By John Nosta | February 1, 2018
We’ve seen a good deal of investment in health tech 2017. If fact, it’s a record at almost $6 billion with many deals exceeding $100 million as reported by Rock Health.
It seems that it’s easier getting in than it is getting out.
I believe this reflects one central idea that is the big obstacle in moving digital from an idea to market: data. There are lots of great ideas gaining traction—from nanoparticles detecting cancer to nudge psychology driving compliance. The thinking is abundant, but the support for these ideas as valid clinical solutions is lacking. Sometimes, it’s just the process and takes time and money to execute clinical trials. But other times, it’s the ‘build it and they will come’ attitude that leaves clinicians (and patients) wanting more.
In healthcare, the traditional market forces like customer demand and pricing are subject to another more rigorous level of scrutiny. Validation, attached to a p-value can be the key driver in success. And wide-eyed entrepreneurs who see market opportunity can often fail to see that tricky path to 0.05. Further, payor gatekeepers also look to data as a core reason to choose or not choose an intervention. Ironically, as we vilify pharma and their sluggish processes, it might be this very model that helps digital health find success. It’s a multi-factorial decision:
- Market need is only one factor in a complicated clinical path.
- Validated trials, from trusted sources are essential.
- Innovation must match true clinical needs, and examined in the context of multiple stakeholders.
- Advances in technology must be compatible with convention systems and workflow.
Another path to consider is moving from IPO to merger. While the digital health world can offer ‘the lightning of innovation’, this generally provides only one of three legs required for success. The other two are clinical validation and market access. And it’s these two difficult paths that can confound idealistic management and stall market success. And for the more traditional life sciences companies that are looking for that lightning bolt of innovation to reinvigorate sales, it could be a marriage made in digital health heaven.
Today’s investment in a device or therapy must take a longer view and consider clinical validation as an essential objective for both cashing in and cashing out. Simply put, market traction and success may be only as good as the data – not just the device.