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Third-quarter results of a venture capital study conducted by Mercom Capital Group show healthcare IT remaining strong for the fifth quarter in a row - and the outcome of the presidential election is not expected to change that, according to managing partner Raj Prabhu.
"This is private funding going into private companies and there continues to be a strong interest and demand in the (health IT) sector with a consumer angle as health apps and social health networks are becoming popular and more mainstream," he said.
Health information management companies received the most funding as a technology group, with $101 million in 20 deals; they were followed by mobile health companies, with $39 million in seven deals, and social health network companies, with $26 million in four deals, according to Mercom.
Fifty-eight investors participated in the third-quarter funding rounds, with First Round Capital, Great Point Partners and West Health Investment Fund participating in multiple deals, the report found.
The report showed "a healthy number" of early-stage deals. "2012 has the potential to be a billion dollar VC funding year for the sector," Prabhu said. He attributed the HITECH Act of 2009, the Affordable Care Act and the Department of Health and Human Services' Health Data Initiative for "getting the ball rolling" on the upward trend.
"HHS started making greater amounts of usable health data available," he said. "This has made a whole slew of applications possible, opening up possibilities for companies, consumers and communities to come up with new solutions leading the way to mobile apps, social health networks and other products."
"Health IT touches everybody, creating a large market that has peaked the interest of investors and is likely to continue to grow," Prabhu said.
The report shows continued strength in M&A activity in the sector as well, providing investors and companies with plenty of viable exit strategies. There were 37 M&A transactions in Q3 2012, amounting to $3.2 billion, of which only 10 transactions disclosed details.
According to Prabhu, that's a strong indicator of growth in the industry. "That total has been surpassed only twice since 2010," he said.
The top funding deal this quarter was the $25.5 million raised by Telcare, a mobile health company that uses cellular machine-to-machine technology to help those with diabetes and other chronic illnesses manage their healthcare.
Other top deals included $20 million raised by Connecture, an online health insurance process automation company focused on health insurance exchanges, and $17 million raised by Doximity, a professional social network for physicians. Clinipace, an eClinical technology provider of real-time access to healthcare information, raised $13 million, and Streamline Health Solutions, a provider of enterprise content management and business analytics solutions for healthcare organizations and SoloHealth, a healthcare technology and data analytics company, each raised $12 million, the report showed.
Among the top M&A transactions, Roper Industries acquired Sunquest Information Systems, a provider of diagnostic and laboratory software solutions to healthcare providers, for $1.4 billion. One Equity Partners acquired M*Modal, a provider of clinical documentation services and speech understanding solutions, for $1.1 billion, Science Applications International Corporation acquired maxIT Healthcare, a healthcare IT consulting firm, for $473 million. And Thomas Bravo acquired Mediware Information Systems, a provider of clinical software solutions, for $195 million.
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