Out of the Digital Health Fog, More Investments Are Coming in 2015


Xconomy National — 

Venture capitalists have been talking up the rewards of digital health for some time now, and we are certainly putting our money where our mouth is. Record-breaking dollars continue to flow into health care IT startups. According to Rock Health, digital health saw over $4B in funding in 2014, more than doubling funding from 2013 and matching the total of the previous three years combined.

For outsiders looking in, the digital health space might seem like an ill-defined universe, promising but bewildering. This year, however, I am encouraged by some changes happening that bolster near-term investment opportunities and make the value to patients more readily apparent.

There are also two crucial pillars now in place to help new investments in digital health products and services flourish in whatever form they might take, from consumer-friendly mobile apps for wellness; to services that help both employers and self-insured people pay health bills and manage benefits; to “big data” population health analytics.

The first pillar is an infrastructure that has been established to hold, dispense, communicate and use heath care information. There is more than 83% penetration of electronic medical records (EMRs) in physician offices, according to a 2014 Medscape survey, as well as the ubiquitous use of smart phones by both patients and physicians.

The second pillar is the ready availability of seed money from angel groups such as Health Tech Angels and incubators such as Rock Health. That seed cash is important because digital health development is more akin to tech. It doesn’t require nearly the same rocket fuel at launch as biopharma or device startups, although go-to-market ventures do in fact require large sums of funding.

With this backdrop in place, what’s next to provide value to the health care system in terms of better patient outcomes and reduced costs? I’m particularly interested in the convergence of technologies that have the potential to help insurers, pharma companies and health providers turn real-world, clinically meaningful data into valuable products.

(Fair warning: I’m going to give examples from Canaan’s portfolio. I’m biased, of course, but these are the companies I know extremely well.)

One example of technology convergence is Chrono Therapeutics, one of our investments. Drug companies want to move “beyond the pill,” which means finding ways to help patients take their medicines more consistently—what we call “compliance”—and to derive more clinical benefit from existing products. Chrono is exploiting digital health technologies to change up the tired category of nicotine patches for smoking cessation. Chrono is developing a new drug delivery device for the timed delivery of nicotine to reduce cravings. The device also communicates with a digital “back end” channel to coach the patient through a mobile app.

Is Chrono’s device a medical wearable, a disease management tool, a novel drug delivery technology, or a self-care app? I would argue that it checks all those boxes, and I anticipate that in the near future, many more innovators will start to look like Chrono.

It’s part of a larger trend of drug companies grappling with where to fit into the new digital health world. Where do drugs and apps intersect? Another company, not part of Canaan’s portfolio, working to marry digital therapeutic tools with a pill is Pear Therapeutics.

I’ll give you another case where the convergence of technologies is particularly promising: the race to provide physicians more help with decision making in patient care. I like to cite the AMA’s survey on professional satisfaction, which indicates doctors yearn for more, not less, interaction with patients. What better way to deliver care than to give physicians tools that allow for more patient interaction without increasing their workload?

Doctors are hit from all sides with what might be so-called “actionable” data: from diagnostic lab results, to sophisticated clinical algorithms in oncology, to a dashboard that monitors patient compliance with drug regimens between visits.

All these data flying at doctors call for better collection and consolidation, especially when the data are … Next Page »

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Wende Hutton is a general partner at Canaan Partners. She joined Canaan in 2004, and her life sciences track record includes seven IPOs and five acquisitions. Follow @

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