Venture capitalists placed their bets on health IT in 27 deals worth $184 million during the first quarter of this year, according to Mercom Capital Group, an Austin, Texas-based consulting firm. The government's electronic health record incentive program spurred the record-setting pace of investments by 46 venture capital firms, Mercom said.
If investors pony up an equivalent amount for health IT firms in the remaining three quarters of 2012, the total could exceed last year's figure; according to Dow Jones Venture Source figures reported in January by InformationWeek, venture capital firms in 2011 lavished $633 million on medical software and information services. That was the most money invested in the sector since 2001, when health IT companies attracted $759 million in venture capital.
In the first quarter of 2012, health information management companies netted $103 million, and personal health records companies $32 million, according to Mercom. Other types of firms that landed VC deals included business and clinical intelligence companies, clinical decision support companies, and EMR/EHR vendors.
The top VC beneficiaries were Kinnser Software, a home health clinical decision support firm, which raised $40 million; Healthx, a provider of online healthcare portals ($22 million); Sharecare, an interactive health and wellness social platform ($14 million); EMR/practice management software vendor DocuTap ($12 million); and PerfectServe, a provider of clinical communication services ($11 million).
Merger & acquisitions activity continued to outpace venture capital deals in health IT, Mercom said. The 34 M&A transactions it recorded in the first quarter were worth a total of $653 million.
One indication of the strong interest in the sector was the recent IPO of Epocrates, which provides mobile reference content to doctors. Offered at $16, the share value jumped 29 percent in trading on Feb. 2. But, perhaps because of concerns about lower-than-typical operating and net margins, the stock price had dropped to $8.38 as of April 17.