It is common knowledge that healthcare systems in most countries have been creaking under the strain of growing costs exacerbated by new lifestyle-related epidemics such as obesity, diabetes and hypertension.

Can a piece of software code be the ‘magic pill’ that would help solve the problem?

Investors are undoubtedly prepared to bet on this: the current decade has seen a rush of investment into digital health & wellbeing, with US$14.6bn being invested in 2018, which is 14 times more than in 2010. An average deal has gone up by $6m to $21m in 2018 vs 2017. The largest deal in 2018 was a $300m Series C funding round for Grail, which has created a solution for the early detection of cancer using a test for circulating cancer DNA.  

A recent report by Global Market Insights estimates that the digital health market will reach $379bn by 2024. Research by Roche UK indicates that 82% of 16-24-year-olds want to see more use of digital technology on the NHS. 63% of young people would be comfortable with a chatbot giving them a diagnosis.

Digital Health: from wellness to clinically driven solutions

As digital health matures, investment focus is shifting from consumer wellness applications to clinically focussed solutions. Wellness applications comprising consumer activation solutions brought to life as part of the quantified self-movement (e.g. myfitnesspal, Runkeeper) and education & transparency platforms such as WebMD have raised multiple rounds of venture funding in the early 2010s and have successfully exited. As these solutions have been largely unregulated, their buyers have been predominantly outside the traditional pharma and life sciences space, including sports and fashion companies and private equity firms. Several category leaders have been created, and the investor appetite has diminished as the price of entry has risen.

The spotlight is increasingly on clinically focussed solutions aiming to drive better health outcomes at lower costs. These solutions empower patients by providing them with tools to collect and understand their real-time health data, educate them and help them make informed choices. Real-time clinical-grade data helps optimise treatment either involving doctors or, in some instances, without human intervention.

Engaged patients correlate with lower costs and better outcomes. Silicon Valley Bank says healthcare costs for least-engaged patients are 21% higher than those for the most engaged patients. Over the past few years, clinical evidence of digital health efficacy has grown substantially: of 571 studies published between 2007 and August 2017, 138 were published in January - August 2017. 860 clinical trials were underway as of August 2017, with  82% of US trials run by patient care organisations.

Our research shows that there is potentially massive value in digital therapeutics, and this has already been proven to some extent. In our paper “What is Digital Therapeutics and Why Does It Matter’, we look at where the value sits and how incumbents, upstarts and venture and private equity investors could unlock it. If you are interested in the full paper please order it here

Carl Engelmarc