Despite a decline in the total amount of U.S. venture capital investments, health information technology raised more capital and deals in the second quarter than in the same period in 2011.
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In the second quarter of 2012, health IT companies raised $268 million for 29 deals, a 33% increase in capital raised and a 45% increase in deals compared to the second quarter of 2011, according to the latest figures from Dow Jones VentureSource.
Not only did health IT buck the trend in the total venture capital investments market during this period--U.S.-based companies raised $8.1 billion through 863 venture capital deals during the second quarter of 2012, a 9% decline in capital and 3% decline in deals compared to the same period in 2011--but health IT garnered more investments than all other subsectors in the healthcare industry.
For example, biopharmaceuticals companies garnered 54 deals and raised $570 million in the second quarter, a 22% decline in deals and 43% decline in capital invested compared to last year. Also during the second quarter, medical device companies raised $653 million for 67 deals, a 33% decline in investment and 22% decline in deals compared to the second quarter of 2011. Overall, healthcare companies raised $1.5 billion for 161 deals, a 33% decline in investment and 15% decline in deals in the second quarter.
"If the second half of the year is on par with the first half of this year there will be about $700 million invested in health IT. That will be the most invested since 2001," Jessica Canning, global research director for Dow Jones VentureSource, told InformationWeek Healthcare.
Canning also said the Supreme Court's decision to uphold the constitutionality of the Patient Protection and Affordable Care Act (PPACA) clears the way for further investments in burgeoning health IT companies.
"The Supreme Court decision to uphold the PPACA takes a little bit of the risk out of a venture capitalist's equation in the sense that people could have been holding off on investments until they knew what was going to happen," Canning said.
Following are some of the companies that attracted the most investment in the second quarter:
--Castlight Health, a San Francisco-based company that provides tools to help employees of self-insured companies compare prices for tests and procedures based on cost and quality, announced in May that it had raised $100 million in Series D funding. The investors included T. Rowe Price, Redmile Group, and previous investors, along with two major unnamed mutual funds. The round brings Castlight Health's total funding to $181 million.
--Epizyme Inc., a Cambridge, Mass.-based company that uses software and informatics to evaluate small molecule histone methyltransferase inhibitors (HMTi), a new class of personalized therapy for patients with genetically defined cancers, received $90 million in April from Celgene Corp. to further pursue its work to discover, develop, and commercialize treatments for patients with genetically defined cancers.
--TriVascular, a Santa Rosa, Calif.-based medical device company that provides tools for endovascular aneurysm repair, announced in June that it received $60 million Series D Preferred Stock equity financing. Kaiser Permanente Ventures, in partnership with the Redmile Group, led the investment round, joining existing investors New Enterprise Associates, Delphi Ventures, MPM Capital, Kearny Venture Partners, and Pinnacle Ventures.
--Practice Fusion, a San Francisco vendor that provides an online electronic medical record platform, announced in June that it had raised a new $34 million round of funding. Artis Ventures, with participation from long-time investors Felicis Ventures and Band of Angels, led the investment round.
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