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Digital Health and Biopharma: Different but the Same

Digital health may be the new(ish) kid on the block of the wider pharma landscape, but in the past year or so it’s been through a pretty rapid maturity process. As with many relatively young markets, the digital health ecosystem is extremely fragmented, very fast moving and vulnerable to both excessive enthusiasm and punishing resets as economic realities kick in.

As CEO of Galen Growth, who recently joined forces with Evaluate to bring insights about the digital space to a wider audience, I thought it would be useful to share a few ways in which the digital health space is the same – but different from the wider healthcare and life sciences market.

The Same: The funding boom is over
The pharma landscape, and biotech in particular, enjoyed something of a golden age during Covid, with huge investment coming into the industry. The same was true of digital health products. Data from our solution, HealthTech Alpha shows that 2021 had record levels of investment, with deals totalling $56bn taking place. Like biotech, though, the purse strings have tightened and H1 of 2023 saw just under $11bn invested in deals. Deals are still happening which is positive, but the era of cheap money is over.

Different: The patent cliff provides opportunity
The “looming” patent cliff for biopharma is now upon us. Pipelines need to be filled and this certainly provides opportunity for late-stage, unpartnered assets who will be in an excellent position to make deals with the biggest players. However, these assets are finite, so big pharma is starting to cast the net more widely, and this means investing in digital assets, in particular AI-based tools. Pfizer, Bristol Myers Squibb and AstraZeneca all signed multiple digital health partnerships in the first half of 2023 and there will more to come.

The Same: Clinical evidence increases ticket size
This is another area where digital health is catching up with the pharma side of the market. The current funding drought means that investors cannot be won over with a CEO’s vision or woolly ideals about paradigm shifts. Hard money require hard evidence. Our research shows that within the remote devices area, for example, 64% of growth-and late-stage ventures have proven clinical strength. 81% of the cumulative funding value from 2022 – H1 2023 deployed to ventures in this cluster went to ventures with proven clinical strength.

The Same: Patients, providers and payers reply on products with proof points
Again, like pharma, the future of any digital health tool is uncertain without a clear pathway to reimbursement. While payers around the world get to grips with if and how to address new therapies for obesity and Alzheimer’s, the digital world is navigating the numerous “health-related” apps, software and devices. Stakeholders such as healthcare providers and payers require proof points of a product’s benefit to the intended user. HealthTech Alpha has catalogued over 16,000 products (mobile apps, software, devices, and more) that have been developed by private ventures focused primarily on digital health. 25% of these products were developed by ventures that have proven clinical strength.

Different: Oncology is NOT the leading therapeutic area
One of the few certainties in biopharma is the extraordinary level of focus and funding that is funnelled into oncology. Evaluate’s latest World Preview report confirmed that this is not expected to change in the foreseeable future. However, while oncology does feature in the top five top-funded therapy areas in digital health, it is neurology that currently sits at the top – up from number four in 2022. It’s worth noting that this is largely driven by a $474m investment in Neumora Therapeutics earlier this year, but there is much more fluidity in this rapidly evolving arena.

You’ll doubtless have noticed the clinical strength is a recurring theme here. In an upcoming blog post we’ll address that in a little more detail. In this fast-paced, but currently challenging area of the health industry, there is much to cover and I invite you to take a look at the highlights of our mid-year report  if you’re looking for a primer on digital health. As part of our partnership with Evaluate, we’ll be sharing much more in the coming months and I look forward to providing more insights.

Julien de Salaberry

Founder & CEO

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