It is worth noting that this year happened to be one of contraction within the digital health space, beginning with a new normal investment climate that involved fewer deals, reduced check sizes, and a smaller group of sector investors, as per Rock Health. Numerous companies within the industry went ahead and filed for bankruptcy, such as Pear Therapeutics, Babylon Health, as well as Health IQ.
Interestingly, Akili decided to abandon the prescription digital therapeutic, and more recently, Biogen got nearer to its digital shop, which included the early halt of a clinical trial it was conducting with Apple.
The fact is that the days of growth at all costs happen to be over, and in order to survive, let alone be competitive, companies must go on to show a path to lesser burn rates, breaking even, as well as in a way deliver profitable progress. Nuanced investors happen to be going beyond even such basic metrics, thereby seeking evidence that a potential digital health partner happens to have more than proof-of-concept capacity.
Given the present spectrum, pharma as well as medical device companies happen to be right to be chary of probable digital health partners. Let us look into a few questions pharmaceutical as well as medical device companies can ask in order to distinguish high-quality companies from the ones that might not be around in a year or so.
Is this a product or a proof-of-concept?
Digital health partners that hold prospects should be able to push the fact that their offering happens to be more than a proof-of-concept pilot. Do they deliver real value along with their technology, or are their partner programs live when it comes to major global markets for a pharma company’s most relevant assets?
It is well to be noted that their solution should offer more than just help along with the margins, with such elements as efficiency, cost, as well as experience, and rather go on to address prominent pain points, foundationally going ahead with the drug or device, so that patients interface as much with the app as they do with the drug or even the device. The app should aid in identifying eligible candidates when it comes to therapy, speed up the path so as to receive the treatment, and also help them maintain compliance, all while building brand loyalty with every successive step.
Do they happen to be buying revenue or selling value?
Investors happen to be recognizing that, for varied and numerous digital health companies, their sales happened to be really revenues, which they bought as against the value that they sold. For instance, a pilot program when it comes to a major pharma company that commonly costs just a few hundred thousand dollars goes on to cost the digital firm a few millions so as to deliver. In other words, that firm is not selling a product as much as it is giving away the unprofitable proof-of-concept.
Very few digital providers actually go ahead and build true products and happen to be compensated for that product’s actual value. Thin gross margins, which are a good benchmark for software products and happen to be 70%, can as well be a warning sign as far as this phenomenon is concerned.
How sticky are customers?
Net promoter score- NPS happens to be an important metric that goes ahead and measures customer satisfaction; probable digital health collaborators should go ahead and enjoy a high NPS relative to their competitors.
Beyond that, it is important so as to determine the stickiness of the customer base, meaning how many of their customers go ahead to stay beyond the very first engagement and for how long by comparing the net retention as well as gross retention rates.
Beyond client stickiness, digital health investors also go on to evaluate revenue patterns that are based on whether the customer spends happen to be expanding, contracting, flat, or churning.
It is well to be noted that financial backers within the digital health space happen to be risking millions with their funding, not to mention the brands standing in the marketplace. Pharmaceutical as well as medtech firms that are looking for dependable digital health partners go on to face those risks too, but for them, the stakes happen to be much higher: The fact is that the patients’ outcomes hang in the balance.
Those risks can be decreased by emulating the approach that is taken by investors. Simple precepts—product against the proof-of-concept, sold revenue and actual value, as well as customer stickiness can go on to help pharma, along with medtech firms, cull wheat from the chaff in identifying high-standard digital health partners.
