Pharma is all in on digital health.
A recent plethora of investments and deals between digital health companies and big pharma signal the latter’s attempts to directly engage with patients, experts say.
Colin Zick, healthcare co-chair at law firm, Foley & Hoag, said pharma companies are recognizing digital health companies have the right mindset to help them achieve their goals around consumer connectivity and drug development.
“There is a realization in big pharma that they don’t know what they’re doing in digital health,” Zick said. “They can try to build it, but the culture is different. The people are different. Big pharma is called big for a reason. It’s a slow-moving institution with the attitude of let’s push money at a problem to eventually solve it. That’s not the tech approach, which is let’s be nimble, move fast and break things.”
In March, Huma Therapeutics was part of this wave of interest when AstraZeneca took a $33 million stake in the digital health company. As part of the deal, AstraZeneca sold its disease management platform to Huma and the two companies agreed to collaborate on creating apps on the platform targeted at different therapeutic areas. AstraZeneca said it will help the company achieve earlier diagnosis and treatment for patients with chronic diseases.
“Historically, pharma is one of the biggest industries in the world, but they don’t have much connectivity to their end users,” said Huma Therapeutics CEO Dan Vahdat. “As soon as you make the drug, you sell it and know nothing about it. You're not connected to the patients.”
Also in March, another European-based pharma giant, Sanofi, forged a $30 million agreement with DarioHealth, a digital therapeutics company, to develop solutions on Dario’s platform and expand the commercial reach of its products in the health plan and employer markets. DarioHealth President Rick Anderson said Sanofi is using digital health to directly engage with and sell products to consumers.
“They want to further their penetration in the digital health market,” Anderson said. “They came to us and said we don’t want this to be about medication or our devices, it’s about getting a foothold in the digital health market.”
GlaxoSmithKline (GSK), Pfizer, Merck, Eli Lilly, Novartis, Bristol Myers Squibb, AmerisourceBergen and other big pharma companies also have made digital health plays in the last few months. One of the most active dealmakers, according to Digital Health Business & Technology’s M&A and funding report, was Merck’s venture capital arm, which invested in four digital health companies.
According to a survey from consulting firm Accenture, the reasons why pharma and biotech executives are working with digital health companies are to access new technology (90%), reduce operational costs (83%) and meeting new patient demands (83%). To accomplish these goals, pharma-digital health partnerships are typically centered on improving diagnosis time and medication adherence rates, integrating real-world evidence into clinical trials, and enhancing drug discovery.
“Pharma is beginning to recognize an industry shift. The future of pharma will depend on bringing new value to patients through digital health,” said Naomi Fried, CEO of PharmStars, a pharma-focused accelerator for digital health startups. “Digital therapeutics, diagnostics, and biomarkers will transform patients’ experience with medications. Patient engagement and support platforms have the potential to create a new dynamic between pharma and patients.”
Pharma companies can build digital capabilities internally, but forming partnerships allows them to scale up and implement solutions faster, said Kal Patel, CEO of BrightInsight, a platform company for biopharma products. Patel said this is especially true with rare diseases, which often take years to diagnose and develop therapeutics for treatment. The company has formed partnerships with pharma company UCB on myasthenia gravis, with Roche on hemophilia A and with CSL Behring on immune deficiency and chronic inflammatory demyelinating polyneuropathy.
“Rare disease has been under-focused on from all levels, whether it’s research and development, in how physicians manage it or with digital solutions,” said Patel, a former executive at AmerisourceBergen. Algorithms can be used to discover risk factors. Once diagnosed, disease management tools can be used to bring personalization to the process. It’s an area where pharma companies would be unlikely to invest resources themselves since building out the infrastructure for every disease would be costly, time consuming and not their core strength.
“Pharma companies are always innovating—but primarily in chemistry, not digital solutions. The pharma industry needs assistance with digital innovations: development, commercialization, and support. These needs are well matched to the strengths of digital health startups,” Fried said.
GSK is both building internally and partnering. It has created an AI and machine learning team as part of its drug development strategy. In 2019, the company brought in a senior vice president of AI and machine learning, Kim Branson, who assembled a computational pathology team that uses AI models to predict various properties of tumors. To scale and deploy the models into clinical trials, it partnered with PathAI, a company that uses AI and machine learning to improve diagnoses.
“I’m not going to hire 500 pathologists so I can get my data labeled faster,” Branson said. “It’s not a trivial amount of work to build that software stack and it’s not my core business. My core business is coming up with algorithms. I’m happy to partner with someone to deploy and operationalize it. Just like we use contract research organizations in clinical trials, it’s the same way of thinking about it with [digital health].”
PathAI CEO Andrew Beck said that speed element is a big reason why digital health partnerships are increasingly appetizing to pharma companies. “The urgency to get this to patients quickly and to really drive drug approvals, which can take a very long time, is a big reason why,” said Beck. “This allows us both to do things a lot faster than we could on our own.”
Complementary skill sets
Branson said GSK is looking for digital health companies that would bring something unique to a partnership. For example, PathAI brings its pathology AI models to patients faster and at a quicker scale.
Temedica, a Munich, Germany-based company that develops digital companion products for pharma companies, announced a partnership in March with Bristol Myers Squibb to develop an app for psoriasis patients. Temedica CEO Gloria Seibert said that digital health companies bring a different perspective when building out products for end users.
“Pharma companies are great when it comes to commercialization of therapies. Digital companies are great when it comes to designing products for usability. Partnerships between the two can create time and cost savings and help generate new synergies,” said Seibert.
Potential synergies can also lead to roadblocks in digital health-pharma collaborations, Patel said. The process has a learning curve and requires education from digital health companies to pharma customers before, during and long after the deals have been signed. “The learning and experience curve is more important to success than the typical scaling technology curve,” he said.
For every big partnership announcement, there is a less heralded breakup. In recent years, Sanofi, Novartis and Otsuka Pharmaceutical all have called it quits with digital health companies.
“They have fundamentally different cultures, languages, and expectations, as well as varied approaches to process and timeline,” Fried said. “Because of expectation mismatches between pharma and startups, deals can easily fall apart or even fail to get off the ground in the first instance.”
Vahdat said he prefers to work with pharma partners who have already made mistakes in digital health partnerships because they have a better understanding of what works.
“You have to be honest about the success metrics are and what’s even possible,” Vahdat said. “You should under-promise. In some of our biggest deals, they’ll come in with a big number and we’ll tell them we can deliver something smaller. Whatever we deliver on top of that is the upside and a cherry on top.”