The Healthcare Boom is Just Beginning: BVP Predicts Bull Run for HCIT Stocks

Summer has only just begun, but the healthcare sector is already red hot.    In fact, three events from the past couple of weeks struck me as pretty newsworthy:

First, June 28th marked the two year anniversary of the Supreme Court’s upholding of the Patient Protection and Affordable Care Act (aka Obamacare).

Then, on June 30th healthcare incubator Rock Health released its mid-year digital health (http://bit.ly/VA9X9I) update which included some astonishing data, namely:

  • In the first six months of 2014, venture capitalists have already invested more in HCIT ($2.3B) than they did all last year
  • VC dollars invested in the sector have grown 85% year-over-year (even more popular than the software sector which saw a 72% increase)

This is a 10x increase from what was invested in the sector by VCs only five years ago.   Of course, for those of us who follow the space, this remarkable growth hardly comes as a surprise:  As we predicted in 2012, the passage of the HITECH act and the upholding of Obamacare has led to increased opportunity for innovation investment in healthcare.

Finally, the June IPO of Imprivata marked the sixth healthcare IT company to go public in the last twelve months – smashing the record for number of HCIT IPOs in that period of time.  And half of these are valued at >$1B in market cap (CSLT, VEEV, BNFT), earning them vaunted “unicorn” status.

Clearly, public market investors now realize what we early stage healthcare investors have long believed:  As the largest sector of our economy, healthcare is ripe for technological disruption and even further growth.

BVP follows a set of 24 publicly traded healthcare IT companies and the data supports our belief:   our HCIT Index is up 86% since 2011 and, despite recent volatility, is still up 4.5% YTD.  It’s fair to ask whether this strong performance merely reflects healthcare IT companies benefitting from the same bull market sentiment that’s driving the general market; but the data shows something different.  The healthcare IT index has significantly outpaced all the other major market indexes, even beating the NASDAQ (which reflects the broader tech sector market) by more than twenty percentage points!  

BVP IndexNote: You can click on the image above to view higher resolution version of our HCIT index

This is only the beginning.  We predict that the public markets are entering a 5-10 year bull run for healthcare IT stocks.   And while we don’t have a crystal ball, we believe we’ll see 3-5  HCIT IPOs per year over the next five years .  Put simply:  We at BVP are long Healthcare IT!