- The deal count for VC-backed healthcare deals is on pace to reach an all-time high, according to the latest third quarter report from CB Insights.
- Investments in AI companies has grown exponentially in the healthcare space. In the third quarter, healthcare AI companies raised almost $1.6 billion across 103 deals, CB Insights reports.
- In 2019, the top 5 healthcare AI company deals raised a total of $1.1 billion in funding.
- The companies include the early cancer detection company Freenome, which raised $160 million, and the virtual care and diagnostics platform Babylon Health, which raised $550 million.
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Investors just poured a record sum of cash into startups looking to use artificial intelligence (AI) to change healthcare.
In the third quarter, healthcare AI companies raised almost $1.6 billion across 103 deals, according to a new report from CB Insights. That's a record sum, and an increase from the $749 million healthcare AI startups took in a year ago.
2019 is looking like a good year for venture-capital-backed healthcare deals overall. Global deal count is on pace to reach an all-time high, according to the CB Insights report. And in total, healthcare companies have raised over $37.5 billion so far this year, the report says.
Victor Adeleke, an associate analyst at CB Insights, said the reason for the wave of healthcare AI investments is the perception of the need to integrate AI into healthcare systems, particularly in drug discovery, medical imaging, and diagnostics.
Another factor is that healthcare AI may help save costs, he said.
"There's also huge potential for AI to cut costs and drive efficiency across healthcare, and incumbents are looking to startups to help them compete with newer players entering the space," Adeleke told Business Insider via email.
Adeleke noted that the increased investment has coincided with more partnerships between pharmaceutical companies and AI startups.
The drug discovery company, BenevolentAI, which is on the list of top 5 healthcare AI deals this year, raised $90 million in equity funding in September, after partnering with AstraZeneca on AI-driven drug discovery in May.
A large part of the success for AI deals this year can be attributed to the newly-minted unicorn Babylon Health, which reached the $2 billion valuation mark with its recent funding round. The company provides virtual care by providing people with remote consultations with doctors and healthcare professionals via text and video messaging.
Read on to see the five biggest deals driving the surge in healthcare AI funding this year.
5. BenevolentAI - $90 million
Company: Founded in 2013, the London-based company uses AI for drug discovery. BenevolentAI uses its drug discovery platform to help scientists find new ways to treat diseases and create personalized drug therapies.
In September, the company raised $90 million from Singapore's Temasek.
"This year, we have demonstrated strong commercial and scientific progress and this funding will further scale our technology and support the development of our pipeline of potentially transformational medicines," Joanna Shields, CEO of BenevolentAI said in a statement announcing the Temasek investment.
Key investors: Woodford Investment Management, Lansdowne Partners, H. Lundbeck, Temasek
4. Recursion Pharmaceuticals - $121 million
Company: Founded in 2013 and headquartered in Salt Lake City, Utah, the company is using AI for drug discovery. Essentially, Recursion is creating algorithms to predict important properties of potential new medicines.
In July, the company closed a series C funding round of $121 million, bringing the total amount raised to $360 million, according to PitchBook.
"With these new resources, we will continue to drive toward a future in which drugs are developed—by people—with a new level of understanding about human biology that was simply not possible before machines," Chris Gibson, Recursion CEO said in a statement.
The company has two drugs in early-stage trials on people.
Key investors: Data Collective, AME Cloud Ventures, Lux Capital, Felicis Ventures, Obvious Ventures, Epic Ventures
3. Freenome - $160 million
Company: Founded in 2014, the South San Francisco-based company is using AI to try and detect cancer early through blood tests.
The company's initial research began in prostate cancer, but it has since moved on to colorectal cancer, which has been proven to respond well to early diagnosis and treatment.
In July, the company closed a $160 million Series B funding round, bringing its total financing to $238 million.
"We are fortunate to have an experienced and proven group of biotech and healthcare investors who share our mission of making early detection of cancer a routine part of patient care," Gabe Otte, CEO of Freenome, said in a statement. "In addition, we are excited to welcome several strategic investors who are committed to our mission. Each brings insight, expertise, and partnership opportunities to accelerate our path to positively impacting patient care."
Key investors: Andreessen Horowitz, GV, Polaris Partners, Verily Life Sciences, Founders Fund
2. Tempus - $200 million
Company: Founded in 2015, the Chicago-based company gathers data from cancer patients on its platform, including genetic data from tumors and clinical data to see how well patients are responding to treatment. The aim is to help doctors find better cancer treatments for their patients.
In May, the company raised $200 million placing its valuation at $3.1 billion. In total, the company has raised $520 million since its founding.
"From our founding, Tempus has been singularly focused on improving the lives of patients diagnosed with disease, starting with cancer," Eric Lefkofsky, founder and CEO at Tempus, said in a statement. "Three and a half years later, we are empowering stakeholders across healthcare with insights derived from real-world clinical evidence connected to rich molecular data."
Key investors: Baillie Gifford, Franklin Templeton, NEA, Novo Holdings, Revolution Growth, and funds and accounts managed by T. Rowe Price.
1. Babylon Health - $550 million
Company: The London-based company provides virtual care by providing people with remote consultations with doctors and healthcare professionals via text messaging and video. The chatbot is also used by the UK's National Health Service (NHS) to help connect people to a general practitioner.
In August, the company closed a $550 million round of funding, putting its valuation at more than $2 billion, the company said.
"Our mission at Babylon is to put accessible and affordable healthcare into the hands of everyone on earth," said Dr. Ali Parsa, founder and CEO of Babylon, in a statement. "This investment will allow us to maximise the number of lives we touch across the world."
Babylon's basic membership is free, giving members access to chat with the app, monitoring ones' health and allowing them to ask medical questions. With a membership that costs about £10 a month ($12.87) or £90 annually, you get consultations with a doctor and specialist referrals.
Key investors: Vostok New Ventures, Public Investment Fund of Saudi Arabia, Kinnevik, Munich Re Ventures