InnovationRx: Healthcare Venture Capital Funding Rebound?

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Is there a light at the end of the tunnel for healthcare startups looking to raise venture capital? That’s what Rock Health’s half year funding report suggests. It found U.S. digital health startups raised $5.7B across 266 deals in the first half of 2024. And, if these trends persist, this year could be on track to meet or exceed 2019 and 2023 funding levels–getting back to “normal” after the pandemic-fueled peak.

This week HLTH hosted a discussion in New York (moderated by yours truly) with insights on the healthtech funding landscape, featuring Laura Sillman of Left Lane Capital, Parth Desai of Flare Capital and Vig Chandramouli of Oak HC/FT. Here are some key takeaways:

What’s Hot: AI, duh! But how do you separate reality from hype? For starters, don’t lead your pitch with “we are an AI company.” Rather, what is the problem you are trying to solve? Be prepared for a longer diligence process where investors are focused on “quality.” For now, the funding party is in back office and workflow applications. Think billing, coding and automated note-taking.

Who’s Paying: When it comes to AI applications, startups are competing against legacy players, like Epic Systems and Oracle Health (formerly Cerner), who are building their own products. But health systems aren’t tied to incumbents and are even willing to double pay if a new product can provide a 3x return–a combination of revenue generation and cost-savings.

Where’s The Exit: A looming presidential election means market uncertainty. We’ve seen a handful of healthcare IPOs, including Waystar and Tempus, but who knows when the IPO market will open up again. Your best exit option? Strategic M&A.

With $277 Million In New Funding, This Startup Hopes To Unlock The Secrets Of Biology

Molly He, CEO, Element Biosciences.

Element Biosciences

Over the past two decades, genome sequencing–unscrambling the building blocks of DNA that form our genetic code–has become an essential tool in medicine. It helped expedite the development Covid-19 vaccines and it’s led to new ways to treat cancer. It’s also a crucial element of precision medicine–tailoring disease treatment to each patient’s unique biology.

With its DNA sequencing platform Aviti, San Diego-based startup Element Biosciences is among the many players in this R&D sandbox. On Thursday, the company announced that it has raised a $277 million series D investment at a $1.03 billion valuation. It’s a well-timed boon for Element.

Pipeline & Deal Updates

AI: Regard, which uses AI to provide doctors with insights based on patient data, announced a $61 million series B round led by Oak HC/FT.

Implantable Devices: Neuspera Medical, which has developed an implantable device that gives incontinence patients better bladder control, announced a $23 million series D round led by Vertex Ventures HC and Treo Ventures.

Cancer Care: Thyme Care, a startup that helps patients navigate cancer care journeys while also entering into value-based payment contracts, has raised $55 million in equity and $40 million in debt financing.

Cancer Therapy: Scorpion Therapeutics, which is developing new precision cancer therapies, raised a $150 million Series C round co-led by Frazier Life Sciences and Lightspeed Venture Partners.

Blood Testing: Truvian Health, a startup developing a benchtop blood-testing device, has raised $74 million co-led by Wittington Ventures and Great Point Ventures. The funding will go towards clinical trials as the company seeks FDA approval for the device.

Privacy: Freshpaint, a software startup that bridges the gap between healthcare marketing and patient privacy, has raised a $30.7 million Series B round led by Threshold.

VA Scribe Pilot: The Department of Veterans Affairs has selected Abridge and Microsoft’s Nuance as the two winners of its AI tech sprint challenge, meaning the two companies will now enter into pilot programs contracts to deploy their automated AI medical scribing software “for test and evaluation in live VA environments,” according to federal notice.

This Startup Raised $5.2 Million To Develop Blood Tests For Cancer

Predicta CEO Kate Caves (center) with cofounders (from left) Gad Getz, Irene Ghobrial, Ken Anderson and Romanos Sklavenitis.

Predicta Biosciences

Over 35,000 Americans are diagnosed with a blood cancer called multiple myeloma every year, but doctors have to rely on invasive and painful decades-old tests like bone marrow biopsies to make the diagnosis. Precision oncology company Predicta Biosciences hopes to change that by offering patients non-invasive, diagnostic tests from a simple blood draw.

Other Healthcare News

UnitedHealth Group says the total impact of the cyberattack on its Change Healthcare unit will cost the company between $2.3 billion and $2.45 billion in 2024.

Elevance Health’s second quarter profits hit $2.3 billion, despite the health insurer’s drop in Medicaid enrollees.

Manufacturers of the blockbuster obesity and diabetes drugs GLP-1 agonists, including Lilly and Novo Nordisk, are exploring using the drugs to treat other conditions ranging from sleep apnea to fatty liver disease.

Here’s an overview of the companies working on competing weight loss drugs, including Boehringer Ingelheim and Viking Therapeutics.

Pfizer is moving forward with a once-daily weight loss pill, danuglipron, after getting promising data from an early-stage trial. And shares of Swiss pharma giant Roche climbed this week after it reported promising results for an experimental weight loss pill.

Women diagnosed with endometriosis may have a “markedly increased” risk of developing ovarian cancer, according to a new study.

Elon Musk said his brain-computer interface company Neuralink is preparing to surgically implant its brain chip in a second patient.