Digital health

A new age for health

In the healthcare industry today, technology is already prevalent. From software that supports a doctor’s medical diagnosis to the use of data mining to analyse large volumes of patient information, technological solutions enable improved health evaluation.

As interconnectivity has increased generally, so too has its reach across all aspects of our lives. By 2030 the number of devices connected by the internet of things (IoT) is set to more than double from current levels (see chart). This expansion naturally includes not only how we identify and treat all types of illnesses, but also how we inform our understanding of health and disease.

This presents a compelling prospect to investors, as novel and exciting technologies emerge that create real world solutions. One such nascent and exciting area of opportunity is digital therapeutics, which are software-based devices used to treat disease. In 2020, a video game was approved to treat attention deficit hyperactivity disorder (ADHD) in children, the first gamebased therapeutic treatment to receive approval in the US for any condition.¹ Its developer, a self-described prescription digital medicine company, creates personalised digital therapeutics. It is also a small, privately-owned company that more closely resembles a San Francisco tech start-up than a traditional pharmaceuticals corporation.²

In another field dominated by startups, bioinformatics companies have popped up over the past decade, often near universities where pioneering research is carried out. Bioinformatics is where biology meets computer science and often involves machine learning to process huge volumes of data that maps and identifies patterns in the human genome. The key objective of such biological-systems research is to identify a protein or a pathway in the body that may facilitate a particular disease. In doing so, it becomes possible to block or change that disease initiator within the body, thereby influencing disease outcomes.³

The digital health sector is supported by strong underlying industry trends. With ageing populations and chronic lifestyle diseases on the rise around the world, healthcare costs have grown, leaving the sector ripe for disruption. At the same time, increased focus on health and wellness has driven up patient demand for better and customised care.

Like in other sectors, digital technologies in healthcare have the potential to disrupt the entire value chain, from drug discovery to the management of care delivery, including patient selfcare. When it comes to patient care, the idea is that technology will optimise the care that medical professionals deliver. As American Medical Association trustee Jesse M Ehrenfeld, MD, put it, ‘Combining AI (artificial intelligence) methods and systems with an irreplaceable human clinician can advance the delivery of care in a way that outperforms what either can do alone’. In this way, digital health will complement the essential services delivered by healthcare professionals, many of whom are under immense strain that the pandemic has gravely exacerbated.

Recently, digital health has hit several significant funding milestones as the theme gains traction among investors. Digital health deals hit an all-time high last year, with eight digital-health unicorns (privately held start-ups valued at over USD1 bn) born in the third quarter of 2021 alone. The pandemic helped drive this push, as the cancellation of in-person consultations fuelled the growth of the previously nascent telehealth industry. Growth in telehealth usage peaked at 80x prepandemic levels amidst the first lockdowns of 2020 before stabilising at 38x toward the beginning of 2021.

Digital health is a highly innovative space, spanning multiple healthcare sub-themes. From diagnostics to the delivery of patient care, developments in digital health have already started the disruption process that will transform the healthcare sector to the benefit of both healthcare providers and patients. Supported by strong underlying trends, successful companies in the digital health space could offer investors attractive returns over the coming decades.