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Digital therapeutics are expected to grow into a $14B industry over the next 6 years.
The Digital Therapeutics Alliance defines DTx as products that “deliver evidence-based therapeutic interventions to patients that are driven by high quality software programs to prevent, manage, or treat a medical disorder or disease.”
The top 10 most funded Digital Therapeutic (DTx) companies have collectively raised over $2B in funding, and digital health M&A is significantly bigger. As of December 2020, the top 20 digital health mergers and acquisitions totaled $50B.
It’s still very early days in digital therapeutics, and we’re already seeing these huge valuations and deals. Back in 2017 at SXSW, ABC’s “Shark Tank” investor Mark Cuban predicted the first person with a Net Worth of over $1T will be working in Artificial Intelligence.
“… the world’s first trillionaires are going to come from somebody who masters AI and all its derivatives and applies it in ways we never thought of … “ Mark Cuban
Most of the current digital therapeutics companies are focused on diseases or disorders with a behavioral component that can be leveraged to improve health. Digital therapeutics are not meant to replace a healthcare professional, they are designed to be tools — usually available by prescription only — that are used in conjunction with a healthcare professional and/or pharmaceuticals.
While each DTx may treat a different disease or condition, the thing that most DTx have in common are these 4 main components:
· Sensor component
· Coaching component
· Data tracking and analytics component
· Educational component
Let’s dive into the focus areas of some of the top most funded DTx startups.
Digital Health’s Top Funded Startups
Hinge Health is leading the top-investment-funded pack in the DTx space with a total funding of $426M, after they closed their latest round of $300M in January 2021. Hinge is a DTx musculoskeletal therapy platform that uses sensors combined with one-on-one coaching to be used in-home. There’s a reason Hinge is doing so well with investors. According to a study published in JAMA in 2016, musculoskeletal disorders collectively resulted in $380.9B of healthcare spending — the most expensive of any category, including the aggregate of cardiovascular diseases.
Omada Health is another well-funded DTx startup widely known in the digital health world. They currently have 5 separate DTx offerings, including their flagship diabetes program. Omada Health also tackles other prevalent medical problems like musculoskeletal and hypertension. These also happen to be some of the top most expensive diseases to treat, and all have a behavioral component that can dramatically improve or exacerbate these conditions. That behavioral component makes them great candidates for DTx.
Livongo is a chronic condition management platform that was acquired by Teledoc in 2020 for $18.5B. One interesting aspect of Livongo is that they were the first digital health company to have an Amazon Alexa Skill (app) for their diabetes program. Since Amazon Alexa is now HIPAA compliant, it can be used with private patient health data and communication. The patient can now say to Alexa “Hey Alexa, what does Livongo say was my glucose reading today?”.
Teaching and guiding patients through meditation remotely using an AI enabled app is the lowest hanging fruit in the world of digital health. Both Calm and Headspace make the top 10 list for funding with $218M and $215M respectively. Both companies are focused on meditation, and distribute through multiple channels, including employers and direct-to-consumer subscription models that include a monthly cost or $69/year.
These apps are far reaching — Headspace has already been used by 70M people in 190 countries. The app aesthetics are completely different between the two, but they work in the same way and accomplish the same thing for the user. While these 2 digital health apps are not clinical grade and don’t require a prescription like the others, Headspace Health has announced their future goal is to be the first FDA cleared app for meditation.
With over $214M in funding, Pear Therapeutics is a leader in the DTx space for many reasons, including their robust pipeline of products. Pear had the first digital therapeutic cleared by the FDA, and is available by prescription only. Pear now has 3 FDA cleared prescription apps on the market for medical problems like addiction and insomnia — medical conditions with a large behavioral health component. Pear’s apps use CBT — Cognitive Behavior Therapy. CBT is one of the gold standards behavioral health specialists use for conditions like addiction, insomnia, and depression.
Predictive Care is the Future of Healthcare
In the world of digital health, predictive care is the future of healthcare. Everyone working in healthcare already knows that treating any medical problem at the earliest stages is significantly easier, cheaper and has much better patient outcomes than catching problems at a later stage. Biofourmis is an AI predictive platform that raised a little over $143M in funding to focus on each individual patient’s future — personalized, predictive care.
By analyzing an individual patient’s physiologic data against a population metadata set, Biofourmis can predict that individual’s disease trajectory. This allows the patient and care team to get ahead of problems, and practice offensive medicine instead of what we normally do in healthcare — defensive medicine. The AI analytics engine also compares the individual’s data with themselves, including position, posture and activity, and can catch the individual’s slight changes, which could indicate a problem or explain a false alarm. These subtle changes probably wouldn’t have been noticed by a human clinician, but can be seen in the patient’s measurement data.
Biofourmis is also providing its platform to hospitals in order to enable a Hospital-at-Home. During the pandemic, CMS (Medicare) has been reimbursing for patients to be hospitalized at their own home. Initially launched with Brigham and Women’s Hospital in Boston, the platform integrates into many EMRs like Cerner and Epic, and provides the hospital with the necessary technology components for remote patient monitoring (RPM). The platform does video and text chat between the patient and the hospital, and can remind patients to do things like take their medication at a certain time. There’s also an emergency button so the patient can talk to a nurse or doctor immediately.
Of note — while CMS has not made the hospital-at-home reimbursement rules permanent, successful programs like Brigham’s can go a long way to convincing CMS to make these reimbursement changes permanent.
Click Therapeutics has just under $860M in funding, including their latest round of debt financing and some multi-year milestone-based funding. Otsuka Pharma (HQ in Japan), a neuro focused pharma, is one of the main milestone-based funders with $300M specifically for Click to develop a DTx app for Major Depressive Disorder. Germany based pharma Boehringer Ingelheim is also a milestone-based funder with $500M to develop a DTx app for schizophrenia. While the details of these deals aren’t public, Click likely traded significantly less stock for that $800M of milestone-based funding than if they had done a straight $800M VC round.
In the deals with the BigPharma companies, these future DTx prescription apps would work in conjunction with pharmaceuticals and/or healthcare professionals such as therapists, psychologists and psychiatrists.
Video Games as Treatments
Akili Interactive Labs was awarded FDA clearance for their prescription videogame therapeutic — EndeavorRx — in June, 2020. It is currently indicated for use for children with ADHD (attention deficit hyperactivity disorder) between the ages of 8–12. Because it was on the FDA De Novo pathway as a novel device (SaMD), the clearance actually created a new FDA class within digital therapeutics. SaMD=software as a medical device, covered in the first installment of this series.
The FDA defines a novel device as one that can “address an unmet need or may be safer or more effective than currently available alternatives”.
As with the disease management digital therapeutics, EndeavorRx is not a replacement, but a tool to be used in conjunction with therapy, education and/or medications, and is available by prescription only.
The Akili Interactive Labs team approached ADHD from a game mechanics standpoint. They realized that by making a treatment fun, that could lead to engagement and better compliance — especially when working with children. So they created a video game to be used for 30 minutes a day that helps improve the child’s ability to focus and ignore other distractions. The software does automatically lock after the allotted time so the child doesn’t continue to play after their treatment is completed for that day.
Check back next week for the third installment in the AI in Healthcare with Michael Ferro on Who Pays for AI in Healthcare
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