Clinical development represents one of pharma’s costliest and riskiest investments.

Trials average $55M each, per a study in JAMA Health Forum, and can take more than a decade to complete. However, over 90% of drugs still fail. AI is emerging as a game-changing force in clinical development, tackling its biggest pain points head-on.

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Estimates indicate that US hospitals lose $262B annually to revenue cycle inefficiencies, while drugmakers spend more than $1B on average to develop a single drug. Meanwhile, the healthcare workforce in the US faces high burnout and a projected shortage of 124,000 physicians by 2034, according to the Association of American Medical Colleges.

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Mirroring trends in the broader venture market, AI proved to be a bright spot amid the downturn in digital health deals. In 2024, AI-focused companies secured 42% of digital health funding and accounted for 31% of deals — both record highs.

Download the full report to access comprehensive data and charts on the evolving state of digital health.

Key takeaways from the report include:

• Digital health dealmaking continues to decline. Despite a slight increase in funding YoY, digital health deal count dropped again in 2024, hitting its lowest annual total (1,225) since 2014. Regionally, Europe saw the sharpest drop in deals, with a 29% YoY decline.
• Fewer deals, bigger checks. The median digital health deal size jumped 39% YoY to hit a record high of $5.3M in 2024. The combination of declining deal volume and larger deal sizes suggests that selective investors are concentrating their resources on companies that meet heightened benchmarks in areas like clinical validation, commercial traction, and regulatory readiness.
• AI takes center stage in digital health. In 2024, AI-focused companies captured 42% of digital health funding and 31% of deals — both record highs. The 5 largest AI-focused digital health deals were spread across diagnostics, drug development, and women’s health.
• Digital health mega-rounds rebound in 2024. Mega-rounds ($100M+ deals) increased in 2024 after 2 years of decline, with the top 3 deals focused on drug discovery and development. Most top deals (7 out of 10) went to US-based companies, pointing to the region’s position as a hub for high-value digital health investment.

We dive into the trends below.

Digital health dealmaking continues to decline

Following 2 years of decline, digital health funding increased slightly in 2024, rising by 3% YoY.

However, digital health deal count fell for the third year straight in 2024. It dropped by 23% YoY to reach just 1,225 — its lowest level since 2014 — highlighting that investors remain cautious.

Regionally, Europe saw the steepest drop, with deal count shrinking 29% YoY to 258, despite a modest funding increase to $2.8B. Asia also experienced a decline, with deal count falling 19% YoY to 218, alongside a funding drop to $0.8B. While still the most active market, the US recorded a 19% YoY decline in deal count to 683, even as funding climbed to $11.7B.

CBI customers: Track 11K+ digital health companies

Fewer deals, bigger checks

While the overall deal count fell, the median digital health deal size surged in 2024.

It climbed by 39% YoY to reach $5.3M — a record high.

This combination of factors suggests that selective investors are prioritizing companies that meet heightened benchmarks in areas like clinical validation, commercial traction, and regulatory readiness.

CBI customers: See 180+ high-potential startups

AI takes center stage in digital health

AI is commanding a growing share of digital health investment activity.

AI-focused companies captured 42% of total digital health funding and 31% of deal volume in 2024 — both record highs. 

This surge reflects heightened investor confidence in AI’s ability to accelerate drug discovery, improve early disease detection, deliver personalized care, and more.

The top 2 AI-focused digital health deals in 2024 went to drug development platform Xaira Therapeutics. Freenome followed with a $254M Series F to expand its AI-driven early cancer detection tools, while Flo Health secured a $200M Series C to scale its personalized women’s health platform. BioAge Labs rounded out the top 5 with a $170M Series D to advance its AI-powered aging-related treatments.

Explore the top AI-focused digital health deals

As AI adoption grows across healthcare operations — from clinical and administrative workflows to drug development — healthcare providers and pharmaceutical giants will likely pursue strategic partnerships and acquisitions to maintain their competitive edge.

Digital health mega-rounds rebound in 2024

Digital health mega-round activity rebounded in 2024 after 2 consecutive years of decline, with deal count rising by 50% YoY to 33.

The top 3 mega-rounds of 2024 all went to drug discovery and development companies. 

Xaira Therapeutics led the pack with two $500M rounds for its AI-driven drug discovery and development platform, followed by Formation Bio with a $372M Series D to advance its drug development efforts. 

At the regional level, the US accounted for 7 of the top 10 mega-rounds in 2024, reflecting its position as a hub for high-value digital health investments. 

MORE DIGITAL HEALTH RESEARCH FROM CB INSIGHTS

• State of Digital Health Q3’24 Report
• AI’s moment in preclinical drug development arrives: Why formulation tech is the next frontier
• Inside the AI drug discovery arms race: Record M&A activity, a biologics funding spree, and more
• Digital Health 50: The most promising digital health startups of 2024
• The $4.6B opportunity in healthcare: Ambient AI to target clinician burnout

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For pharma companies, it’s critical to maximize efficiency in preclinical development — the stage after drug discovery and before clinical trials — as poor processes can mask early warning signs of drug candidates that are likely to fail.

The stakes are high: Studies show that 90% of drugs fail in clinical trials. In Phase 1 trials alone — which have a median cost of $3.4M per trial — 40% of drug candidates fail.

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Bringing a drug to market traditionally involves staggering costs — averaging $1.3B when accounting for all failed compounds — and costs continue to rise as productivity in the drug R&D process declines. 

AI has the potential to break this pattern by dramatically accelerating drug discovery and reducing costs.

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Using CB Insights data, we uncovered 4 strategic priorities highlighted by Roche’s acquisitions, investments, and partnerships since Q1’23. We then categorized companies by their relationships with Roche across these priorities.

Here are 3 key takeaways from our analysis:

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Our 2025 Tech Trends report provides a concrete roadmap for corporate leaders to navigate some of the most important technology shifts in the year ahead.

We include specific recommendations for action so that business leaders can get ahead of the next wave of value creation.

Here is a selection of key findings from the report:

• AI agents are given money to spend: AI agents’ utility is limited until they can make transactions seamlessly. A small group of tech players is building new infrastructure to make that happen.
• The future data center arrives: With data center power usage expected to more than double by 2026, big tech companies are morphing into energy innovators to support AI workloads. There’s a huge opportunity in improving data centers’ energy efficiency.
• Investment floodgates open for RNA therapeutics: RNA therapeutics developers are pioneering new ways to treat traditionally “undruggable” diseases, with a growing focus on neurodegenerative disorders like Alzheimer’s and Huntington’s diseases.
• AI M&A fuels the next wave of corporate strategy: AI’s share of corporate tech M&A has doubled since 2020. Tech incumbents like Nvidia, Salesforce, and Snowflake, as well as consultancies like Accenture, are rapidly acquiring AI startups to tap into enterprise demand. 
• Disease management enters a new phase with AI: AI is improving care delivery across 3 key areas of disease management: precise symptom evaluation; testing/screening for earlier disease detection (including before symptoms even appear); and finding at-risk individuals in datasets of entire patient populations. 
• Retail’s personalization imperative: Generative AI is unlocking 1:1 experiences across commerce touchpoints, with leaders like Target seeing a corresponding 3x boost in conversation rates. Personalization will become omnipresent in retailers’ offerings.
• And much more

Methodology

Our analysis relies on a wide range of CB Insights datasets, including financing and acquisition data, valuations, founding team and key people data, earnings transcripts, and more. We also leverage CB Insights’ proprietary scoring algorithms to measure business health (Mosaic) and maturity (Commercial Maturity), as well as the likelihood of acquisition (M&A Probability score). Throughout the report, we provide CB Insights customers with jumping-off points to dig deeper into the data behind the report.

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What you need to know:

• Eli Lilly is using technology to reengineer how it develops treatments, leveraging AI to speed up drug discovery.
• The company is investing in novel drug delivery methods, such as targeted delivery systems, to improve treatment efficacy and the patient experience.
• Lilly is rapidly expanding its direct-to-consumer approach through LillyDirect, partnering with telehealth providers and integrating with digital pharmacies to streamline drug distribution and improve patient access.

Eli Lilly is using technology to reengineer how it develops and delivers treatments.

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To do this, new tech-enabled solutions are targeting key bottlenecks throughout the clinical trial lifecycle for all participating stakeholders, from researchers to life science companies to patients.  

To help strategy teams prioritize clinical trials markets in their planning decisions, we plotted markets using CB Insights’ TECH framework, which scores markets across 2 dimensions:

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What you need to know: 

• Animal health is seeing rising demand and early-stage startups are building novel products targeting the space, including AI-based solutions.
• Focus areas for emerging trends include: Diagnostic platforms for vets, advanced therapies, methane-reducing solutions, AI-driven diagnostics & monitoring, and disease prevention & treatment.

Animal health — which includes companion and livestock animals — is steadily growing as a topic of interest among executives.

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Essential resources to understand the future of healthcare:

• • The generative AI in healthcare market map — These tech companies are bringing generative AI into medical research and clinical settings.
  • Pharma AI Readiness Index: Who’s best-positioned for the AI boom? — Assess how prepared top pharmaceutical companies are to adopt and respond to rapidly evolving AI technologies.
  • 6 digital health markets gaining momentum in 2024 — We analyzed early-stage investment trends to uncover which digital health markets — from telepsychiatry to virtual & hybrid women’s healthcare — are quickly evolving and how.
• 
  • The Digital Health 50 — Here are the world’s most promising digital health startups.
  • Big Tech in Healthcare — How Amazon, Google, Microsoft, & Nvidia are looking to transform drug R&D, primary care, and more.
  • State of Digital Health Q2’24 Report — Funding in digital health drops, but larger check sizes and an uptick in exits highlight bright spots for the industry in Q2’24.
• 
  • Longevity tech market map — 64 promising startups across 12 categories aiming to expand lifespans, from human cryopreservation to cellular reprogramming.
  • Digital Health AI M&A — Every second acquisition in 2024 has been an AI company; here’s where we’re seeing the most activity.
  • 20 tech trends to watch closely in 2024 — The technology trends that will transform industries as generative AI takes center stage, including several directly impacting healthcare.

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In 2024 so far, a16z has backed more than 20 AI startups working within disruptive categories. For example, this year, it has invested in several AI-driven copilots and agents designed to automate key workflows in big industries like healthcare and finance. It has also turned its attention to multimedia generation startups expediting the creation of a wide variety of content, from images to videos to audio.

While championing AI’s advancement, the firm also acknowledges associated risks — its founders are proponents of open-source models, arguing that their transparency and accessibility will help ensure that AI is developed in a secure and ethical way. So far this year, the two largest a16z-backed AI deals have gone to open-source large language model (LLM) developers xAI and Mistral AI.

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As a result, a range of technologies have emerged to address issues across the entire trial lifecycle. These use AI, data analytics, and digital platforms to streamline processes, improve data quality, and boost patient engagement — all with the aim of driving down trial times and costs while increasing success rates.

This market map identifies 96 vendors in 14 categories reshaping clinical trials. This tech ecosystem offers sponsors and research organizations opportunities to conduct more efficient, patient-centric trials that also meet regulatory requirements.

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This acquisition follows Commure’s Oct 2023 acquisition of another AI-driven provider workflow solution Athelas — which offers revenue cycle management (RCM) and automated documentation services — further bolstering its AI arsenal.

These deals reflect a key trend in healthcare M&A: AI is all the rage. 

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The impact on the pharma industry has been substantial, with Ozempic’s producer, Novo Nordisk, seeing a 36% rise in sales in 2023 driven by the accelerated adoption of its GLP-1 products. D2C pharmacies like Hims are also entering the space, offering their own GLP-1 drugs at a fraction of the cost to patients. 

The rapid growth in prescriptions for these appetite-curbing drugs has drawn wide-spread attention from corporates across industries.  

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The pharma giant is partnering with companies to speed up drug discovery using AI. These efforts extend across its core R&D focus areas, including immunology and oncology.

The company is also leveraging partnerships and investments to enhance clinical trials and bring its 75+ clinical-stage projects to market more quickly. For example, Sanofi Ventures led a Series B round for Nucleai, which uses AI to help drugmakers understand how patients will respond to their drugs and, as a result, select the most suitable patients for clinical trials.

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These leaders are harnessing their existing offerings — in areas like cloud computing, AI, and hardware — to service healthcare providers and pharmaceutical companies.

While big tech players are competing with each other in this landscape, they are also carving out distinct strategies: 

• Amazon is going deeper into primary and specialized care.
• Google is amassing troves of health data, which could play a role in its biotech bets. 
• Microsoft is equipping healthcare organizations with AI tools to improve clinical research, drug R&D, and care delivery.
• Nvidia’s long-standing hardware dominance positions it to play a major role in the future of smart hospitals. 

This report uses CB Insights datasets like investments, acquisitions, business relationships, patents, buyer interviews, company scouting reports, and more. Learn more about our data here.

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The industry is built around encoding information in quantum entities called “qubits” — which have a probability of being either 1 or 0, as opposed to traditional bits that can only be one or the other — to open up new computational approaches and ways of handling data that are not possible on conventional devices.

For example, quantum computing could allow entirely new algorithms that are much more efficient at some key tasks — like complex optimization problems, sorting through large datasets, and running simulations. Though the tech is not yet mature, companies are already working to apply quantum computing to commercial applications like drug discovery, finance, materials discovery, and logistics. Investors are excited — startups in the space saw equity funding surge to $1.3B in 2023, a rare bright spot for venture last year. As quantum computers become more capable in the coming years, expect commercial interest to rise quickly.

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Salesforce CEO Marc Benioff called AI “the single most important moment in the history of the technology industry” in the company’s most recent earnings call. JPMorgan CEO Jamie Dimon said, in his April 2024 letter, “we are completely convinced the consequences [of AI] will be extraordinary.” 

Others are hyper-focused on AI’s potential to drive new efficiencies and product development. Big pharma companies are pushing ahead with AI-powered drug discovery collaborations, with the goal of accelerating drug development timelines. Payments giants, meanwhile, are leveraging AI to fight back against a wave of fraud.  

Much of the hype around recent advances has yet to translate to revenue. No AI-discovered drug has been approved yet for sale (though Insilico Medicine brought the first drug fully generated by AI into human trials in 2023), and Salesforce acknowledged its latest AI push would not have a material impact on its revenue this year. 

But the promise of future opportunities — and the perceived risk of inaction — is driving leaders to make moves now that could eventually reshape some of the world’s biggest industries. Our 70-slide report surveys the AI strategies of the following companies:

• Financial services & insurance: JPMorgan, Visa, Mastercard, UnitedHealth Group
• Enterprise tech: Oracle, Salesforce
• Pharma: Eli Lilly, Novo Nordisk, Johnson & Johnson
• Industrials: Toyota, Siemens

Using the CB Insights technology intelligence platform, we analyzed signals like investment & partnership activity, executive chatter in earnings transcripts, patents, and more to understand their efforts. Download the full report to see them all. 

Largest companies based on market cap (as of 4/15/2024). Our analysis excludes big tech, semiconductor developers, and state-owned companies.

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It’s tackling the issue on all fronts, from investing in AI-enabled care models via Google Ventures, to forging partnerships through its Google Cloud division, to launching new products that tailor generative AI to healthcare use cases.

These moves seek not only to address the challenges facing the sector, but also to strategically differentiate Google from big tech peers like Nvidia, Microsoft, and Amazon — all of whom are making concerted efforts to integrate AI into healthcare.

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The tech giant found a major entry point into healthcare workflows when it acquired Nuance for $19.7B in 2022. It followed up on this by expanding its existing relationship with leading EHR vendor Epic to introduce generative AI across clinical workflows, with the aim of improving provider efficiency and mitigating staffing shortages.

Microsoft’s recent relationships also point to an increasing focus on developing and deploying generative AI in the pharmaceutical industry. The tech behemoth is partnering with and investing in startups in drug development, where early applications of generative AI have seen especially strong investor and commercial traction.

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To reach that goal, the pharma giant is investing internally — it has 178 projects in the pipeline and spent nearly $11B on R&D last year, up 12% from 2022 — as well as looking to emerging technologies that can help it fire on all cylinders.

AstraZeneca has been strategically partnering with companies offering AI drug discovery, diagnostics, and real-world data to help offset some of the cost of drug development and speed up the process. For example, it signed a $247M deal with Absci in December 2023 to develop generative AI-designed antibody therapies for cancer.

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Tech providers are racing to develop simulations — which can replicate real-world scenarios in clinical trials — that can predict drug interactions, patient responses, and potential side effects. 

Below, we’ll highlight a few areas where AI-powered simulations are being used to enhance clinical trials and research across:

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Pharma giant Bristol Myers Squibb (BMS) has done three $4B+ acquisitions since October. Beyond M&A, the company has been active on the partnership and investment front.

We discuss its activity — and the pharma sector more broadly — below.

M&A ACTIVITY

Since October, BMS has acquired 3 companies:

• Mirati Therapeutics ($5.8B) — cancer drug developer
• Karuna Therapeutics ($14B) — psychiatric and neurological drug developer
• RayzeBio ($4.1B) — radioparmaceutical cancer drug developer

LICENSING ACTIVITY

In addition to M&A, BMS has been actively striking partnership & licensing deals with other biopharma companies.

You can see 4 licensing deals it’s struck just since October as well courtesy of CB Insights commercial transaction data.

INVESTMENT ACTIVITY

And finally, the pharma giant remained an active corporate venture capital investor in 2023.

Its deal activity held up pretty well in an otherwise down year for venture.

Within its venture investments, BMS is deploying money into new companies and not just following on in existing investments as the graph below illustrates.

BIG PHARMA ACQUISITIONS

Pharma giants are sitting on a lot of cash, and with some having drug pipelines that need replenishment, 2024 should be a big year for M&A activity in the pharma space overall. 

2023 already marked a major upswing in activity.

Pfizer completed its $43B acquisition of Seagen in December. Meanwhile, AbbVie announced back-to-back acquisitions worth nearly $19B combined in Q4.

Heading into 2024, BMS has likely put everyone else’s corp dev and licensing/R&D teams on alert that it’s go time.

For customers who want to dig into Fortune 500 pharma M&A activity on CB Insights, check out this search here.

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