Investors expect to pour more funds into digital health, survey shows

Investors expect to pour more money into digital health startups and companies in 2022, following a strong investment year in the sector in 2021, driven by the COVID-19 pandemic and the increasing demand for digitized solutions, according to a new survey by the Israel Advanced Technology Industries (IATI), an umbrella organization of high-tech and life sciences firms operating in Israel.

The survey polled 25 leading venture capital and investment groups, finding that 60 percent said they anticipated investing more in health technologies over the course of the year. Some 36% said they expected to invest about the same as in 2021 and 4% said less than 2021. The poll was conducted in the last few weeks of 2021, together with consulting giant McKinsey.

IATI CEO Karin Mayer Rubinstein told The Times of Israel in an interview that investors were looking at three specific sub-sectors this year, namely “preventative medicine, a field that is developing very fast, remote healthcare, and telehealth solutions adoption.”

Mayer Rubinstein said that, since 2020, more investors have shown interest in digital health, with a notable uptick in interest among VC funds and investment companies not necessarily focused on the field.

“This is not only about economic potential but also about the social aspect and the pursuit — by companies and investors — to bring about a high level of medical security. The goal is to be prepared and ready and solve, through research and development, the medical challenges and crises of the future,” she explained.

Mayer Rubinstein said that some investors who answered the survey also expressed “concerns over the high-valuations [for companies in 2021] because of all the IPOs, and SPACs, and big funding rounds, and we may be headed toward a market correction.”

Karin Mayer Rubinstein, CEO of Israel Advanced Technology Industries (IATI) (Sivan Farag)

2021 was a bumper year for the Israeli tech industry overall, with companies raising an extraordinary $25.6 billion in capital over the course of the year, shattering 2020’s previous record of $10.3 billion. Last year was also an exceptional year for tech exits as well with 75 IPOs (initial public offerings) in 2021, at an aggregative post valuation of $79 billion. These record-setting numbers were a reflection of global trends like the rise in investments in technologies, partially as a result of the pandemic, “and the lessons of how much digital innovation and tech are key components of a strong and robust industry… but the numbers in Israel are stronger than the average,” Start-Up Nation Central CEO Avi Hasson told The Times of Israel last month.

The sectors that drew the most capital in 2021 were enterprise IT and data infrastructure, cybersecurity, and fintech, followed by life sciences and digital health. (The life sciences industry is generally divided into four major subsectors – digital health, medical devices, biotechnology and pharmaceutical therapeutics.)

According to the most recent Start-Up Nation Central data, digital health companies raised about the same amount in the first quarter of 2021 as all of 2020, and were set to close the year with record funding. Israel is home to about 480 digital health startups and companies.

The most notable health tech investments in Q1 2021 included a $132 million funding round for diagnostic firm K Health, a developer of an AI-based personal health assistant, a $100 million for C2i Genomics, a developer of a liquid biopsy for cancer tumor monitoring, and a $71 million investment in Viz.ai, a developer of AI-powered stroke care technology.

The K Health app on a smartphone. (K Health)

Investors who answered the IATI survey also saw key opportunities in technologies that help prevent medical conditions or give early signs through digital engagement and well as solutions that address the elderly populations. They also saw a continued need for remote care, post-pandemic, including virtual patient care and monitoring.

Gila Tolub, a French-Israeli partner based in McKinsey’s Tel Aviv office, said in a statement that one of the top trends has been “more money flowing into technological solutions that can identify and diagnose patients’ exact medical conditions, or streamline drug research and development processes (e.g., solutions that help conduct clinical trials virtually).”

“Israel is perceived in the world as an advanced provider of these [health technologies and can become a leader in the field,” added Tolub.

Among the 25 investors polled for the IATI survey were Israeli health tech and life sciences venture capital firm aMoon, Pitango Capital, Entree Capital, D10, NFX, and OurCrowd, as well as foreign companies such as NY-based investment giant Blackstone and Koch Disruptive Ventures.

Yair Schindel, co-founder of 8400 at the aMoon Fund offices in Ra’anana; March 12, 2018. (Shoshanna Solomon/ Times of Israel)

Dr. Yair Schindel, co-founder and managing partner at aMoon, said that the health tech industry was “witnessing a revolution” and that its economic potential was “tremendous.”

“The convergence of healthcare and technology is creating remarkable potential to confront the most pressing challenges facing modern day health systems. The growth forecast for the US Health Tech market alone is $30 billion per year. The relatively new combination of Health and Technology has been made possible in recent years by the development of revolutionary breakthroughs whose synergy has the potential to change the world of medicine,” said Schindel.

He noted a “shift away from high cost, reactive care towards personalized, predictive and preventative care that stratifies, flags, and performs proactive outreach to high-risk populations” that will also “enable a shift away from high-cost treatment centers such as ERs and hospitals towards less expensive care models at home and in the community.”

“We also believe that significant reductions in the cost of genomic sequencing, the advent of multi-omic technologies and huge improvements in bio-informatics capabilities will allow for less invasive screening of disease at earlier stages. To provide proactive, not just reactive, care. To prevent, not only to treat,” said Schindel.

Israel, he explained, was “in a unique position to lead this market” with a “rare combination of excellent human capital that includes some of the best scientists and artificial intelligence engineers in the world, first-rate academic research, and in addition, two of the largest healthcare databases in the world, dating back 25 years and managed by HMOs.”

Israel’s four HMOs — Maccabi, Clalit, Meuhedet, and Leumit — have spent over two decades building databases of digitized medical records, holding the files of more than 98% of the population.

A newly opened Maccabi coronavirus testing site in the central city of Modiin, on September 13 2021. (Yossi Aloni/ Flash90)

Israel recently earmarked roughly NIS 55 million ($17.6 million) for a new innovation program that will allow health organizations such as HMOs, hospitals, and institutes to build the digital infrastructure required for anonymized data-sharing and research and development collaborations with healthcare startups.

Schindel said humanity was “on the verge of a scientific revolution that is driving the next great leap forward in understanding our individual biology and transforming human health.”

“As the genome revolution marked the beginning of a new era, Omics science [fields of study in biological sciences that ends with -omics] is unveiling fundamentally new possibilities to unlock biological information and enable a limitless breadth and depth of data and scientific insights that will reshape the way we diagnose, prevent, treat, and cure disease,” he said.

Shoshanna Solomon contributed to this report


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