2019 First Quarter Update: Momentum Continues Unabated
We are delighted to share with you our Q1 2019 HealthTech key trends update, powered by HealthTech Alpha, a Galen Growth Asia solution, the only analytics platform dedicated to monitoring the digital health ecosystem in Asia Pac.
Previously in 2018
Our go-to-reference Full Year 2018 HealthTech funding analysis report announced a record-breaking year closing at US$6.3B and confirmed the region’s HealthTech ecosystem as the second largest in the world by value. Total investment funding significantly exceeded 2017 and doubled 2016 demonstrating the value of key drivers such as growth stage investor appetite, corporate partnerships and an increasingly accommodating regulatory environment. In early January 2019, we forecasted that we should expect to see this bullish trend continue so the Q1 2019 key trends should be a strong indicator.
Already Ahead of the USA, but is 2019 on Track to Exceed 2018?
Total investment in digital health in Asia Pac in Q1 2019 exceeded the US$1B mark, up US$70M YoY and setting yet another record. And for the first time for a first quarter, Asia Pac digital health total funding deployed has edged ahead of the USA!
Asia Pac vs USA Cumulative Funding History
But will this unabated momentum, building on last year’s, see this twelve-months period set another annual record? Or are we beginning to see signs of a froth building?
Q1 2019 Key Trends
Asia HealthTech Funding History
Fewer Deals, Bigger Tickets
Total investment in digital health in Asia Pac in Q1 2019 closed at US$1B, with a sizeable increase YoY, across a total number of deals closed of 60, down 15% YoY, indicating an increasing ticket size per deal.
In fact, average funding per deal increased by 33% to $17.9M YoY indicating continued confidence from investors, particularly at growth stage.
Despite, Q1 2019’s total deal count trending downwards, setting a new first quarter low down from 2016’s high of 91, deal share across Early, Growth and Late stages remains unchanged over the past three consecutive quarters. There is growing concern at the Early stage deal count which remains static.
Squeezed by the generally more sizeable Growth and Late Stage deals, Early Stage investments in Q1 2019 continued to lose share. Compared to Q1 2018, total funding value accounted for only 0.7% of the total value invested in the first quarter, down from 3.9% YoY. Noteworthy deals include the $1.5M strategic early stage investment by Indian pharmaco Cipla in the India chronic disease management platform Wellthy Therapeutics and the $1M Seed investment in the Singaporean stroke prediction startup See-Mode led by Cocoon Ventures.
In contrast, Growth Stage investments gained more than 10% in total deal value share compared to Q1 2018, now accounting for more than 63% of the total funding invested. This is also the largest share of Growth Stage investments since Q2 2017 when Growth Stage deals accounted for more than 68% of the total funding invested. Noteworthy Growth Stage deals this quarter include the $65M Series B investment in Indonesia’s Integrated Solution Halodoc led by UOB Venture Management and a $8M Series A investment in India’s Healofy led by China newly listed Online Marketplace Babytree.
Turning our attention to Exits, deal count is up with 5 recorded M&A and IPO deals vs Q1 2018 single deal. All M&A deal activity this quarter is at a digital health venture level rather than corporate activity.
Asia HealthTech Deal Volume by Investment Stage
China Stagnates, India Plummets but Rest of Asia Thrives
China vs India vs Rest of Asia by Deal Volume Share
In March 2019, China lowered its goal for economic growth and announced a major tax cut, as policymakers seek to pull off a gradual deceleration while grappling with a debt legacy and the trade standoff with the U.S.
This has yet to manifest itself significantly in the investor’s appetite with total funding in Q1 2019 reaching US$735M, down only 6% YoY. This velocity was sustained by the quarter’s three mega deals, all executed in China, (i.e. financing rounds which exceed US$100M) which represents a threefold increase YoY.
Q1 2019 Asia Pac Mega Rounds
|Startup||Funding Size||Country||HealthTech Category|
|Burning Rock Dx||$126M||China||Medical Diagnostics|
|ZY Health (康晟健康)||$100M||China||Patient Solutions|
Burning Rock, founded in 2014, focuses on NGS (Next-Generation Sequencing) diagnostics solutions for precision medicine in oncology, announced the closing of the Series C financing totalling US$126M (RMB 850M). The financing was led by GIC, followed by LYFE Capital, CMB International Capital, Lilly Asia Ventures (LAV), Sequoia Capital China and T&Brothers Capital. The company previously completed a US$45M (RMB 300M) Series B financing in 2016 with investors Sequoia Capital, LYFE Capital, CMB International Capital and Legend Star.
Of particular note however, funding in digital health in India which experienced the greatest dip in $ terms, down 37% driven by a deal count slide of 59% vs Q1 2018, likely to be the result of issues such as the “angel tax” and erratic e-commerce regulations.
Of note, South Korea’s HealthTech ecosystem continues to gain momentum, closing 8 deals primarily deployed on solutions focused on Medical Diagnostics and Research.
South East Asia accounts for 22% of all deals in Asia HealthTech in Q1 2019, up 11% YoY, with emphasis on Early Stage deals (Seed and Pre-A) in Singapore with 60% share, Malaysia and Indonesia.
Solution Category Attractiveness
HealthTech Alpha classifies each HealthTech venture by its primary solution which we monitor continuously as this does evolve / pivot. Our taxonomy includes 15 distinct super categories (under pinned for further granularity by a total of 42 categories). We track both $ value and volume for each super category to better understand the attractiveness of each.
Q1 2019 saw Medical Diagnostics take pole position both in terms of total dollars invested and number of deals executed. The top three super categories, namely Medical Diagnostics, Health Management Solutions and Online Marketplaces, retain their overall attractiveness accounting for 65% of total funding deployed.
Of note, Patient Solutions takes second place by deal count and Research, which was a new entrant in this ranking in H2 2018, slips to fifth, further demonstrating the growing sophistication of digital health innovation in Asia Pac.
Deal Value Category Share
With the exception of the quarter’s mega rounds which were all executed in China, we consider a shortlist of noteworthy funding rounds to bring into evidence the larger deal activity experienced in Asia Pac (excluding China).
|HealthTech Category||Funding Size &
|Halodoc (INDO)||Health Management Solution||
|UOB Venture Management|
|1mg (IN)||Online Marketplace||
|Corisol Holding AG|
|CXA Group (SG)||Payments & Administration||
|LVIS (SK)||Medical Diagnostics||
Halodoc, founded in 2016, an Indonesia-based digital healthcare platform, and the winner of the Galen Growth Asia’s 2018 Most Innovative HealthTech Startup, connects customers in Indonesia to over 20,000 licensed doctors in the country for live consultations via its mobile app and website. Services also include fast delivery of medication from over 1,300 participating pharmacies as well as lab tests which can be ordered and carried out in the customer's home. Halodoc raised US$65M in a series B funding, the largest HealthTech deal of South East Asia, led by new investor UOB Venture Management. This is the second major financing round for the company since its establishment in April 2016. SingTel Innov8, Korea Investment Partners and WuXi AppTec are among the other new investors taking part in the latest round.
Online pharmacy startup 1mg, founded in 2012, an India digital health venture, allows customers to order medicines, consult doctors and also purchase health products. Users can also book diagnostic services and lab tests. 1mg has raised US$35M in a round led by new investor Corisol Holding AG, a Switzerland-based family office. Existing investors Sequoia Capital India, Omidyar Network and Swiss healthcare-focused investment firm HBM Healthcare Investments also joined the funding round.
CXA Group, a Singapore HealthTech venture, provides a platform where employers can empower employees with access to personalised health and lifestyle offerings, with clear and quantifiable ROI for the business. Founded in 2013 with the mission of transforming the delivery of employee benefits from pen-and-paper and one-size-fits-all to a digitised and personalised platform, the company aims to shift healthcare spend from treatment to prevention, to improve workplace population health. CXA Group raised US$25M in its latest round of funding which a new group of strategic investors such as HSBC, Singtel Innov8, Telkom Indonesia MDI Ventures, Sumitomo Corporation Equity Asia, Muang Thai Fuchsia Ventures, Humanica and Heritas Venture Fund.
LVIS, a South Korea and Silicon Valley based brain network analysis tool provider raised approximately US$15M in a Series B round by DSC Investment, KB Investment and SK Group. LVIS uses light to selectively stimulate certain areas of the brain and then monitors changes in the nervous system. LVIS present application is monitor patients with brain injuries caused by temporary or irregular abnormal excitations of neurons and plans to extend its offers to diseases such as Parkinson’s disease and dementia.
Noteworthy Q1 2019 Partnership Announcements
Commercial partnerships between corporates and startups are critical to the validation and scaling of digital health ventures. We monitor this key driver of momentum in the ecosystem and share those reported in the public domain.
Novo Nordisk Pharma Ltd., a Danish pharmaco, and Health2Sync, a Taiwan digital health venture, announced a partnership in Japan to expand digital diabetes management to healthcare providers and patients. As part of the partnership, Novo Nordisk Pharma Ltd. will support the distribution and adoption of Health2Sync's app and healthcare provider platform in Japan.
Cipla, an India pharmaco, and Wellthy Therapeutics, an India digital health venture, announced a partnership to offer Digital Therapeutics for Diabetes and Cardiovascular Diseases. to offer a combination of pharmacotherapy and digital therapeutics for improved patient outcomes in the chronic disease areas of Diabetes and Cardiology in India. Under the agreement, a multi-lingual clinically-validated digital disease management platform will be made available to patients living with diabetes or cardiovascular diseases via doctors' clinics or co-packaging on select Cipla brands.
Therapeutic Focus: The War on Diabetes
Diabetes is a global problem, affecting more than 425 million people: 60% located in Asia. By 2030, without intervention, both China and India combined will have almost half a billion diabetics.
A study of the HealthTech Alpha analytics on this disease area, reveals that 3% of digital health startups are currently dedicated to tackling diabetes in Asia Pac i.e. the solution and purpose of the venture is entirely centric to the diabetes disease and patient.
Diabetes HealthTech Dedicated Solutions in Asia Pac Snapshot
That said, it should also be recognised that a significant number of startups have and are developing solutions that have a multi-chronic disease focus. Others are agnostic of disease and are also developing proven solutions applicable to the patients with the disease.
The inclusion of all HealthTech innovators, from building awareness, diagnostic and treatment, all the way to managing the disease or the healthcare workflow, would bring this percentage to double digit.
We will be sharing further insights from our deep dive into the Asia Pac digital health innovation in the fight against diabetes in the coming weeks.
Frothy or Not: Cappuccino or Latte?
Asia Pac HealthTech funding is repeatedly breaking previous records. In 2018 alone, investors poured more than US$6.3B into the sector, exceeding 2017’s record-setting total by a massive 1.5x. With 294 deals completed in 2018 (slightly less than the 329 in 2017), the mean deal size increased to US$27M. At least one third of all 2018 deals were seed and Series A rounds, suggesting investors continue to believe in new entrants as they double-down on maturing, later-stage companies.
With the surge in funding, and a nascent exit market, there is growing scrutiny on digital health in the region, leading some investors and strategics to ask the question: will venture value creation will continue to track with investment trends in the sector?
To help us address this question, we borrowed from Rock Health’s published framework to assess the current “frothiness” of digital health in Asia Pac. Our assessment as follows:
|Frothiness Indicator||How Asia Pac HealthTech Measures Up||Our Prognosis|
|Hype supersedes business fundamentals||· Startups must figure out how to navigate biz dev, regs and scale in a complex industry. Entrepreneurs are actively moving towards sustainable business models||Not Frothy|
|High cash burn rates||· Startups are raising cash reasonably quickly, due to the availability of capital and growth needs
· Average time span between investment rounds remains steady
|Unclear exit pathways||· Single digit sector IPOs since 2016; M&A is a more reliable exit strategy and is on the up||Not Frothy|
|Surge of cash from new investors||· Digital health in Asia Pac has witnessed a growing number of new crossover investors entering the space of late||Moderately Frothy|
|High valuations decoupled from fundamentals||· Few unicorns and all in China
· Investment rounds growing sensibly with steady frequency
|Moderately Frothy (China)|
|Fraud or misuse of funds||· No signs of exuberance and no scandals e.g. Theranos||Not Frothy|
With HealthTech rapidly becoming a significant share of total Asia Pac venture capital asset class, HealthTech funding will be increasingly tied to macro-economic cycles as outlined in our Full Year 2018 report. If and when capital becomes harder to come by, HealthTech companies will have to prove that they can deliver under their own steam.
This is the Galen Growth Asia Q1 2019 YTD Asia HealthTech Investment Landscape update, which, is an update to our comprehensive go-to-reference half year reports. These can be downloaded for free at: https://galengrowth.com/research/
This update is powered by HealthTech Alpha, Asia’s only HealthTech Insights Platform
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Galen Growth Asia (GGA) is the leading, exclusively HealthTech, research, analytics and advisory firm in Asia Pac serving Fortune 500 companies and global investors. Founded in late 2015 by HealthTech innovators, GGA, is at the epicentre of HealthTech innovation, aka digital health, currently a $75+B startup ecosystem.
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This update is provided for informational purposes only and was prepared in good faith on the basis of public information available at the time of publication without independent verification. Galen Growth Asia does not guarantee or warrant the reliability or completeness of the data nor its usefulness in achieving any particular purposes. Galen Growth Asia shall not be liable for any loss, damage, cost or expense incurred by reason of any persons use or reliance on this update. This update is a proprietary aggregation of publicly available and undisclosed data and shall not be forwarded or reproduced without the prior written consent of Galen Growth Asia.