APRIL - MAY 2023
The Bright Future for Digital Therapeutics across Europe
By Michelle Tempest and Marc Kitten, Partners at healthcare and life sciences consultancy Candesic
Dr Michelle Tempest and Marc Kitten, both Partners at healthcare and life sciences consultancy Candesic, explore the excitement around Digital therapeutics (DTx) as an emerging field in healthcare. DTx use technology to deliver evidence-based interventions to treat, manage, or prevent diseases. This article examines the current state of DTx in Europe, its challenges and opportunities, and the implications for healthcare providers, policymakers, and investors.
The digital therapeutics market in Europe is rapidly growing, driven by the increasing prevalence of chronic diseases, the ageing population, the high cost of traditional healthcare and the rise of digital health startups. The COVID-19 pandemic has accelerated the growth of the market by increasing the demand for remote healthcare services. However, the market faces several challenges, including regulatory uncertainty and reimbursement issues. To maximize the potential of DTx in Europe, healthcare providers, policymakers, and investors need to work together to establish clear regulatory frameworks, incentivize providers to adopt DTx, and invest in only the most robust evidence-based and clinically validated DTx products. The success of DTx in Europe has the potential to improve health outcomes, reduce healthcare costs, and drive innovation in healthcare – so adopting DTx at scale and at pace is to be encouraged.
DTx’s involve the use of software-based interventions to prevent, treat or manage diseases, either as standalone interventions or in combination with traditional therapies. These interventions are evidence-based, clinically validated, and have passed regulatory hurdles. They can be used to improve outcomes for patients with chronic conditions such as diabetes, hypertension, and depression. The use of digital therapeutics can evidence reduction in healthcare costs, increased patient engagement, and improved health outcomes.
The DTx market in Europe is driven by several factors. First, the increasing prevalence of chronic diseases, including diabetes, obesity, and cardiovascular disease, is placing a significant burden on healthcare systems. Second, the ageing population in Europe is increasing, leading to a higher demand for healthcare services. Third, the high cost of traditional healthcare is driving patients and providers to seek alternative solutions that are more cost-effective. Finally, the chronic shortage of human staff is encouraging people to search for digital solutions. These issues have come together in a perfect storm to encourage startups to get creative and develop DTx’s.
Current State of Digital Therapeutics in Europe
The DTx market in Europe is still in its infancy, but it is rapidly growing. In 2019, the European DTx market was valued at $560 million, and it is expected to grow at a CAGR of 24.2% between 2020 and 2025. The COVID-19 pandemic has accelerated the growth of the DTx market in Europe due to the increased demand for remote healthcare services.
Several digital therapeutics are currently available in Europe. For example, a DTx called CBT-i Coach helps patients with insomnia by providing cognitive-behavioral therapy through a mobile app. Another DTx called Dario Health helps patients with diabetes monitor their blood glucose levels and provides personalized coaching based on the data collected.
When we speak with DTx companies, they regularly report global regulatory confusion. While several DTx products have received regulatory approval, there is yet to be an agreed consistent regulatory framework for the industry across Europe. For some startups it has left them with high legal fees, for others it has meant time consuming and over-burdensome paperwork with an onerous paper trail. The result has been some uncertainty amongst investors left wondering on how long it will take to get DTx to reach their total accessible market (TAM).
Another challenge can be different reimbursement rates of DTx across Europe. While some countries, such as Germany and France, have established reimbursement schemes for DTx, others do not. This again can limit the speed of reaching their TAM.
Opportunities for Digital Therapeutics in Europe
One thing is clear. DTx are here to stay and there are significant opportunities for growth. One of the main opportunities is the increasing prevalence of chronic diseases. As the population ages and lifestyles become more sedentary, the demand for effective and affordable solutions to manage chronic diseases will continue to grow. DTx can provide a cost-effective and convenient solution for patients and healthcare providers.
Another opportunity is the rise of digital health startups. Europe has a vibrant startup ecosystem, and many digital health startups are developing innovative solutions to address unmet needs in healthcare. These startups can drive innovation in the DTx market and create new opportunities for growth.
The COVID-19 pandemic has also created opportunities for the DTx market in Europe. The pandemic led to an increased demand for remote healthcare services, which has accelerated the adoption of DTx. The pandemic has also highlighted the importance of technology in healthcare and the need for innovative solutions to address healthcare challenges.
Implications for Healthcare Providers, Policymakers, and Investors
Healthcare Providers: Healthcare providers play a critical role in the adoption and implementation of digital therapeutics in Europe. Providers need to be educated about the benefits and risks of DTx and how to integrate them into clinical practice. Providers should also consider the potential impact of DTx on their business models and patient outcomes. To encourage the adoption of DTx, providers need to be incentivized, and reimbursement schemes should be established to ensure that providers are fairly compensated for the use of DTx.
Policymakers: Policymakers have a crucial role in shaping the regulatory environment for DTx in Europe. Policymakers need to establish clear regulatory frameworks for DTx products and ensure that they are evidence-based and clinically validated. Policymakers also need to consider the potential impact of DTx on healthcare systems and establish reimbursement schemes that encourage the adoption of DTx. Finally, policymakers should consider the potential ethical and privacy implications of DTx and establish guidelines to ensure that patient data is protected.
Investors: Investors have a significant role in driving innovation and growth in the DTx market in Europe. Investors should focus on investing in startups that are developing evidence-based and clinically validated DTx products. Investors should also consider the potential impact of DTx on healthcare systems and the potential for reimbursement. Finally, investors should be mindful of the potential risks of investing in the DTx market, including regulatory uncertainty and competition from established healthcare providers.
We have selected two case studies that illustrate the potential of digital therapeutics in Europe. There are of course many more to consider.
Kaia Health is a digital therapeutics startup based in Germany that develops software-based interventions for chronic pain management. The company has developed a mobile app that provides personalized coaching and exercise programs for patients with chronic pain. The app uses cognitive-behavioral therapy and mindfulness techniques to help patients manage their pain. Kaia Health has raised $50 million in funding to date and has partnerships with several healthcare providers and insurance companies in Europe.
HelloBetter is a German-based digital therapeutics startup that provides evidence-based interventions for mental health disorders. The company has developed a web-based platform that provides cognitive-behavioral therapy and other evidence-based interventions for depression, anxiety, and other mental health disorders. HelloBetter, too has partnerships with several healthcare providers and insurance companies in Europe and has received regulatory approval for its products.
Both companies are likely to disrupt their respective markets in several common ways,
- Accessibility: Both companies provide digital therapeutics solutions that are more accessible and convenient than traditional therapy or medication-based approaches. This can help to address some of the barriers that patients may face in accessing care, such as geographic location, stigma, or cost. Kaia provides patients with a convenient way to access their personalized coaching and exercise programs from anywhere, while HelloBetter's web-based platform provides patients with convenient access to CBT-based interventions.
- Evidence-based interventions: Both companies use evidence-based interventions in their products, which can provide patients with greater confidence in the effectiveness of the treatments they are receiving.
- Cognitive-behavioral therapy (CBT): HelloBetter's web-based platform provides patients with convenient access to CBT-based interventions, while Kaia Health provides patients with a holistic approach to pain management that includes some CBT and mindfulness techniques.
- Partnerships: Both companies have partnerships with healthcare providers and insurance companies, which can help to increase the reach and visibility of their products and make them more widely available to patients.
There are several other disruptive digital therapeutics companies in Europe and the list is growing. Some other examples include Bold Health for gastrointestinal disorders, SidekickHealth and Oviva for chronic diseases, Psyon and Silvercloud Health for depression and anxiety, Cognitant for medication adherence, Ada Health for personalized health assessments and guidance and Nutrium for personalized nutrition coaching and support. Overall, DTx are here to stay from the wellness sector through to substituting and complementing traditional healthcare services. As with all startups - there will be winners and losers. However, savvy investors should be able to seek advice or discover the gems themselves, as DTx’s follow clinical evidence and as a result snake oil pitch decks should be easy to spot. The only fly in the ointment could be the slowness of policy makers to their reimbursement house in order. As soon as regulation and politics align - DTx’s will attract healthcare providers and investors like bees to a honeypot.
Note: Unfortunately, our guest contributor for this piece was not able to meet the deadline, so, in the name of AI and and with a nod to this year's EdTechX Summit theme (H-2-AI), we enlisted the help of ChatGPT (with just a few tweaks)!
Africa stands at the cusp of a digital revolution, with technology reshaping every aspect of life on the continent. Central to this transformation is the rise of educational technology, or EdTech. Although investment in African EdTech represents just a small fraction of global EdTech investments, attracting just $20m of funding between January 2019 and August 20213, GSV Ventures predict the spend to reach $57bn by 2030.
As investors, we hold the keys to shaping this sector in a way that is profitable, sustainable, and equitable. Impact investing, with its focus on generating social and environmental benefits alongside financial returns, can be a powerful tool in driving this change.
Investing in EdTech in Africa is not just about financial gain; it's about fundamentally altering the educational landscape to ensure equal opportunities for all. Nelson Mandela famously said, “Education is one of the most important weapons in a country. And the standard to which black education is neglected is something very difficult to put in words.” With the highest rates of education exclusion recorded in Sub-Saharan Africa, according to UNESCO, EdTech represents an avenue for delivering quality education to millions of students, regardless of their socio-economic status.
The South African EdTech startup, Valenture Institute, illustrates the power of impact investment in the sector. With a recent influx of investment, Valenture is expanding its online learning platform to democratize access to quality education. The company’s approach to personalized learning enhances academic outcomes and fosters critical thinking skills, preparing African youth for a globally competitive marketplace.
Andela, the Nigerian-based company, offers another example of impactful EdTech investment. With funding from prominent investors, Andela trains Africa's talented software developers and connects them to global tech companies for remote jobs. This investment has created a sustainable talent pipeline, empowered thousands with high-paying jobs, and contributed to the growth of Africa's digital economy.
While EdTech holds the spotlight, the principles of impact investing apply across sectors. Consider the case of Twiga Foods, a Kenyan agtech startup, which uses technology to connect farmers directly to vendors. Similarly, Flutterwave, a Nigerian fintech company, facilitates cross-border transactions, fostering regional trade and financial inclusion.
As we witness these successes, it's crucial to remember that the real value of impact investing lies not in the profits generated, but in the lives transformed. We must therefore put impact at the heart of our investment decisions, to ensure we're driving growth that is not only financially rewarding, but also contributes to a more prosperous, equitable Africa.
Tech investment in Africa has the potential to be a powerful force for good, creating profitable businesses while also delivering tangible social impact. By integrating impact considerations into our investment decisions, we can help shape an African tech sector that truly lifts all boats – profitable, sustainable, and above all, equitable.
H-2-AI: The Inflexion Point of Human Development
As we navigate the ever-evolving landscape of artificial intelligence, it's becoming increasingly clear that AI is transforming the relevance of human skills and learning in profound ways.
The advent of AI has presented us with a new era of technological innovation, with immense opportunities for individuals, educational establishments and businesses alike. The traditional skills and knowledge we once believed to be essential are in the balance and, as we move towards a more machine-driven world, we need to completely reassess what it is we need to know.
The inflexion point of human development is upon us, and we need to be ready to embrace the changes that come with it. EdTechX will help you navigate this new world and provide you access to the tools, the network and resources to build a future that can harness the potential of generative AI.
We invite you to join us at the 10th edition of the EdTechX Summit and be part of this important conversation. Together, we can shape a better future for humanity and ensure that AI serves us and future generations in the best possible way.
Save 20% on tickets when you book before 31st May!
Digital Therapeutics’ Integration into the ‘Standard of Care’ – A Progress Update
By Hannes Klopper, CEO at HelloBetter
Since September 2020, doctors and therapists in Germany can prescribe evidence-based digital health applications (“DiGAs”), and for 73 million citizens the cost is fully covered by statutory health insurance.
So far, 46 DiGAs have been approved by the Federal Institute for Drugs and Medical Devices (BfArM) and 41 are included in the DiGA-registry. The majority of the DiGAs (19) focus on diagnoses in the “mental health” category such as depression, and anxiety. 70% of all DiGA users are female and the average age is 45 years.
Overall, the number of prescriptions tripled between the first and the second year since the debut of the DiGA model, resulting in 203.000 prescriptions.
Almost three-quarters of all DiGAs were prescribed by general practitioners (37%), orthopedists (18%) and ear, nose and throat specialists (17%) (DiGA report, 2022).
In 2022, only 15% of physicians and psychotherapists were not yet aware of DiGA, while around 37% stated that they had already tried out or prescribed a DiGA (compared to only 18% in 2021) (Stiftung Gesundheit, 2022).
3 Developments to watch
- Patient usage of Digital Therapeutics
A recent survey has shown that…
- more than 70% of DiGA users used a DiGA as long as recommended or even longer, suggesting better compliance than the 50% estimated by the WHO for pharmaceuticals.
- more than half of the patients said that the DiGA content fit their personal needs exactly. In light of the significant variance of the patients’ individual circumstances regarding their diseases and indications (e.g. chronic patients vs. non-chronic patients), this is a respectable result.
- 4 out of 10 users see DiGAs as a real help in getting their own condition under control. Given the overall shortage of doctors and therapists and adding the fact that DiGAs usually address indications that the existing care system struggles to address, this illustrates the significant potential of DiGA to improve the standard of care (AOK Survey, 2023).
- Integration with existing billing and workflow processes
DiGAs are getting more and more integrated into the everyday processes of doctors and therapists and become a standard treatment modality. The reimbursement of services in the public outpatient sector in Germany is regulated in the so-called EBM catalogue. Some DiGAs are already included in this catalogue enabling doctors to bill follow-ups with DiGA patients, valuing the provider’s time and effort.
- Regulatory openness for blended care:
The law stipulates that a DiGA can either be used by a patient independently or jointly by the patient and a healthcare provider. In practice, however, applications that integrate coaches, for example, have a hard time securing approval as this routinely led regulators to call into question the medical efficacy of the digital component of the product.
However, in December 2022 ‘elona health’ managed to secure approval for a blended care DiGA, paving the way for other innovative solutions that integrate digital and face-to-face care.
This approval is an important step towards empowering patients and providers, enhancing the patient-provider experience with real-world data and expanding the scope of digital therapeutics deployment.
These are just three of a number of developments that demonstrate that DiGAs are here to stay. They will allow us to address the shortage of doctors and therapists, long waiting times and gaps in the care system to provide patients with the timely, evidence-based support they deserve.
Erik Brynjolfsson, Professor at the Stanford Institute for Human-Centred AI, explains how AI can be harnessed to work out skill adjacencies that can help to close the gaps.
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A new report from the Impact Investors Council shows an acceleration of Indian impact enterprises graduating to later funding stages, presenting attractive opportunities for asset managers. World Economic Forum Read more
1 HealthTech Alpha
2 Deal announced but not yet closed
3 Care Delivery Division of 98point6 acquired
4 Technology assets acquired
In Q1 2023, global education deal-making reached its lowest volume and value in terms of both fundraising and M&A transactions, compared to previous quarters from 2019 onwards. M&A deal value decreased by $4.6bn, compared to the same quarter in the previous year, representing a decrease of 85%.
Consistent with Q1 2022, the United States and Canada were the dominant geographies in terms of M&A deals, accounting for 60% of total transactions. In Q1 2023, the market witnessed a diverse range of transactions, with half of the deals valued at less than $50m, while 38% of the deals were large transactions exceeding $150m. These high-value transactions made a significant contribution of $707m to the sector during this period. Strategic buyers dominated the space in Q1 2023, accounting for 82% of deal volume in the quarter. In February 2023, Perdoceo Education Corp acquired Coding Dojo, an educational technology company that trains students in tech skills and runs computer science bootcamps, for $81m.
Fundraising experienced its lowest deal value for the period under review, declining by 12% from Q1 2022 to $4.3bn in Q1 2023. Notable fundraising transactions included EdTech company 2U’s $127m raise and JMI Management’s $90m investment into Coursedog, a cloud-based curriculum and schedule management software. A recent report by HolonIQ states that there has been an 80% decrease in global EdTech venture capital investment from Q1 2022 to Q1 2023. This decline is primarily attributed to the collapse of significant deals caused by a worldwide slowdown in investment activity.
2023 has confirmed the significant decline in funding, which is likely to continue in the year ahead, and possibly for several years to come. Although Q1 2022 saw robust performance and was generally in line with the previous year's momentum, funding deployed in each succeeding quarter has gradually decreased as the economy weakened and markets evolved. Investors who were previously not involved in the education sector and joined the investment hype from 2020 to 2022, have now generally withdrawn from the education sector altogether, or shifted their focus to the latest popular trends, such as Web3 or Generative AI.3 Ultimately, this decline can be attributed to a combination of factors, specifically the end of the funding boom caused by the pandemic as well as a general global economic downturn.
1 Includes deals announced but not yet closed
2 Relates only to deals with disclosed transaction amounts. Small deals are considered to be <$50m; Medium deals are considered to be ≥$50m and <$150m; Large deals are considered to be ≥$150m
M&A/Exits2 & Fundraising Activity3
2023 is a critical year for healthcare as demand rises and global costs increase, threatening the advances made during the pandemic. Covid-19 has disrupted a sector resistant to reform, creating conditions for a necessary paradigm shift. The challenge for sector leaders is to maintain momentum despite soaring costs, legacy infrastructure, and politicised environments.5 As of 27 March 2023, 147 Health Unicorns worldwide were collectively valued at $335bn from their last funding round. These Unicorns are among the sector's most promising enterprises and offer hope for innovation in the health market.5 The healthcare sector is at a critical juncture in 2023, with significant challenges and opportunities ahead as it navigates a path towards innovation and growth.
2023 has been characterised by a global economic downturn. Fundraising activity decreased in terms of both value and volume, with deal value experiencing a significant decline, falling by $8.1bn (65%) to $4.4bn in Q1 2023. However, the value of M&A/Exit deals increased by nearly $13bn compared to the previous quarter. The substantial rise is attributed to CVS Health Corporation’s $11bn acquisition of Oak Street Health, a network of primary care centers for adults on Medicare. Another significant M&A transaction was Takeda's acquisition of Nimbus Therapeutics, a biotechnology that uses computational technology to create selective small molecule therapeutics, for $4bn.
91% of fundraising deals were valued below $50m, with only 2% of deals exceeding $150 million. Notable fundraising transactions during this period included Neumora Therapeutics' $474m Series C raise, with the Abu Dhabi Growth Fund as the lead investor. Another example is Monogram Health, a provider of evidence-based in-home care and benefit management services for polychronic patients, which raised $375m in a Series C round.
North America was the dominant player in the HealthTech space this quarter, accounting for approximately 60% of both fundraising and M&A/Exit activity, followed by Europe and APAC. The United States has the highest healthcare cost and spending globally6, and digital health solutions are seen as a potential means to save a considerable amount of money in healthcare spending in the long-run. These factors are a significant driver motivating the high level of investment in the digital health space in the United States.
1 Includes deals announced but not yet closed
2 Exits: An exit occurs when an investor sells part or all of their ownership
3 HealthTech Alpha
4 Small deals are considered to be <$50m; Medium deals are considered to be ≥$50m and <$150m; Large deals are considered to be ≥$150m
6 Insider Intelligence