- Apps and video games that can treat health conditions nabbed $1.2 billion in VC dollars in 2019.
- Only a few commercial products have been launched so far, and they’re struggling to penetrate the healthcare system.
- Experts say this field is primed for consolidation and could be a great target for telehealth firms.
- This article is part of a series called “Future of Healthcare,” which explores how technology is driving innovation in the development of healthcare.
Pear sells three apps designed to treat opioid abuse, substance abuse, and chronic insomnia. But it’s only expecting to make $4 million in revenue this year.
It’s emblematic of where the young field of
stands today. The technology is theoretically promising, but the business model is completely up in the air. Most health insurers don’t cover these products, nor are many physicians prescribing them.
Digital therapeutics are technologies like cell phone apps or virtual reality games that are designed to treat different diseases. In many cases, they target underserved mental health or neurological conditions like post-traumatic stress disorder and schizophrenia.
The plethora of small, young digital therapeutics companies needs a savvy business partner. Pharmaceutical and
companies each stand out as prime options. But, it’s not clear which will truly engage with this new healthcare technology.
“Digital therapeutics, despite being around for a number of years now, it’s still in an early stage of market development. I think the next few years are going to be about what kinds of businesses are best to shepherd through any special clinical benefits,” Jeff Liesch, a consultant at Blue Matter Consulting, told Insider.
As this gets worked out, the digital therapeutics field is likely to see a wave of M&A.
“Consolidation will come, and we’re seeing it coming,” Liesch said.
Pharma giants like Novartis, Roche, and Sanofi have been exploring prescription apps
Digital therapeutics startups are getting their fair share of the investment dollars flowing into the healthcare industry. The amount of venture capital investment in digital therapeutics grew from $134.3 million in 2015 to $1.2 billion in 2019, according to Pitchbook. Another $709 million was invested in the first nine months of 2020, the most recent data available.
Pharma giants like Novartis, Roche, and Sanofi have expressed an interest in the field. Novartis partnered with Pear to launch a schizophrenia therapy, but dropped that project in 2019. It later acquired a digital therapeutics startup developing a 3-D video game to address lazy eye.