprehensive, integrates more readily into the existing health care process and focuses on what matters: vision." He added that its neural networks perform with "unprecedented sensitivity and specificity" because they are built to examine the newborn retina.
Kumm said the company has several near-term plans. For example, his company is in the pre-submission process with the FDA to speed a clinical study that shows the company's AI can screen for a range of pathologies in newborns.
"We are working in the Amazon Cloud to build and ensure Pr3vent is available nationwide for everyone," Kumm added, noting that the company plans on expanding its AI's capabilities to recognize and accommodate real-life artifacts in images.
Looking to Israel
A report from the Israeli nonprofit Start-Up Nation Central, there are a number of newly established companies in that country that focus on decision support subsector, where AI and machine learning play a huge role.
"While globally AI/ML is the fastest growing technology, this trend is even more pronounced in Israel: 85% of sector funding in Israel went to AI-based Digital Health companies, a 120% year on year increase," the authors of "Israel's Digital Health Industry in 2018," released earlier this year, wrote. That figure is higher than in the U.S., they added.
One company that has done well is Tel Aviv, Israel-based Healthy.io, which raised $18 million in series B funding. The funding, reported in February, was earmarked for helping scale the company's home testing service based on its U.S. FDA-cleared smartphone urinalysis test-kit. The funding round was led by Aleph, with Samsung Next and private investors also participating. The company has noted that it has combined computer vision and AI to turn the smartphone camera into a clinical-grade medical device.
Another Israeli company, Ibex Medical Analytics Ltd., of Tel Aviv, has developed an AI-driven computational pathology cancer diagnosis system. In March, the company reported the completion of an $11 million series A funding round led by Amoon Fund. In early August, the company said that Ajit Singh, managing director of Artiman Ventures, a Silicon Valley-based VC firm, would be joining its advisory board. He previously worked at Siemens Oncology and Siemens Imaging Systems and was the CEO of Bioimagene, a digital-pathology based cancer diagnostics startup that was picked up by Roche.
Earlysense Ltd., of Ramat Gan, Israel, which focuses on contact-free, continuous monitoring solutions for the health care continuum, reported in January that it had completed a $39 million round, with the majority of the funding coming from Hillrom Inc. and Wells Fargo Strategic Capital. Earlysense's technology leverages big data and advanced machine learning algorithms to generate health information, allowing clinicians to achieve early detection of adverse events and improved patient outcomes. The company, which also has a presence in Woburn, Mass., subsequently reported the appointment of Matt Johnson as its new CEO.