Market Dynamics: Time to take off?

It's been a busy August and a mad September so far. Even though my self-imposed deadline for publishing the newsletter has slipped by a day or two, I'd like to share some thoughts with you in a slightly unusual edition.

The Back Drop: Coffee and adrenaline

The week didn't start too well with my first flight cancellation in 30 years of travelling. With the flight scheduled at 3.30pm and the cancellation being announced at 6.00pm we had to work out how to get to a client workshop at 11.00am the next day (1,000km away); a very late night, a very early morning and some real creativity but we made it.

I'm slightly amazed we did it but I'm so glad we found a way. From a professional perspective we needed to. From a personal perspective, it was a great group of people to work with but also, it provided plenty of strategic food for thought.

I was then onto a plane into London to host our first Corporate Working Group In Digital Health since 2019. This is our forum for representatives from global companies to network and learn about digital health with the opening session being focused on market dynamics with presentations from UBS, Galen Growth, GE and DHV-NET. Some excellent group discussion followed.

Corporate Working Group In Digital Health (dhv-net.com)

Market Dynamics

I haven't been so tired for years but the adrenaline kicks in when hosting a group and the coffee keeps you going. Having had time to ponder on the flight back, here are a few thoughts that have emerged from the blur of the past week (you'll understand why I can't share too much detail).

The feeling at the CWG was expressed as a mixture of optimism and pessimism.

• We had an excellent presentation from UBS evidencing the factors that are underpinning a likely pick up in the market.
• This was followed by a similarly impressive presentation by Galen Growth which highlighted how woman's health and mental health have been the focus of investment in 2024 along with musculoskeletal (skewed a little by the Sword Health deal) and oncology (it was very much a European perspective for a European audience).

Perhaps one of the statements that resonated most was made by someone (said with a large smile on their face) who attended one of the last CWG meetings before the pandemic.

"NOTHING HAS CHANGED!"

I think this was originally made in reference to pharma's outlook on digital health given we are still experiencing a lot of short term decision making which results in reorgs and lay offs but this resonated with many delegates as a statement on the wider market. Selling digital health solutions hasn't gotten any easier over the last 5 years bar the pandemic spike.

Strategic Back Ground

As host of the CWG it was my job to do some scene setting and the picture painted was not a comfortable one. I shared some of the statistics on trends in mental, HCP shortages and life-style associated disease which haven't changed in the last 5 years. We are sleep-walking into a very worrying situation. It still makes for grim reading and you can read some of this in this previous edition of this news letter.

Evidently unmet need is growing and whilst digital health can't solve the underlying social issues that give rise to these mega-trends, it offers a means to treat/manage in ways that that traditional healthcare and life science can't. If digital health solutions aren't widely available then unmet need will grow and citizens will need new ways to access appropriate health and care.

• Unmet need will begin to translate into unmet demand.

Our healthcare systems aren't sustainable and the challenge is growing but can our systems transform in time to avoid a fundamental crisis? It's a big question but there is already evidence that across the world we are entering a new chapter.

• Sporadic Crises: The pressure on our healthcare systems continues to increase from long standing and well known trends that we seem unable to do anything about. As such, we are entering a chapter which will be characterized by sporadic crises in our healthcare systems leading to more sustained crisis. That said, there was optimisim within the group that digital health could help avoid sustained crisis.
• Opportunity: The silver lining in this situation is that there may be opportunity for new players with new models of access and delivery to play a part in the face of rising need (which is likely to translate into rising demand from citizens). Galen highlighted Mayo Clinic's significant and intriguing activity in Europe; VC investment into private healthcare in the UK in the face of NHS challenges is well known. Who else will enter the market and what models will we see? Perhaps a grim but fascinating chapter ahead.

I've already mentioned pharma which was well represented at the CWG. Many representatives had been on the current merry go round, working for several pharma companies. My argument is that such experience represents the gradual build up of expertise and knowledge in the industry which has been on a long and often painful learning curve. Whilst I fully expect to see more short term decisions resulting in more lay offs I also think that pharma knows that broadly speaking, its future is entwined with digital health. A such, I feel that across the next few years, more informed companies will take a very strategic look at how to invest in digital health based on the following segmentation.

• Pharma and healthcare: Those who choose to sell digital health products and services into the healthcare market are faced with the same complex dynamics and grinding pace as any other players. ROI will be hard to justify but not impossible.
• Support For Existing Business Model: The use of digital health technologies to help sell more drugs presents internal not external challenge. (beyond the art of mastering partnering with DH companies) The principles have been established and this offers considerable benefit in terms of potential to be competitive and out manoeuvre competition.
• Enhancement of core processes: Similarly, the use of DHTs to enhance clinical development, marketing and pharmacovigilance functions offers the same potential.

It may actually be easier for the smaller pharma companies to create effective strategy to direct investment into digital health even if scoping the touch points between pharma and digital health is a considerable undertaking but they should be more agile and able to take advantage of the growing knowledge base developed in other companies by recruiting into key strategic positions. That said, larger companies have more resource, but will we see leaders with reach across their organization deliver effective strategy?

My slightly grim outlook was moderated by a conversation with someone from RnD in big pharma. It was a great reminder that whilst the healthcare market may still offer resistance, from a technical perspective, digital health is moving fast and becoming ever more sophisticated.

• Innovation, knowledge and expertise is building across the industry rapidly and this innovation needs to reach market; it will be available to companies who can create effective commercial models. There is also a market that fuels this innovation with growing opportunity to feed this RnD-based market.

Start dust, glitter & timing

There was discussion about the latest trends. Buzz words come and go and whilst there is typically some underlying substance, for me, it's a matter of timing. Let me explain:

Investment isn't the same as revenue. When money is pumped into the market is stimulates a lot of activity and this presents plenty of opportunity for supply chain companies who benefit from the activity that results from this injection. LinkedIn headlines abound, conferences are buzzing and a new wave of start-ups emerges. Revenue tends to follow but sometimes a lot later.

There is no doubt that "investor sentiment" is affected by such things as FOMO and "the latest shiny thing" but should you be dismissive when you suspect hype is at work? It depends on your perspective.

• Investment & Revenue: Supply chain companies don't have to be so concerned about whether investment is well informed or ill, informed. Look at the money that was poured into DTx. The supply chain did very well out of this. Companies struggled.. Investors lost money. Some years later (i.e. now) there is some reality to the DTx market and the future looks brighter. Understanding the market and how the money might flow (or not) is highly informative about likely revenue in a market/associated with a product/service - investment is not such a good indicator.
• Commercial Models: We had an excellent presentation from GE on their data platform at the CWG. What really lodged in my mind was that, unlike a lot of smaller competitive companies, they had taken the time and trouble to work out how the the money should flow and the value proposition to their customer. It's not a digital health-specific issue but a solid GTM/market access strategy is the most valuable exercise you can undertake. That has to be the mantra for 2025 (but it won't be)!

So it's been a big week and I need to rest before I'm on my travels again. A Sunday take off for another workshop. The pace is picking back up.

ABOUT

In an interview with Robert Lewandowski, reminiscing about his time with Pep Guardiola at Bayern Munich, he remembers Pep telling him that when he was in possession of the ball, Pep could not help him but he had confidence in his expertise, skills and creativity to take the best decisions to score goals. Where Pep could help, was to provide him and his team with process/structure to support the build up to that point; a combination that allowed creativity and talent to flourish within a structured approach.

Whilst football is a tactical game, I believe that a coordinated and structured way forward within which talent can flourish is what makes strategy so powerful. I am an experienced strategist that can help your organization work towards a brighter future allowing individual talent and team work to flourish, guided by structure and coordination.

I specialize in strategy and digital health/life science; digital health is a complex and counterintuitive field and I love working in this. I am a scientist (so I understand evidence) and I have occupied commercial roles. These two aspects combined with a strategic mind provide an unusual and useful combination.