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Digital Health Success Stories (and Failures) Report - Part 2

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Part 2 of our report looks closely at some of the high profile failures to date in order to highlight warnings signs for projects and collaborations in the future. You’ll hear from Skip Fleshman, General Partner at Asset Management Ventures, about his perspective on the enormous investment being pumped into the market and how it should be managed. You’ll get an insider view from Cure Forward and Imperial College Health Partners about some of the reasons behind failures they have experienced and what we can learn from them. And through 2 case studies, you’ll learn more about how transparent and accurate results and trials are integral to ongoing development and success.

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Digital Health Success Stories (and Failures) Report - Part 2

  1. 1. Failed Digital Health Efforts What Can We Learn? 1
  2. 2. INVESTMENTANDOUTCOMEDISPARITIES-A TROUBLINGTREND GENERAL PARTNER Asset Management Ventures Skip Fleshman Portfolio Companies Include: Freenome Proteus Digital Health Evidation Health HealthTap Arterys WellDoc 1DocWay Chimerix 3T Bio Lark Collaborators Include: Boston Children’s Hospital “The recent large Series A financings in digital health caught my attention. Clover grabbed $100 million in equity and debt financing, Color Genomics raised $15 million, Cure Forward raised $15 million, Honor raised $20 million and Lyra Health raised a whopping $35 million. Although the proliferation of $1 billion + mega-funds has made it hard for many venture capitalists to justify smaller Series A investments, I don’t think this is the right approach for venture capitalists or for startups. The excess capital creates the wrong incentive structure for long-term success. As soon as a large Series A is closed, entrepreneurs will have a strong temptation to spend this money faster than is prudent which can quickly lead to inefficient, and sometimes wasteful, spending. This pressure to spend could come from within or from investors directly, as they expect this money to be used to generate returns on their investment. Large Series A rounds are highly correlated with very high valuations which can cause other problems too. First, this increases early stock option strike prices. One of the benefits of being an early employee is getting options that have a value in pennies, not dollars. This is taken away when the Series A valuation is already high. High valuations also set higher exit expectations which take the option of an early and smaller M+A, off the table. Investors still expect outsized returns on the larger valuation. What’s a better way to deal with this? Historically the venture capital community relied on a milestone-based investment approach where the company was funded with enough capital (plus reserves) to get to specific, value-creating milestones. These smaller rounds create expectations that the company will hit manageable milestones over time in an efficient manner — increasing value with each subsequent round and iterating along the way. This creates achievable incentives that focus the team on specific goals but also engenders a sense of urgency to create appreciable value.” EXPERT PERSPECTIVE
  3. 3. CASESTUDY-IMPERIALCOLLEGEHEALTH PARTNERS&BABYLON “In our experience and having seen dozens of digital solutions cycling through various local accelerators and NHS programmes, there are a number of challenges that digital entrepreneurs may want to consider: 1. Be clear on the problem (up to 80% of companies we see can’t articulate what the problem is they are aiming to address with their solution) 1. Lack of technical and operational integration is by far the biggest deployment block for those solutions that get taken forward. Even technically sound and powerful solutions such as mobile ECG devices are often not interoperable with existing EPR systems in primary or secondary care. As a consequence, exchange happens fairly manually or via pdf files. These are often not searchable in the EPR systems and therefore lose their value. Consequently, digital solutions struggle to integrate into existing workflows and risk creating additional operational steps. Moving from these point solutions to solutions that anticipate workflow and pathways is paramount. Axel has been involved with Imperial College Health Partners since its conception in 2011 as an Interim Director and joined the Partnership full-time in August 2013 as Director of Strategy and Commerce. As of September 2016 Axel was appointed as Managing Director. Prior to joining the Partnership, Axel was Executive Director of Strategy and Business Development at Chelsea and Westminster Hospital NHS Foundation Trust. He brings a broad range of experience from academia and central government where he was Deputy Director and Chief Analyst at the Prime Minister’s Strategy Unit in the Cabinet Office and No 10. Dr Axel Heitmueller Managing Director Imperial College Health Partners INSIDER CASE STUDY
  4. 4. CASESTUDY-IMPERIALCOLLEGEHEALTH PARTNERS&BABYLON 4 3. We do not see a future for small app or solution developers selling individually into health care systems. The transaction costs are too high and often these relationships never go beyond initial pilots. Instead, we would like to see greater integration of solutions into existing supply relationships. E.g. it seems inconceivable that in the future MRI scanners would not come with a marketplace for decision support applications potentially driven by AI as part of the machine. Selling into a smaller number of large suppliers seems more effective than selling to the large number of relatively small healthcare organisations. However, ensuring plurality of solutions in these market places will be a key challenge for e.g. device companies. 4. Patient centred design should be the norm not the exception. Today, the vast majority of digital solutions are not developed with that design principle in mind. 5. Increasingly, health professionals are looking for a bundle of solutions. For example, a package of diabetes self-care may consist of educational content, behaviour change interventions and monitoring. At the moment, clinicians or patients have to interact with individual apps or solutions when the true value comes by combining them into a coherent package. But there is a lack of integrator functions and business models. Combinatorial solutions that self-regulate and ensure the best solutions reach the patient or care professional at any point in time are not currently in the market. Axel has been involved with Imperial College Health Partners since its conception in 2011 as an Interim Director and joined the Partnership full-time in August 2013 as Director of Strategy and Commerce. As of September 2016 Axel was appointed as Managing Director. Prior to joining the Partnership, Axel was Executive Director of Strategy and Business Development at Chelsea and Westminster Hospital NHS Foundation Trust. He brings a broad range of experience from academia and central government where he was Deputy Director and Chief Analyst at the Prime Minister’s Strategy Unit in the Cabinet Office and No 10. Dr Axel Heitmueller Managing Director Imperial College Health Partners INSIDER CASE STUDY
  5. 5. Why didn’t this work?: What was once Chicago’s leading Unicorns is now embroiled in controversy and is being dogged by allegations and lawsuits relating to misleading clients and investors on its performance. BMS has not renewed its investment in the company in the wake of this controversy. The company refutes the claims, but it is clear significant reputational damage has been incurred and in health care, loss of reputation can be fatal When: November 2017 Total Investment: $500,000,000 What can we learn?: Don’t rest on your laurels and don’t celebrate the wrong metrics. Outcome Health reached a valuation of $5.5 Billion in 2017 - a lot of time and effort went into the business model and marketing at the detriment of the offering. To Investors: Don’t promote cutting corners - rapid growth is not always a good thing. To Founders: Deal with allegation head on both internally and externally. The whole system is still learning and the is a certain about of room for mistakes but sweeping failures under the carpet will benefit no-one. To Consumers: Don’t expect the integration of new tech systems to be a one stop shop - engage in your own monitoring and evaluation and work with your collaborators to iterate solutions and keep outcomes in check 5 Outcome Health – The Danger of Aggressive Growth
  6. 6. ResApp - Failed Clinical Trial Why didn’t this work?: Acquired by Narhex Life Sciences in 2015 ResApp has enjoyed its fair share of success. However ResApp recently failed trials in the USA (Massachusetts General Hospital, Texas Children's Hospital, Cleveland Clinic) due to lack of fluency in understanding of such technology, lack of standardization across multiple sites, lack of quality control. Proposed re-trials in the pipeline. When: November 2017 Total Investment: $16,500,000 AUD What can we learn?: ResApp CEO Tony Keating spoke openly about his key lessons following the failed ResApp Trial calling for those engaging in similar collaborations to not make assumptions about technical fluency; make sure that data protocols are clear and lead to meaningful data and to carefully choose great partners and be willing to try again if at first things don’t work out as expected. Read the full interview here To Founders: Take a leaf out of Tony Keating's book - learn from your mistakes and speak as candidly as possible to help the wider community mitigate against the same stumbling blocks. To Partners/Consumers: For CROs and healthcare systems who are experts in their fields testing tech interactions may seem like something that can relatively easily be tested in line with existing processes and frameworks - think twice. Accept that what you’re doing is unique and unprecedented and make sure to invest your time in getting all stakeholders on the same page to adjust your usual approach appropriately. 6
  7. 7. 7 “I think the lesson learned was different than "know your business model". The issue was more that we took too much time and money to build and launch the platform, and then we had too little time to demonstrate market uptake and revenue before we needed to raise more capital. If we had started sooner with a less-perfect website, we would have demonstrated better proof of principle and the next financial round wouldn't have been so risky for new investors.” Martin Naley FOUNDING CEO and CSO CURE FORWARD INSIDER CASE STUDY Why didn’t this work?: Cure Forward were forced to suspend their services which aimed to address the disconnect between patients and awareness of clinical trials relevant to them as one way to solve the most costly and prolonged part of drug development - clinical trial recruitment. This suspension of services was claimed to be due to the inability of the company to generate enough revenue in order to attract new investors When: May 2017 Total Investment: $17,000,000 Customers: Quintiles and Novartis What can we learn? To Founders: Cure Forward's model consisted of payment once a patient was activated in a trial, payment for value rather than fee for service, bravo. However in this situation long lead times exist which can make getting a startup off the ground difficult when waiting to get paid To Partners/Consumers: Even following the announcement that Cure Forward was dissolving the company maintained its loyalty to their existing customers. They communicated to patients that they should refer to the Cancer Support Community for guidance in their treatment options. Loyalty to consumers is crucial even in times of tough transition.
  8. 8. What Next? Collaborating for Improved Outcomes & Financial Returns 8
  9. 9. Key Takeaways DEFINE SUCCESS BY IMPACT NOT INVESTMENT True innovation does not happen in isolation 9 JUSTIFY ADOPTION AND REDUCE COSTS Who pays? healthcare is already expensive don’t add to the noise STAY LASER FOCUSED ON EVIDENCE OF EFFICACY Accept that in healthcare that takes time REAL SUCCESS REQUIRES COLLABORATION True innovation does not happen in isolation
  10. 10. 10 Sanjeev Bhavnani, MD, is a board certified physician specializing in cardiac intensive care, heart failure, left ventricular assist devices (LVAD), therapeutic hypothermia and multimodal imaging, including echocardiography, nuclear and vascular imaging.Dr. Bhavnani has deep academic and research expertise in mobile health, wireless medicine and healthcare delivery transformation. His work has focused on the utilization of technology-enabled care, device designs, data analytics and policy implementation. As a lead investigator, he has designed clinical trials using smartphone apps, wearable and wireless devices, and sensor- based technologies designed to improve healthcare quality and patient self-care, while reducing hospital readmissions. Dr Sanjeev Bhavnani Division of Cardiology Scripps Clinic and Research Foundation FUTURE GAZING "Transformation with digital health, big data, and precision health is likely to result from a confluence of approaches that brings together multiple stakeholders in the care delivery process. By incorporating key principles of evaluation, integration, and engagement to those factors important to patient care and research will facilitate the creation of the next phase of technology-enabled healthcare to drive improved outcomes. Healthcare transformation requires collaboration between stakeholders and to best position early phase ideas to grow into scalable and meaningful solutions. Harnessing new partnerships and promoting collaborative efforts will enable the identification of unmet needs, and to design for efficient implementation as new technology, data, and precision-based innovations are applied to patient care.” Read More in the 2017 Roadmap for Innovation—ACC Health Policy Statement on Healthcare Transformation in the Era of Digital Health, Big Data, and Precision Health Key Takeaway for Future Successes:
  11. 11. 11 “As we look at digital and data plays, our models and processes of evaluating the ventures associated with them tend to remain outdated. Our manual diligence processes can and should be supplemented with data analysis that includes predictions of market risk. These tools are not widely used today in venture, despite their strategic relevance and ability to deliver on highly accurate predictive models of market survival and growth. Why is that? Why is it that in venture we tend to still rely heavily on the manual diligence process without collaborating with or investing in predictive models that can complement our manual diligence and lead to higher portfolio performance and success? Moreover, incorporating this capability at government grant funding levels in the value chain will naturally yield better ‘hit rates’ for follow- on investors as well- improving overall performance in this space.” Sarah Fisher is the Commercial Director for Janssen Healthcare Innovation, Europe, within Johnson & Johnson. She specializes in global commercialisation strategies for new technology introductions with a focus on execution excellence and the formation of new business units. She started her career with J&J in New York City, and has a combined 12 years of experience across medical device and pharmaceutical business units within the Johnson & Johnson portfolio of companies. Sarah’s passion for entrepreneurial ventures has driven her to serve in various commercial and operational roles within 5 different intrapreneurial ventures, and one post- acquisition commercial integration venture. Sarah Fisher DIRECTOR GLOBAL MARKETS EXTERNAL INNOVATION Johnson & Johnson FUTURE GAZING Key Takeaway for Future Successes:
  12. 12. Connecting healthcare leaders

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