7 reasons why MEDTECH companies are better partners for Digital Health Startups
(This blogpost was originally written and first published on https://healthinar.wordpress.com/2017/07/16/reasons-why-medtech-companies-are-better-partners-for-digital-health-startups/)
By Tram Trinh (@Tramchomy)
Bayer announced a new global head for digital health and finished its 3rd accelerator batch. Merck has officially doubled the size of its venture unit and is launching its 3rd accelerator batch in 2017. Many ‘big pharma’companies including Roche, Pfizer and Takeda have started to reach out to the startup world, attending most of the key European digital health events (Health 2.0, ECHAlliance, FT healthcare, Frontiers Health etc.). Not surprisingly, these initiatives created a flow of digital health entrepreneurs rushing towards partnerships with the big pharma companies in hope to engage with a potential exit candidate.
Pilot-isis — a typical infection of the pharma companies
Nevertheless the path to exit with a big pharma can be a daunting journey that can last a minimum of 2–3 years. Like any big corporations, they are huge organizations. Disseminating new digital health products across a base of a minimum of 100,000 employees (scattered around the globe) is a serious long-term effort that requires a lot of attention and time.
One of the major pitfalls a startup can fall into are pilots that end up getting stuck in one country/division/function and never scale globally. For example, if startups knock at the marketing door, chances are that their job priority in an affiliate or region is to launch a drug and deliver targeted numbers. Their focus is miles away from scaling up a newly experimented digital health innovation, often perceived merely as an add-on to their drug-selling business model (unless it’s an app that can be used immediately as a marketing channel to support drug branding).
“There is some unavoidable investment time”, says Fredrik Debong, co-founder of mySugr, a startup focused around diabetes. “It is important to define and agree on the KPIs with your C-level pharma contacts right from the start and maintain an up-to-date discussions you will most likely shorten the timeline.” If you start the relationship with no incentives for the pharma management to drive a project with vague uncertain envisioned results, you can be guaranteed your pilot remains a pilot for a long time.”
One success of mySugr with Novo Nordisk relies on the clarity of the promise from the start: educating the market fast based on a trusted loyal base of patients. MySugr B2C model represents a recurring loyal user base of close to 1 million patients. And recent news proved it right: Swiss Pharma € 50 bn Roche acquired MySugr in June 2017 at an estimated € 70–80 Million sale prices to advance with MySugr Roche’s own digital strategy on the diabetes market.
Medtech — alternative gate way to the health care system?
However, with medtech it appears that pilots are not needed and the timeframe between the date of initial discussions to rolling out the digital health solution can go down to 6 months, as demonstrated by mySugr in partnering with Roche. Traditional medtechs are currently in transition: they must adapt to several metrics shifts in reimbursement regulation, consumer empowerment, digital enablement and their competitive landscape. As a result they are opening up faster to increasing partnerships with the digital health startup ecosystem. Here are the 7 driving factors:
1) New European MDR Medical Device Regulation
The 5th April 2017 EU Medical Devices Regulation requires more information transparency to consumers, vigilance and market surveillance, safety and reliability in medical devices. This is leading to portfolio rationalization at medtechs and represents an urgent incentive to invest “in new capabilities such as data analytics” EY 2016 medical technology report
2) Shrinking revenues, pricing pressure from influential payers and hospital systems, in European socialized markets
This has forced medtechs to co-develop and partner with tech companies outside of their traditional boundaries to deliver shared-risk and value-based outcome to payers and patients. Omar Ishrak, CEO Medtronic, at JP Morgan Health Care Conference January 2016 already mentioned his “New Partnerships and Business Models based on Joint Accountability”. A few months later, Medtronic partnered with the digital brain of IBM Watson to improve diabetes treatments.
3) Data as a common language
Christian Krey, CEO of Emperra, explains to us that “Medtech companies in our ecosystem have always been familiar with creating and using data for patients’ benefit. They understand the value of data and how to use and combine them to find new business models. Most Pharma companies still see their future in selling molecules, having a longer way to data-driven business models. For a digital health startup a partnership with a medtech company will leverage both partners.
4) A “patient-centric offer” as the baseline
between medtechs and digital health startups, says Gabriel Enczmann, Director Business Development at mySugr. “They are both allowed to market and speak to patients directly while pharma is highly regulated on what can be said or not said about their product to patients “
5) Moving “beyond the product“ into long-term Integrated health solutions.
Andreas Joehle, CEO & Chairman of the board of directors at Hartmann, stipulates clearly that his industry must re-think healthcare to create sustainable solutions: “we need to drop individual agendas and have an open-minded conversation about how to make real improvements. This needs to involve stakeholders from the entire healthcare value chain, as well as having people from outside the industry to bring new perspectives”. “Mobile apps have quickly established themselves on the healthcare scene and can help monitor everything from blood sugar levels to heart rates and cholesterol levels”
At Frontiers Health 2016, Dierk Beyer, Partner and co-founder of TransAct Advisory who see real-life digital health exit transactions confirms “If you combine a gadget with an IT platform, this can be interesting for both Medtech and startups. The links to disease monitoring represents a tremendous value to Medtech”
6) The unique value of proximity and relationships built by startups with their end-users
Pritt Krus, CEO of Dermtest, from Estonia emphasizes how relationships catalyze sound discussions: “As a digital health startup employing software and hardware solutions we have several potential cooperation points; yet quite often the extent and relevance of cooperation possibilities become clear only after a good relationship has been established with our main stakeholders first — doctors and patients — and there is initial traction with the service.”
This growing loyal community of doctors is what Touch Surgery, founded by CEO MD Jean Nehme, succeeded in building. Its cutting-edge surgery simulation app helps surgeons train ahead of complicated surgery procedures, or to familiarize themselves with new surgical procedures. Jean highlights that “The key to startup success is the ability to articulate the “new” and the “old” way in the startup “pain killer” value proposition to your Medtech partner. The winning agreement between both sides lies somewhere between the new disruptive way and the traditional model looking at long-term and existing practice”, which Touch Surgery did with J&J Ethicon, Stryker, Smith& Nephew and Zimmer to name just a few.
7) Medtechs and Digital Health Startups are ready from both an organizational and investment perspective to build strategic collaborations
Creating a global and local synergy in the partnerships
As Gabriel Enczemann from mySugr reveals, their successful startup approach has been on two levels as they are expanding from Austria, to the US, Germany, Italy, Belgium and Canada with the big Medtech Roche Diabetes. Speaking with champions and affiliates from two continents did help them build a global offering service that includes as well ready-to-pick options for country affiliates.
Synergy between startup R&D and medtech Regulatory know-how
“Partnering for a startup with a big medical device organization is like having an external regulatory department, and the startup is like the medical device organization’s innovation External lab” says Frederic Lordachs, co-founder and partner at Doctoralia from Spain.
One thing is sure: Roche’s acquisition of MySugr predicts further digital health acquisitions by Life Sciences companies, increased digital health valuations and investor interests. What digital health startups have recently built with Medtech companies will pay off in a shorter timeframe.
About the author
Tram Trinh combines executive entrepreneurial and corporate health tech industry experience, as well as non-executive roles across Fortune 500, Privately-held Medium-Sized Business to Not-For-Profit organizations. She has lived and worked worldwide and founded VITANLINK to bring societal impact, co-founding and co-developing ventures in Medical Devices & Diagnostics | Telemedicine | Digital Health-eHealth | Artificial Intelligence