Novartis Is Playing Serious Games
With the acquisition of Amblyotech, the pharma giant will develop digital therapeutics based on gaming software and 3D vision technology.
“Amblyotech’s software is a great example of how we can reimagine medicine using digital technology.” — Nikos Tripodis, Global Business Head, Ophthalmology, Novartis
By 2030, there will be almost 1 billion people over the age of 65 worldwide. More and more people will need treatment for chronic conditions, increasingly taxing healthcare systems and driving healthcare costs up.
Against this backdrop, digital technologies and AI are enabling the rapid development of digital therapeutics, or DTx, new therapeutic approaches that use software and data to prevent or treat a wide range of physical, neurological or psychological conditions.
The promise of digital therapeutics (DTx) include lower costs of delivery of care, higher effectiveness, and faster development cycles for treatment, as well as new sources of fast-growing revenue and profits for the industry.
Who is Novartis
Headquartered in Basel, Switzerland, Novartis is one of the largest pharmaceutical conglomerate in the world. Novartis was created in 1996 through the merger and restructuring of Ciba-Geigy’s and Sandoz’s pharmaceutical businesses.
The history of Novartis, Ciba-Geigy and Sandoz is rooted in the early development of the Swiss chemical and pharmaceutical industry in the industrial cluster around Basel, starting in the second half of the 19th century.
Today, Novartis is a publicly-traded multinational with nearly $50 billion in annual sales, and 100,000+ employees worldwide. Novartis’ business is divided into two main divisions: Innovative Medicines, which focuses on new IP in prescription drugs and oncology , and Sandoz, which manages the generics and biosimilars businesses. Novartis drugs and therapies are used to treat nearly 800 million people each year.
In 2019 Novartis completed a $30-billion spinoff of Alcon, its vision therapy and eye care products division, divesting it into a separate and independently-traded public company. Novartis had previously acquired Alcon in 2010 from Nestle.
Novartis’ strategic goals are articulated around five fundamental pillars:
Novartis expects the projected value of the global digital health market by 2023 to exceed $230 bn and is committed to tap into digital innovation.
“Go big on data and digital.” — One of Novartis’ five strategic priorities.
As part of this strategic push, Novartis has invested in technology programs and partnerships in recent years such as:
- Initiatives to fundamentally change the drug and treatment discovery process using data from clinical trials and other sources and AI technologies.
- The development and launch of ACTalya, a AI-powered digital personal assistant for sales representatives to improve how they manage relationships with customers.
- The launch of the Novartis AI Innovation Lab in collaboration with Microsoft.
- A partnership with Amazon Web Services to help improve efficiencies in manufacturing and supply chain.
- Innovation outposts, under the Novartis Biome program, to tap into digital hubs in Silicon Valley and across the world to open the company to collaboration with startups.
- A collaboration with Tencent/WeChat to create AI-powered patient assistants in China.
Who is Amblyotech
Amblyotech is an Atlanta-based developer of digital therapies for the treatment of amblyopia (a.k.a. lazy eye), a condition that affects about 3% of the population, and other ocular diseases.
Launched by biotech and pharma industry veterans results
Robert Derricotte and Joseph Koziak, the company positioned itself as a hybrid company between life science and software.
The company focused on a condition, amblyopia, which affects 9 million people in the US alone and for which there are effectively no therapies for patients over the age of 12. When the condition is diagnosed in children, the only treatment options are eye patches and atropine eye drops. Patches placed on the stronger eye force the brain to use the weaker eye to see, while atropine drops cause blurred near vision on the stronger eye to similar effect. Both treatments are generally not very effective, can last years and have high relapse rates.
The patented binocuclear technology that Amblyotech developed uses 3D glasses to provide different visual stimuli to each eye, forcing the brain to process signals from both eyes and preventing and reversing the deterioration typical of amblyopia.
In 2015, Amblyotech partnered with Ubisoft, the French videogame company behind top gaming franchises such as Assasin’s Creed, Just Dance, Far Cry, Tom Clancy and Prince of Persia, and with McGill University in Canada, to develop and release Dig Rush, a video game specifically designed for the treatment of amblyopia. The game makes use of 3D glasses and especially-designed gameplay to optimize stimulation of each eye as the patient plays the game.
The company was able to complete clinical studies with hundreds of patients including with National Eye Institute (NEI)-sponsored Pediatric Eye Disease Investigator Group (PEDIG).
Amblyotech raised approximately a total of $700,000 in funding, according to SEC filings.
The Deal
On April 20, 2020, Novartis publicly announced it had acquired Amblyotech for an undisclosed amount and that and it planned to, “in collaboration with Ubisoft and McGill University, pursue the development of the acquired digital technology for the treatment of amblyopia.”
In a statement, Nikos Tripodis, Global Business Franchise Head, Ophthalmology said “We look forward to using our deep clinical development expertise in ophthalmology to accelerate this platform toward regulatory approval, and our global commercial footprint to maximize access for patients who need it.”
Why it Matters
Digital therapeutics is an emerging industry with substantial growth and profit potential globally. Digital therapeutics includes software and hardware-based therapies delivered via digital means that can partially or completely substitute for traditional pharmacological treatments.
In a recent report, Business Insider Intelligence estimated the DTx market to grow to $9 billion by 2025 and patient adoption to grow 10x by 2023.
It is not surprising then that DTx startups have brought in more than $1.5 billion in VC and CVC investment since 2018, as well as strategic attention from corporate development departments at many large pharmaceutical companies.
Recent examples include:
- Bayer’s leading, last year, of a $40 million funding round in One Drop, a mobile diabetes treatment management platform;
- Sanofi’s partnership with digital mental health company Happify Health to work on depression treatment in patients with multiple sclerosis (MS);
- J & J investment in chronic digestive diseases management company Cara Care.
Novartis also got into the digital therapeutics space, most notably with a 2019 commercialization deal with AI-powered health analytics company Biofourmis and a development and commercialization agreement in 2018 with Pear Therapeutics, a company developing prescription apps for substance use disorder treatment (the commercialization part of the deal was later rolled back and distribution responsibility returned to Pear). The deal with Pear came after Novartis had participated into all four successive rounds of financing in the startups.
The Amblyotech acquisition marks the first time that Novartis targets its M&A machine at digital therapeutics. It may be just an opportunistic transaction or it may well be part of a wider digital M&A strategy in the DTx space, alongside the venture investment strategy that Novartis has been pursuing.
Regardless, M&A action in digital therapeutics is real and accelerating. It should come at no surprise if traditional pharmaceuticals giants deploy some of their cash to buy the most promising startups in the space.
TL;DR
- Novartis is a publicly-traded pharmaceutical multinational with nearly $50 billion in annual sales.
- Amblyotech is a US-based developer of digital therapies for the treatment of amblyopia a.k.a. lazy eye.
- On April 20, 2020, Novartis publicly announced it had acquired Amblyotech
- The digital therapeutics (DTx) market is expected to triple in size to $9 billion by 2025.
- DTx startups have raised $1.5+ billion in VC/CVC investment since 2018.
- Pharmaceutical corporate giants have invested in DTx startups and are starting now to acquire them.
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