...led by an ability to focus on longitudinal patient journeys, resulting in better patient experience and valuable real world evidence (RWE) for pharma companies

Pharma companies own more than 50% of the healthcare sector's global profit pool. Most pharma companies are organized around a few specialties and they aim to capture significant market share in those specialties. Today, as pharma companies navigate a more customer centric, tech driven health environment, they are moving towards personalized and precision medicine for customers on one hand and reduced drug trial timelines on the other. This shift in pharma strategies requires access to patients and data in addition to doctors, who leading pharma players already have deep relationships with. Pharma companies are increasingly acquiring tech platforms which give them this access across specialties, for e.g. Roche's acquisition of Flatiron for USD 2 bn in 2018. The space has also seen large unicorns being built globally some of which have acquired emerging start-ups in the same vertical.

Within the Indian healthtech sector, specialty focus tech companies will have a formidable role to play. From USD 2 billion in 2020, the sector is estimated to expand more than 10 times to USD 21 billion by 2025, in just five years. This dizzying growth promises to unlock a multitude of opportunities for technological innovation. Healthtech in India is also expected to see large platforms being built, both organically and inorganically, like in the US where Ro recently acquired Modern Fertility to build a deeper customer offering for fertility on its women's health platform.

Greater consumer ownership of health requires replacement of episodic, one-time consultations with continuum of care journeys. And pharmaceutical companies need greater access to data to be able to grow and retain their leadership positions across specialties. The top four pharmaceutical leaders in India are valued at more than USD10bn and these leaders are constantly staying ahead of the curve with investments on the digital front. Shailesh Gadre (IMS Health, South Asia, MD ‘04-’09), highlighted the same in a conversation, “Next wave of growth in pharmaceuticals would also come from M&A and companies are already gearing up for the challenge.” A separate conversation with a leading consulting firm corroborated the same.

The primary reason behind such acquisitions is data; pharma companies increasingly prioritise real world evidence (RWE). “RWE will become more relevant and relied upon in the future”, says Anandram Narasinham, MD & GM, Merck Group, South Asia. “While clinical trials will still hold their space, the importance of RWE will grow many fold as it is more realistic, authentic and less expensive. From label expansions to new protocols, RWE will play a very important role to get new drugs and treatments to patients. With technology and digitization, leveraging RWE will become easier and practical too.” Digital specialty platforms such as Flatiron play the crucial role of providing the companies access to RWE. The companies can then deploy these inputs into their R&D and marketing efforts.

Abhay Mehrotra, former Director at Roche explains, “The early impact of RWE was seen with the invention of multi-precision drugs in the past few years, enabled by fast and economical access to vast volumes of data. Closer home in India, pharma companies stand to benefit additionally in terms of marketing and enhanced access and availability through specialty focused tech platforms. Greater engagement with KOLs is key to pharma sales, especially in specialties like oncology where treatments are expensive and diagnosis & treatment landscape is constantly evolving. Better awareness and diagnosis are the other drivers for pharma sales and they continue to look for plays which can identify, engage and retain a patient.”

At Enzia, we are bullish on investing specialties with large/ growing markets with either broken customer journeys or strong disruption possibilities.  As per global sales data, oncology is the largest segment with ~22% market share among specialties (illustrated in the figure below) and is also growing rapidly. Lifestyle-related diseases* is the next largest, with 8% market share but dermatology and neurology are some of the fastest growing segments at 13% and 10% CAGR (19-26) respectively and expected to gain significant market share.

*Lifestyle-related includes anti-diabetics, anti-hypertensives and anti-coagulants

Full stack specialty care models in oncology, cardiology, women’s health, dermatology and neurology have strong potential given the large, growing markets. For start-ups venturing into these specialties , it is imperative to start with business models that are patient or doctor/ KOL focused because that gives them an ability to build consistent experience through the care journey, and hence retain the customer better. Retaining customers gives you both higher LTVs and longitudinal patient data. We believe that healthtech startups which have business models with the following characteristics will emerge as winners –

1.     Patient-centric vertically-integrated models – These provide end-to-end services including information, doctor consultation, diagnostics, treatment, and products. Proactive For Her, an early-stage digital platform focused on women’s reproductive health, aspires to build such a comprehensive ecosystem; they began with consultations, have recently moved into diagnostics and over time, aim to expand to products. Similar full-stack models are coming up in other specialties, notably oncology, as well.

2.     Businesses compatible with Key Opinion Leaders (KOLs) - Healthtech cannot replace doctors who are key opinion leaders (KOLs) and a specialty-focused platform with a good business model will look to complement them and enhance their diagnosis and performance. A good example is Numen Health – which creates a bridge between doctors and their patients starting with simplifying discharge summaries to ensuring adherence and compliance, hence helping doctors retain patients. It also becomes the central care team for patients synthesizing inputs from various doctors and creating actionable care summaries.

3.     Adopters of ‘Phygital’ business model - a combination of online-offline services. Healthcare ultimately needs physical touchpoints, and they are highly unequally distributed across India, with more concentration in urban areas. The phygital model can address this imbalance to a certain extent and its adopters will be able to access authentic, and in some cases, even first-time RWE which would be immensely valuable to pharma companies. Companies like NeuroEquilibrium are doing interesting work leveraging diagnostics-innovation and the phygital model.

From end-to-end servicing for patients to correctly assessing and meeting doctors’ needs, from addressing non-Tier I healthcare issues through phygital models to improving diagnosis of specialty diseases - India’s specialty-focused tech start-ups have plenty to achieve. While addressing these challenges, they must also pay attention to building meaningful revenue models and generating RWE in order to be able to tap into the pharma sector for value eventually.

(An edited version of this article was published in ETHealthworld. Link - https://health.economictimes.indiatimes.com/news/industry/specialty-focused-tech-businesses-to-see-strong-traction/86782424)