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What's next for Digital Therapeutics after it all went PEAR shaped?
The DTx market suffered a second big blow and company failure recently after Pear Therapeutics lost 99.28% of it's value resulting from a SPAC merger with Thimble Point Acquisition Corp in March 2021, IPO on the Nasdaq in December 2021 followed by its subsequent Chapter 11 bankruptcy filing in April 2023.
Pear's decline followed in Proteus Digital Health's footsteps after the company filed for bankruptcy in June 2020 having raised over $500 million in funding, a massive $1.5 Billion valuation and loss of a development deal with Otsuka Pharmaceuticals.
In addition to the two DTx bankruptcies, three other DTx companies who have gone public via mergers, SPACs and IPOs have seen their share prices collapse by between 40% and 90% as investors lose patience and ultimately confidence in the digital therapeutic narrative.
However, despite these two examples of DTx bankruptcies and poor performance of DTx companies listed on the stock market in the last few years, the future of the Digital Therapeutics market still looks promising as the demand for digital interventions to prevent, manage, and treat various medical conditions continues to grow.
Here are some of the key trends and opportunities that are likely to shape the future of the DTx market:
Increased focus on chronic diseases: The rising prevalence of chronic diseases such as diabetes, hypertension, and cardiovascular disease is expected to drive the demand for DTx solutions that can help patients manage these conditions.
Expansion of regulatory frameworks: Regulatory bodies such as the FDA and the European Commission have already approved several DTx solutions for various medical conditions. As the market grows, it is expected that more regulatory frameworks will be put in place to ensure the safety and effectiveness of DTx products.
Integration with traditional healthcare: DTx solutions are expected to become an integral part of traditional healthcare, with more healthcare providers and payers integrating digital interventions into their treatment plans.
Personalisation and customisation: DTx solutions are becoming increasingly personalized and customized, using data-driven insights to tailor interventions to individual patient needs.
Partnership and collaboration: Healthcare providers, pharmaceutical companies, and technology companies are likely to form more partnerships and collaborations to develop and commercialize DTx solutions.
Focus on mental health: DTx solutions are expected to play an increasingly important role in addressing mental health issues such as depression and anxiety, which have become more prevalent in recent years.
Overall, the future of the DTx market is bright, as more patients, healthcare providers, and payers recognize the potential of digital interventions to improve health outcomes and reduce healthcare costs. With continued innovation and investment, the DTx market is poised for significant growth in the coming years.
What is DTx?
DTx stands for "Digital Therapeutics". It refers to a new class of medical treatment that uses digital technologies such as mobile apps, wearable devices, and software programs to prevent, manage, or treat various medical conditions. DTx aims to improve patient outcomes by providing personalized, data-driven, and evidence-based interventions that are delivered remotely through digital platforms.
DTx interventions are often used to support traditional medical treatments, such as medication and therapy. For example, a DTx app may provide cognitive-behavioral therapy for individuals with depression or anxiety, or a DTx wearable device may monitor vital signs and provide feedback to individuals with cardiovascular disease. DTx interventions can be accessed by patients in their homes, at work, or on-the-go, making healthcare more convenient and accessible.
DTx is a rapidly growing field, and many healthcare organizations, pharmaceutical companies, and technology companies are investing in the development and commercialization of DTx solutions. DTx has the potential to transform the way we deliver healthcare, by making it more patient-centered, data-driven, and accessible to a wider range of patients.
How big is the Digital Therapeutics market?
The Digital Therapeutics (DTx) market is still in its early stages but has been growing rapidly in recent years. According to a report by Grand View Research, the global Digital Therapeutics market size was valued at USD 2.2 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 21.4% from 2021 to 2028. The report also predicts that the market size could reach USD 9.4 billion by 2028.
Another report by MarketsandMarkets estimates the DTx market to be worth USD 6.9 billion in 2021 and is projected to reach USD 15.6 billion by 2026, growing at a CAGR of 17.8% during the forecast period.
The increasing prevalence of chronic diseases such as diabetes, obesity, and hypertension, as well as the rising adoption of smartphones, wearable devices, and other digital technologies, are some of the key factors driving the growth of the DTx market. Additionally, the COVID-19 pandemic has accelerated the adoption of telemedicine and other remote healthcare services, which has further boosted the demand for DTx solutions.
Overall, the DTx market is expected to continue to grow in the coming years, as more healthcare providers, payers, and patients recognize the benefits of digital interventions in improving health outcomes and reducing healthcare costs.
How have DTx companies performed on the stock market in the last few years?
The short answer is not very well, digital therapeutics companies have not performed well on the stock market in the last few years due to three main reasons: the overall performance of the healthcare sector, regulatory developments and investor sentiment.
Let's have a look at 5 examples of DTx companies who have gone public via mergers, SPACs and IPOs in the last few years - Pear Therapeutics, Proteus Digital Health, DarioHealth, Better Therapeutics, Livongo Health.
Case Study 1: the history of Pear Therapeutics
Pear Therapeutics was a leading player in the digital therapeuticsmarket, based in Boston developing DTx solutions to treat various medical conditions, including substance use disorder, opioid use disorder, schizophrenia, and multiple sclerosis.
In December 2020, Pear Therapeutics announced that it had entered into a definitive agreement to merge with Thimble Point Acquisition Corp., a special purpose acquisition company (SPAC). The merger was completed in March 2021, and Pear Therapeutics became a publicly listed company on the Nasdaq stock exchange under the ticker symbol "PEAR."
The merger provided Pear Therapeutics with additional funding and resources to continue its research and development efforts and expand its commercialization efforts. The company also continued to receive regulatory approvals for its DTx products, with its reSET-O product becoming the first FDA-cleared prescription digital therapeutic for the treatment of opioid use disorder in 2018.
Case Study 2: the history of Proteus Digital Health
Proteus Digital Health, a digital therapeutics company that developed sensor-enabled medicines, faced several challenges that led to its decline. Here are some of the factors that contributed to the company's difficulties:
Limited adoption: Despite developing innovative technology, Proteus Digital Health struggled to gain widespread adoption among patients and healthcare providers. The company's sensor-enabled pills, which were designed to help patients with chronic conditions such as hypertension and diabetes, required complex technology and infrastructure, which made them challenging to implement on a large scale.
Regulatory hurdles: Proteus Digital Health faced several regulatory challenges, including delays in gaining approval from the US Food and Drug Administration (FDA) for its sensor-enabled pills. The company also faced scrutiny from privacy advocates and patient advocacy groups, who raised concerns about the potential for misuse of patient data collected by the sensors.
Financial troubles: Proteus Digital Health raised over $500 million in funding from investors, but the company struggled to generate revenue and achieve profitability. In 2019, the company laid off 292 employees, or about 20% of its workforce, and filed for bankruptcy in June 2020.
Management issues: Proteus Digital Health faced several leadership changes over the years, including the departure of its CEO and co-founder Andrew Thompson in 2018. The company also faced several lawsuits from former executives and investors, who alleged mismanagement and breach of fiduciary duty.
Overall, Proteus Digital Health faced significant challenges in bringing its innovative technology to market and achieving widespread adoption. While the company's sensor-enabled pills had the potential to revolutionize the way chronic conditions are managed, the complex technology and infrastructure required made it difficult for the company to gain traction in the market.
Case Study 3: the history of DarioHealth
DarioHealth has faced several challenges and changes over the years.
In August 2020, DarioHealth announced that it was restructuring its operations and laying off 34% of its workforce in an effort to reduce costs and improve its financial position. The company also announced that it was moving its headquarters from Israel to New York in order to better serve its US customers and partners.
In addition to these operational changes, DarioHealth has also faced several legal challenges in recent years. In 2019, the company settled a patent infringement lawsuit with a competitor, and in 2020, it settled a class action lawsuit alleging that it made false and misleading statements about the capabilities of its blood glucose monitoring system.
Despite these challenges, DarioHealth has continued to provide its mobile platform and other services to patients with chronic conditions. The company has also continued to innovate and expand its offerings, recently launching a new program to provide behavioral health coaching to patients with chronic conditions. As the demand for digital health solutions continues to grow, DarioHealth may be well positioned to continue growing and evolving in this space.
Case Study 4: the history of Better Therapeutics Better Therapeutics is a digital therapeutics (DTx) company developing software-based treatments for conditions such as type 2 diabetes and hypertension, was still operating and providing services to patients.
In May 2021, Better Therapeutics announced that it had entered into a merger agreement with a special purpose acquisition company (SPAC) called Mountain Crest Acquisition Corp. The merger was completed in July 2021, and Better Therapeutics began trading on the Nasdaq stock exchange under the ticker symbol "BETR".
The merger provided Better Therapeutics with additional funding to support its growth and development, and the company announced plans to use the proceeds to expand its commercial operations and further develop its product pipeline. Better Therapeutics' lead product candidate, BT-001, is a software-based treatment for patients with type 2 diabetes, and the company is also developing treatments for hypertension and other chronic conditions.
Since going public, Better Therapeutics has continued to focus on developing and commercializing its products, and the company has announced several partnerships and collaborations with healthcare providers and other organizations. The DTx market is still relatively new and rapidly evolving, and Better Therapeutics is well positioned to continue growing and expanding its offerings as more healthcare providers and patients embrace the benefits of digital interventions.
Case Study 5: the history of Livongo Health
Livongo Health is a digital health company that provides personalized health management services for people with chronic conditions such as diabetes, hypertension, and behavioral health conditions. The company was founded in 2014 by Glen Tullman and other healthcare industry veterans, with the goal of using technology to improve the lives of people with chronic conditions.
In its early years, Livongo focused on developing and launching its flagship product, the Livongo for Diabetes program. The program uses a combination of connected devices, software, and coaching to help people with diabetes monitor their blood glucose levels, manage their medications, and make healthier lifestyle choices. The program also includes features such as real-time alerts and personalized health insights based on the user's data.
Livongo quickly gained traction in the digital health market, and in 2017 the company raised $52.5 million in a funding round led by General Catalyst and Kinnevik. The following year, Livongo expanded its offerings to include a hypertension management program, and in 2019 the company went public with an initial public offering (IPO) on the Nasdaq stock exchange. The IPO raised $355 million, and Livongo's stock price surged on the first day of trading.
In 2020, Livongo announced plans to merge with Teladoc Health, a leading provider of telehealth services. The merger, which was completed later that year on the 30th October created one of the largest virtual healthcare companies in the world, with a combined market value of over $37 billion. The merged company is focused on providing a comprehensive range of virtual healthcare services, including telemedicine, digital health coaching, and personalized health management for people with chronic conditions.
Since its founding, Livongo has received numerous awards and accolades for its innovative approach to healthcare, and the company's products and services have been adopted by millions of patients and healthcare providers around the world.
After all the hype and now fears, what is the potential of digital therapeutics?
The potential of digital therapeutics (DTx) is significant, as these interventions have the potential to revolutionize the way healthcare is delivered and improve patient outcomes. Here are some of the ways in which DTx can make an impact:
Improved access to care: DTx can help to overcome geographic and logistical barriers to healthcare by providing remote and on-demand access to interventions. This can be particularly beneficial for patients living in rural or underserved areas or those who have difficulty accessing traditional healthcare services.
Personalised interventions: DTx can be tailored to the specific needs of individual patients, using data-driven insights to deliver personalized interventions that are optimized for each patient's unique needs and circumstances.
Lower costs: DTx can be more cost-effective than traditional healthcare interventions, particularly for chronic conditions that require ongoing management. By leveraging digital technologies, DTx can reduce the need for in-person visits and other costly healthcare services.
Enhanced patient engagement: DTx can engage patients in their own care, providing real-time feedback and coaching to support behavior change and improve health outcomes. This can help to increase patient motivation and adherence to treatment plans.
Integration with traditional healthcare: DTx can be integrated into traditional healthcare settings, providing a complementary approach to care that can enhance the effectiveness of existing interventions.
Overall, the potential of DTx is significant, and the market for these interventions is expected to grow rapidly in the coming years as more healthcare providers and patients embrace the benefits of digital interventions. With continued innovation and investment in this field, DTx has the potential to transform the way healthcare is delivered and improve outcomes for patients around the world.
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