"People come to us every week, and dozens of institutions at the head have seen us."
A number of entrepreneurs in the field of digital therapy told 36Kr that their enterprises are in the financing window recently, and the investment institutions that we have received, the names are summed up in Sequoia China, Jingwei China, IDG, Hillhouse Capital, Huaxing, Baidu, ByteDance, Tencent, JD.com, Alibaba's war investment department and almost all the front-line VCs and star investments, there are hundreds of investment institutions that are famous in the market.
There are funds in the direction of TMT, funds in the pharmaceutical industry, and even funds that originally only invested in consumption, all of which have come, and a large number of investors have rushed to digital therapy. 36Kr learned that Zhu Xiaohu of the Jinsha River also personally voted for a certain project.
The enthusiasm of investors is not unreasonable, and overseas, this field has grown unicorn companies with a valuation of more than $1 billion, such as Akili and Pear Therapeutics. Pear's first digital therapy product, reSET, is based on behavioral cognitive therapy (CBT), which serves as part of clinicians' prescriptions for addicts, while Akili's digital therapy product, EndeavorRX, is designed for children aged 8-12 years with attention deficit hyperactivity disorder (ADHD) to achieve effective treatment of the disease through video games.
Can you detoxify through a mobile APP? Playing games can cure the disease? Can you improve your vision with VR? What is the business prospect? As a result, it seems that future entrepreneurs have come down, and the pre-entrepreneurship work background includes doctors, engineers, programmers, investors, etc., setting off a chapter in China's digital therapy.
First, why is the niche track suddenly hot?
The dominant definition of digital therapeutics (DTx) in the market is that digital therapy is a software-driven, evidence-based medicine-based intervention to treat, manage, or prevent disease. Digital therapies can be used alone or in conjunction with medications, medical devices, or other therapies that influence patients through information (e.g., text, pictures, videos on apps), physical factors (e.g., sound, light, current, magnetic fields, and their combinations), medications, and more to optimize patient care and health outcomes.
The development of digital therapy stems from the limitations of traditional treatment methods, and with the maturity of modern digital technologies (such as AI, VR, cloud computing, big data, etc.), this has brought a series of innovative interventions in addition to traditional treatment methods. Through digital means, digital therapy transforms existing medical principles, medical guidelines or standard treatment protocols into application-driven interventions, which can effectively improve the compliance and accessibility of patient chronic disease management, and is an innovative way to break through the limitations of traditional drug treatment.
Taking tumor treatment as an example, rehabilitation intervention can not only reduce the negative impact of various adverse reactions in the process of tumor treatment, but also significantly improve the quality of life of tumor patients. However, due to the difficulty of postoperative physical recovery and complication prevention in tumor patients through drugs, the current best prevention and treatment measures are to allow patients to self-manage from diet, exercise, psychology and other aspects, which requires patients to have certain medical reserve knowledge and high compliance. Patients often face the problem of lack of psychological identity caused by lack of medical knowledge in the process of self-management, and it is difficult to adhere due to the lack of adequate feedback and supervision.
Dr. Jia Jie of Huashan Hospital affiliated to Fudan University once wrote in the China Medical Journal that digital therapy can effectively improve the compliance and accessibility of self-management of cancer patients, strengthen the concept of self-rehabilitation and self-management of patients, and enhance patients' self-confidence. In addition, tumor patients often have psychiatric and psychological problems, and tumor patients usually express less emotion and seek psychological support from professionals, while digital therapy simulates doctor-patient interaction into a digital product module, which can solve such problems to a certain extent.
Compared with traditional drug-based therapies, digital therapies have the advantages of reproducibility, accumulation, lower cost and more convenient access, but its disadvantage is that it cannot provide difficult service content (such as surgery), and can only partially replace manual services.
According to the ICD-11 disease classification standard released by the WHO in 2018, there are 27,500 diseases in humans, and human diseases can be divided into endocrine, nutritional or metabolic diseases, mental, behavioral or neurodevelopmental disorders, sleep-wake disorders, nervous system diseases, visual system diseases, circulatory system diseases, etc. according to the broad category. According to the feasibility forecast, thousands of diseases in multiple disease categories may be expected to be digital therapies with the help of digital technology.
Judging from the approved digital therapy products at home and abroad, the first-level indications that are currently distributed mainly include mental diseases, behavioral and cognitive disorders, endocrine, nutritional and metabolic disorders, nervous system diseases, etc., while the second-level indications mainly include diabetes, sleep disorders, psychological disorders, Alzheimer's disease, autism, etc.
In the past, in the field of digital therapy, only partial app clinically validated effectiveness of the paper research and early exploration of a small number of players. From 2020 onwards, with the intensive approval of a series of digital therapy products, the verification of commercialization and the emergence of huge financing in the industry, digital therapy, which has been developing for many years, has suddenly become an "outlet" in China and has ushered in a high degree of attention.
In 2021, at the digital therapy theme forum held by a well-known medical industry service platform in Chongqing, the huge venue was full of people, and the aisles and doorways of the venue were full of people.
This wind has taken many doctors, engineers, investors, etc. away from their original positions and become entrepreneurs in the field of digital therapy. For example, Liu Xiaogang, the founder of Zheng'an, was an engineer of Huami Technology, and Zheng'an focused on digital therapy for insomnia; Sun Wei, founder of IBT Wujian Technology, served as a partner of Digital Wisdom Craftsman Venture Capital and Houxin Health Investment, IBT Wujian Technology focused on science and digital therapy for central nervous system diseases; And Kong Xiang, the founder of Mu Mian, worked in the Department of Critical Care Medicine of Fuwai Hospital of the Chinese Academy of Medical Sciences and the Sleep Center of the General Hospital of the Air Force, and Mu Mian mainly focused on sleep, mental stress and brain health.
In addition to companies that specialize in digital therapy, digital therapy has become a "fashion" in the medical and health industry. Internet medical companies such as Miao Health, Micro Pulse Medical, Medical Union, and Zero Kr Technology, as well as pharmaceutical giants such as Takeda Pharmaceutical and AstraZeneca, have also begun to lay out digital therapy product pipelines.
After the epidemic, the opportunities for medical health, the intensive approval of digital therapy products at home and abroad, the end of entrepreneurs, and a series of positive signals in the industry began to be transmitted to the investment institutions. Many institutions are beginning to have investors who specialize in the field of digital therapy, pouring into the industry to see projects and quickly complete the source of projects.
Investors in Qiming Venture Capital, Northern Lights, Kangqiao Capital, Changling Capital and other institutions told 36Kr that they have at least dozens of projects in the field of digital therapy.
36Kr statistics found that since 2020, more than 20 financing companies in the field of digital therapy have been obtained, and in the most recent year, there have been at least more than 10 public financing incidents in the industry.
Financing of digital therapy companies in the most recent year
In the industry, the financing round and amount are still in the early stages, most of the corporate financing is tens of millions of yuan, only Shukang and Bosten's single round of the amount of 100 million yuan. Shukang focuses on digital therapy for exercise and nutrition therapy, and Bosten focuses on digital screening and intervention for Alzheimer's disease.
36Kr exclusively learned that the current valuation of track companies is generally in the range of 100 million to 500 million, a few companies can reach the range of 500 million to 1 billion, and there is no enterprise valuation of more than 1 billion yuan. During the interview with 36Kr, IBT Frontier Technology, Bosten, Enqi, Shukang and others said that they were in a new round of financing window.
Hanergy Investment has just recently completed a scan of the digital therapy track, and Liu Pengcheng, a partner at Hanergy Investment, revealed that the investment institutions that are currently in contact are mainly in a wait-and-see state.
"Even the most expensive enterprise in this track has less than 100 million yuan in financing, and it is still several of them investing together, and each one is split down to a layout of 20 or 30 million." Liu Pengcheng told 36Kr, "In the future, there need to be one or two companies that can run out, and one or two large institutions continue to bet on this track, and the market vane can be truly established." ”
Second, how to do digital therapy?
If you start a digital therapy company from scratch, then the founding team needs to solve a series of problems such as staffing, indication selection, product design, clinical trials, registration and certification, and commercialization. These links are problems that every entrepreneur must face.
So what is the current situation in the industry, and how do you do it?
(1) Staffing
Digital therapy is an absolutely interdisciplinary field, and a team of medical, engineering, algorithmic and technical talents is the standard for the development of digital therapy. Judging from the many companies interviewed by 36Kr, the current employees of each company are mainly in the scale of dozens of people, and most of them are R & D personnel with multiple professional backgrounds. Zheng'an, IBT Frontier Technology, Bosten, and Shukang are all in the scale of 50-100 people.
For example, taking IBT Frontier Technology, a brain science wisdom medical company that focuses on the diagnosis and intervention of neuropsychological diseases, as an example, The founder Dr. Sun Wei told 36Kr that there are three main parts of the company's staffing: one part is to do scientific translational research, one part is to do medical research, including product design and clinical design, and the other part is product and engineering team - these three parts account for nearly 80% of the company's manpower.
(2) Indications selection
"Companies across the digital therapy track need to find some suitable application scenarios, mainly in the medical field refers to indications, and many projects have chosen the wrong indications from the beginning, resulting in a more difficult future business model." For example, the clinical benefits of digital therapies for many chronic disease surveillance and management are often relatively hidden, and they cannot interact with medical insurance, and it is difficult to form large-scale income. There are also relatively good cases, recently in the United States, there is a digital therapy based on VR amblyopia treatment approved, which solves the clinical pain points, and for children, parents have a strong willingness to pay, and the commercialization path is relatively clear. In the view of Northern Lights investor Li Shuai, "digital therapy companies must first find application scenarios that can bring obvious clinical benefits, and at the same time think clearly who will pay for it in the domestic environment, whether it is insurance, pharmaceutical companies, doctors, or patients." “
The Eggshell Research Institute did statistics in September last year, and from the 73 digital therapy companies monitored, mental diseases, endocrine system diseases, and nervous system diseases are the main indications for digital therapy.
From the perspective of enterprises with large financing at present, Bosten, IBT Frontier Technology and Wangli Technology have all chosen the indications for mental illness, while Shukang has chosen sports rehabilitation and nutritional treatment.
In the view of Marco, managing director of Kangqiao Capital, digital therapy is born out of non-drug treatment, and its value lies in the strong intervention and treatment effect on patients. For example, stroke, in the past, the rehabilitation doctor in the hospital to do long-term training and compensatory rehabilitation, but this is a non-standard treatment that relies on the individual experience of the rehabilitation teacher, but digital therapy is to use digital methods and products to make standardized but personalized products.
In general, diseases with long-term management, clear clinical guidelines, and more interventions are suitable areas for digital therapy.
(3) Clinical trials and registration declarations
The essential difference between digital therapy and past digital health products is that the former is supported by evidence-based medicine. The logic of evidence-based medicine lies in whether it has clinical data support, so every digital therapy company cannot avoid clinical trials and registration declarations.
At this stage, there is no specific supervision or promulgation of relevant guidelines for digital therapy products in China, and the supervision and registration of similar products are approved in accordance with the relevant policies and procedures of medical device software, and the specific operation mainly follows the "Guidelines for technical review of medical device software registration" and "Guiding Principles for Technical Review of Mobile Medical Device Registration".
According to people close to the regulatory level, although the regulator has not promulgated specific digital therapy regulatory principles, "the regulatory level actually understands this piece, and some large conferences on digital therapy in foreign countries have been attended by the regulatory level." ”
At present, more than 20 digital therapy products approved in China are mainly class II medical devices.
Registration of digital therapy software in China
According to the heads of Shukang, IBT Frontier Technology, Zheng'an and Enqi Enterprises, the company is preparing for the registration declaration of Class III medical devices.
In terms of the cost of obtaining certificates, if you add clinical trials, the cost of class II certificates ranges from millions of yuan to tens of millions of yuan, with a cycle of 1-2 years; the cost of obtaining certificates of class III certificates is at the level of tens of millions of yuan, with a cycle of 2-3 years.
(4) Commercialization
Commercialization is a hurdle that every company cannot avoid. At present, most digital therapy companies are in the stage of product research and development, and they are still far from the time of large-scale commercialization. Even if companies have commercial revenue, they do not rely on digital therapy, such as Mu Mian, which obtains part of the revenue from the licensing of medical-grade music.
In terms of commercialization, the largest income scale in the industry is Bosten and Shukang.
In the second half of 2020, Bosten and Alipay launched the "Brain Training" mini program, embedded in the social security section of the Alipay Civic Center, where users can also conduct memory testing while querying social security and provident fund, with a cumulative service of more than 10 million people. At the beginning of 2022, on the user side, Bosten comprehensively upgraded the "Brain Green Pine" annual training plan, including cognitive training, cognitive exercise, chronic disease management, brain health science, and accompanying guidance from real trainers. According to people close to Bosten, Bosten's annual income is tens of millions of yuan, mainly from cooperation with the government and commercial insurance.
The commercialization of Shukang mainly comes from overseas, and insurance is the payer. According to He Chunshui, co-founder of Shukang, Shukang has reached cooperation with several hospitals in the United States, and about 30,000-50,000 patients with heart failure will use Shukang's products for rehabilitation after discharge, and each patient will be charged about 300-500 US dollars per month. In 2022, Shukang is expected to achieve tens of millions of dollars in overseas revenue.
In addition to the companies in the industry whose main business is digital therapy, there are also a number of companies that have set their sights on the cake of "digital therapy" and have launched product lines and business teams of digital therapy, such as micro-pulse medical, medical association, miao health, zero kr technology, etc. Last year, Zero Kr Technology even incubated a subsidiary that does digital oncology therapy, Digital Healing Medical Technology.
For example, in the case of Micro Pulse Medical, the main business of Micro Pulse Medical is to do the traffic operation of public hospitals, and the introduction of digital therapy is to be used as a means of commercial realization. For enterprises such as Zero Kr Technology and Miao Health, it may be based on the reason for strategic synergy with other product lines.
In the view of Li Shuai of northern lights, "they may have really found a more suitable application scenario and monetization means, of course, they may also be packaging themselves with a new concept." ”
Third, the VC soul asked: Do you think clearly?
At the Global Healthtech Summit forum in Singapore, Li Tiantian, the founder of Lilac Garden, had a fierce debate with several entrepreneurs who do digital therapy, Li Tiantian is conservative about starting ups doing digital therapy, and he believes that digital therapy is a "trap" for start-ups:
First, DTx is benchmarked as a drug or device, and companies need to spend a lot of time and money doing clinical trials to prove the efficacy of the product. And money and time are two of the most valuable things for startups, and some startups may not be able to withstand this risk; second, since it is digital therapy, it still needs a doctor's prescription to use it for patients, and patients can't use it freely without a prescription. So it takes a high cost to educate doctors, to convince doctors, so that doctors can prescribe it through this form, which is a huge cost.
Third, in the treatment process, for patients, compared with traditional therapy, digital therapy requires learning costs, and the learning process may also require an operation team, which in turn increases service costs and operating costs; fourth, is digital therapy really useful for patients with poor compliance?
Li Tiantian told 36Kr that digital therapy is a less entrepreneur-friendly field, "most startups may not survive so much capital and time investment, be more cautious." ”
In the past two years, with the listing of The track head company Pear and the approval of a series of digital therapy products, the industry has ushered in a big variable.
In December 2021, Pear landed on the NASDAQ via SPAC. In its recently released annual report, Pear disclosed that in 2021, the company's prescription digital therapy (PDT) product sales revenue was $3.748 million, an increase of 24 times year-on-year. This revenue mainly comes from the increase in bulk sales of two products, reSET and reSET-O, which are the first two products approved by Pear by the FDA.
As the head of the track, although the revenue scale is small, it has somehow validated the commercial potential of digital therapy. The annual report discloses that Pear has made commercial attempts in many areas, deploying PDT in many large addiction health systems, medical groups and medical research centers, including Caesars Medical, Northwell Health, etc., while Pear has also developed the commercialization of PBM, Medicare, Medicaid and other fields. It's worth mentioning that since the first PDT product went on the market, Pear has had more than 700 clinicians in 32 states prescribe more than 20,000 reSET and reSET-O prescriptions.
Overall, whether Pear, as the head of the track, can run through, it remains to be verified by time. But the field of digital therapy has ignited the enthusiasm of some entrepreneurs and investment institutions. Entrepreneurs poured in, and investment institutions followed quickly.
Qiming Venture Capital and Changling Capital are institutions that bet more on this track and have an earlier layout, with about 4-5 investment projects in the two companies, and a single investment in finance is about 10 million yuan.
In the view of Jiang Xiaodong, founding partner of Changling Capital, "Although the industry is in the early stage of commercialization, it does not mean that it cannot be commercialized in the future. Jiang Xiaodong told 36Kr that the most important thing about digital therapy is "therapy" rather than "number", and its core is medical logic, "as long as the company chooses the right direction, and then uses the evidence-based medicine method to really create a product that can solve the patient's problem, and then turn such commercial potential into reality, it will naturally grow into a valuable company." ”
Sun Motao, an investor in Qiming Venture Capital, said, "We don't pay much attention to the noise of the outside world, a good team, the direction they do is clinical and valuable to patients, then we are very willing to support in the early stage." ”
To some extent, digital therapy is very similar to the original AI medical outlet, both of which are regulated as medical devices and are used in clinical practice. Liu Pengcheng told 36Kr that from the perspective of the financing node of a track, the current digital therapy is similar to AI medical treatment in 2016, when entrepreneurs gradually poured in and investment institutions followed suit.
Looking back now, although AI Medical has ushered in a wave of listing, Shukun Technology, Keya Medical, etc. have successively submitted tables, and Eagle Pupil Technology has been successfully listed, but whether this track is completely running through is still in doubt. The commercial income of several leading enterprises is only to the scale of 100 million yuan.
For digital therapy, the current investment institutions in the market have maintained a follow-up, but mainly tend to wait and see, and the biggest concern for investors is clinical value and commercialization.
Li Shuai feels that the industry is in an early stage of exploration, but also need policy, insurance, capital and other parties to promote the development of the industry, the current market can find a good business model of the company is not much, "some of the previous Internet medical companies, or some medical software companies, transformation to do digital therapy, must really see the problems in this field, in order to go further." ”
From product development to clinical certification to business model exploration to achieving revenue at scale, this is a very long chain. "I don't think a lot of companies have the ability to do this kind of closed loop." Marco said, "The most important thing is that many companies have not figured it out themselves, so how do I invest?" ”