Fifteen years ago, the first iPhone was released to mixed reviews. True believers praised its elegance, suggesting that humanity’s relationship with technology would be forever altered. More tempered critics questioned the bold departure from consumer-accepted form factors, including the phone’s lack of a physical keyboard.
The iPhone was the proverbial “shiny object” — curious, unapologetically different and new. Microsoft’s CEO nonetheless mocked its price point.
While the iPhone only represents a small portion of global smartphone units sold today, Apple’s ability to enter — and dramatically shape — the consumer electronics space has become the North Star for nearly every industry seeking to capture additional value in the connected age.
For the broader health ecosystem, this turning point accelerated the pursuit of digital solutions with the promise to increase adherence, support disease management or create a new class of therapeutics that didn’t require a molecule at all. In short order, pharma established new teams, theses and partnerships.
Fast forward to the present. Rock Health reported that $29.1 billion was invested in digital health in 2021, almost doubling 2020’s sum. For the firm, this surge was indicative of the long-awaited evolution of healthcare. At the same time, it flagged the new infrastructure, business models and talent that would be required to close the gap between the promise of digital health and the near-term reality.
Indeed, in recent years pharma appears to be reconsidering its role in the beyond-the-pill ecosystem. While deals such as Roche’s 2018 acquisition of Flatiron Health turned heads, there were also messy public breakups. In 2019, Sanofi and Onduo parted ways, as did Novartis and Pear. Once a health-tech darling, Proteus ran out of cash and its assets were sold to Otsuka in 2020. Of the five chief digital officers interviewed for MM+M’s Game Changers in 2019, only one remains in the role.
For Lisa Suennen, a health investor who also serves as operating executive and managing partner of Venture Valkyrie, this is entirely expected. After more than a decade of digital experimentation and experience, pharma is assessing its role in a maturing digital health ecosystem.
Suennen references the Gartner Hype Cycle, which charts an emerging technology’s path to maturity. After hard-won lessons in the trough of disillusionment, Suennen believes, “We are coming back up with something good.”
In 2022, pharma no longer asks if it should pursue digital opportunities. The questions are instead where and how they can have the greatest impact.
DTx: It’s awkward
Despite the bumps, pharma interest in digital therapeutics is still very much alive. As one executive noted: If you are an expert in therapies (which historically meant a compound) and you knew that there was something new that could improve outcomes, don’t you have a real obligation to invest?
Yet to have impact, good intentions and healthy budgets are not enough. For Chris Hogg, cofounder and CEO of Marley Medical, “The big challenge with digital therapeutics is that they require a fundamentally different business model.”
During his tenure with early digital therapeutic Propeller Health, Hogg observed that pharma has a clinical risk model. The hope at the time was that the industry would use its heft to pave a new reimbursement model with payers. Alas, that failed to materialize at scale.
“This is not pharma’s fault,” Hogg stresses. “Healthcare has well-worn rails. It takes much longer to build new rails than any of us anticipated.”
Hogg remains optimistic, pointing to a second lesson learned: Funding digital health products with commercial marketing dollars can contribute to culture clashes. “Pharma is perfectly designed to be bad at software,” he explains.
Once a pharma company knows that a molecule works, there is a clear market opportunity. All activities move to the commercial side of the business and launch plans are not to be messed with.
Digital products, on the other hand, are built and launched before a market is fully understood — or even before it’s clear how they will create revenue. Unlike pharmaceutical therapies, they can be tweaked and improved post-launch.
Given these opposing ground rules, it’s no surprise that so many pharma/tech partnerships came to an end.
“Launching a new product is not a marketing endeavor,” says Santosh Shanbhag, CFO of Akili Interactive. The company announced in January that it will go public as it launches EndeavorRx, an FDA-cleared and CE-marked prescription digital therapeutic for pediatric ADHD.
Shanbhag suggests that unless a pharmaceutical company is willing to engage with a digital therapeutic the way it engages with a molecule, it’s better off partnering or investing with companies that can take it over the finish line. By way of example, he cites Akili’s partnership with Japanese pharma company Shionogi.
But Shanbhag offers a new world-view of partnership: “I don’t think digital therapeutics at this stage need pharma to grow.” He sees big tech or even gaming as more likely distribution partners.
Suennen offers three truths for pharma companies that continue to pursue digital therapeutics. The first is that these therapeutics do not represent a primary revenue-enhancing asset. “Get into it for the secondary effect,” she advises.
Second, she notes that companies need to understand they “are now in the services, tech and device businesses … and [their] fortress lines will need to be broken down.”
Finally, Suennen adds that pharma organizations must abandon the idea that every drug can have its own app. “Whatever you create to succeed, it will need to lift all boats, not just yours. The digital value is the community effect,” she explains.
Taking digital upstream
In recent years, a quiet but powerful revolution has been underway as the same technologies being piloted for consumer use find a home in research and development. For Ariel Dowling, Takeda’s R&D digital strategy lead, the iPhone brought an explosion of new capabilities to advance health.
Due to the scale at which Apple was investing in the iPhone, the chips Dowling was using (as a mechanical engineer studying movement analysis) dropped from $1,000 per chip to a dollar. Suddenly, many consumers were carrying high-performance med-tech components in their pockets.
“It was one of these lucky incidents,” she recalls. “I happened to be using the chips that became the standard for digital health moving forward, and so I was one of the first people out of the gate who had the experience with that chip and knew how to build algorithms and how to build the brains for those chips.”
Dowling spent the next few years working with med-tech startups, only to realize that their primary customers were pharma companies seeking to use this technology in clinical trials. But none of those organizations had in-house talent that understood the device or the technology itself.
“They realized they were taking these things from the vendors and were getting this data back. But they didn’t know what to do with it, because they didn’t have the in-house capabilities,” says Dowling, who soon found a home working inside the industry.
While Dowling agrees there is a role for pharma to play in building connections though consumer-facing digital health solutions — such as the Takeda-funded Oshi Health, a virtual specialty care company focused on gastrointestinal needs — digital technology represents a very powerful opportunity further upstream.
“With R&D specifically, there’s a really big opportunity for digital tech,” she says.
To that end, Dowling points to the earliest research phases (0, I, II) when study cohorts are small and the goal is to understand both if a therapeutic works and if it merits further investment. With the arrival of remote monitoring, pharma now has the ability to increase the amount of information upon which to base these decisions.
“You can use new methods to understand what is happening with patients and what is happening in their daily lives. It doesn’t need to be a regulated endpoint, but it has to be an endpoint that has been valued enough that you can be confident that the data is accurate,” Dowling explains.
To do this successfully, pharma must invest in the talent and structures that foster entirely new ways of thinking about R&D. For example, at Takeda there is a dedicated digital team that evaluates digital opportunities throughout the company’s pipeline.
The earlier digital teams can be integrated into the process, the better. Dowling notes that these groups can “help guide the way you build the protocol, select endpoints and analyze the data, all the way to when the drug is launched.”
Karen Akinsanya, chief biomedical scientist at computational drug discovery firm Schrödinger, also takes a longer view. Throughout her career, she has had opportunities to collaborate with forward-looking teams to test the waters in the realms of drug discovery, biomarkers and companion diagnostics.
Akinsanya, like Suennen, notes that much about the digital health hype cycle is predictable. But, she adds, “There is some interesting and very important learning through that cycle that ultimately will sustain over a much longer period of time.”
How it manifests might be different than previously envisioned, she continues, “But I don’t think that any of this is wasted. We have to go through these periods of testing the boundaries of something to figure out the challenges.”
With each new challenge, startups are born and the broader industry gains the ability to implement solutions on a larger scale.
“It forces people to constantly reevaluate what is worth investment and what has become pretty mainstream — and therefore, what has already been absorbed and doesn’t already require additional startup innovation money,” Akinsanya explains.
Today, Akinsanya believes that digital can have the biggest impact in the research phase. One of the reasons she joined Schrödinger, which uses AI to assist companies in R&D, was the promise that digital technology can accelerate the cycle time to test molecules.
“If technology and software can expand our ability to test hypotheses so that we are picking the cream of the crop — the best biology and the best chemistry, to then go into clinical trials — that’s where I see technology and software having an enormous impact in this endeavor of going after better medicines,” she says.
Akinsanya finds inspiration in the half-century trajectory of our collective understanding of DNA, which has moved from merely knowing it exists to developing advanced therapeutics.
“When you couple it with computation — which really allows us to scale up, even beyond insights into protein structure — we can use these incredible new insights as to how proteins fold, how proteins exist in the cell and how they interact with ligands to effect change in the body, be it physiological or pathophysiological,” she explains.
Technology is what allows Schrödinger to combine “this exquisite view of proteins, at the structure level and the protein motion level, to design molecules,” Akinsanya adds.
While individual pharma executives fine-tune opportunities to apply beyond-the-pill lessons to either the commercial or R&D sides of the business, most agree they are not a mutually exclusive investment.
“Digitization is valuable across the value chain,” says James Musick, global head of personalized healthcare at Roche.
Rachel Sha, VP of digital strategy and governance at Sanofi, agrees, noting that, if anything, “We have widened our aperture.”
Both Sha and Musick see partnership as key to pharma’s future in an evolving ecosystem. For Sha, the past 15 years of experimentation have fostered the ability to partner more effectively.
“Part of the challenge of the earliest deals was the difference in the culture and ways of working,” she notes. Likewise, Musick says, “We believe we are going to be doing almost everything in partnership.” He sees the world in “partnership stacks” — which may mean external partnerships, novel ways of combining talent across organizations or both.
Rather than viewing digital as a function within disparate silos, Musick’s second tour at Roche saw him propose a cross-cutting approach. Case in point: A machine-learning expert recently joined his team and has shared his computer vision skills with epidemiologists to advance how they look at diagnosis or disease management.
“That starts to become a horizontal application, rather than a narrow application,” Musick observes. “It’s an organizational philosophy strength.”
With a more nuanced set of experiences and a bigger world-view, bringing real digital innovation to pharma requires more than skills and more than partnership. It requires vision and aspiration.
“Philosophically, we have a responsibility but also an aspiration to be the leading digital platform for the patients we serve,” Sha says. “Be it a digital solution or analytics insight or interactions for clinical trials, we think it takes more than a chemical or biological therapy to ensure that patients have the best outcomes.”
Sara Holoubek is the CEO of Luminary Labs. Disclosure: Luminary Labs has a commercial relationship with Sanofi.