Insights from "Reality Check: DTx Investment Landscape, still hot or cooling down?" panel at LSX - partnering for Life Science eXecutives
Things are improving. Some rounds are unannounced. The Click Therapeutics, Inc. deal with Otsuka Pharmaceutical Co., Ltd. is giving people some hope. So do DiGA companies in Germany. Now that there are no more public DTx companies, we need to reassess how to value DTx companies.
When talking about DTx not having delivered, we should take into account the very unusual context in which past investments have taken place - low interest rates, Covid etc. This was bound to create disappointments.
The crisis is actually helpful. It will weed out the weak companies.
If we look at the Dotcom bubble bursting and the Financial Crisis, we saw that the recovery started 6-8 quarters after the crash. We are now in Q 8 after the start of the current crisis. So thinks will start to pick up again. We made 3 investments in the US in the last year and 2 in Europe.
When we look at market access and regulation things are better now and are looking more promising than they ever have. So there are also bright sides!
Competitive advantage is a combination of clinical outcomes and sophisticated go to market motion that does not try to boil the ocean. You have to think about targeting and segmentation.
We ask: how many touch points are required until you can charge for your solution? How many people do you need to convince? How many clicks to potential users need to make to actually use your solutions?
Pharma companies spend hundreds of millions of dollars to bring products to market. Why would believe that we can be successful with a tiny fraction of that? It does not have to be the same, but we need substantial investments to make significant progress.
Pharma partnerships have generally been difficult. Pharma should invest in these DTx companies to have a real stake in their success.
If you want to work with a pharma companies you can expect a year of scoping, a year of planning and year of implementation. When the pharma company is a big tanker, that yacht next to it is the 8bn acquisition target. DTx companies are a rubber ducky. They often don't know what to do with them.
The NHS is sometimes likened to the Lannisters in Game of Thrones. They will pay you... eventually. As a bank we have a hard time getting comfortable with these super long sales cycles.
Having something harmonised for DTx companies across Europe would make it easier to invest in DTx companies.
This is even more difficult in Asia. In Europe we at least have the CE mark.
Some people say: why would anyone launch in the US right now? That would be insane. As a DTx company Europe is where you should launch right now.
Whether you focus on reimbursement or D2C focus on one market first. Do that exceptionally well and then move elsewhere.
Andy Molnar, Josep Ll. Sanfeliu, Ingrid Teigland Akay, MD MBA, Dominick Kennerson, Erki Mölder, Shamik J Parekh
