A Global Reflection on the State of Digital Healthcare

Global Adoption of Digital Healthcare

Set to grow to a quarter trillion-dollar industry by 2030, whilst Telemedicine has been available to clinicians for many years, it was not until the recent spotlight of the pandemic that it has truly been embraced. As medical facilities became increasingly overburdened and posed a risk of Covid-19 infection, Telehealth solutions, which equip digital information and communication technologies to bring benefits to both patients and care administrators, have been rapidly introduced across all areas of healthcare.

With utilisation now stabilised at 38x the pre-pandemic level, what was once a distant futuristic goal has now become a reality. Prior to 2010 we witnessed hardly any investment into the Telemedicine sector however it is now experiencing

unprecedented levels of growth of 169% year-over-year. Indeed, 13 Telemedicine companies have achieved Unicorn status since the start of the Pandemic with a total of 27 worldwide valued at $55 Billion in aggregate.

As noted by the World Health Organisation in their ‘Global strategy on Digital Health 2020 – 2025’ report, the development of a digital continuum of care has the proven potential to enhance health outcomes and private sector innovation is at the heart of this. Despite this, many countries still require support to develop digital health strategies and to successfully implement them.

At present Europe is leading the way with a 37% share of the global digital health market, with the sector now equating for 21% of total European healthtech start-ups. Despite this, the landscape of European telemedicine adoption remains fragmented and whilst the particularly established infrastructure of the United Kingdom, France, Sweden and Portugal have thrust them into an advanced stage of telemedicine adoption, this readiness of infrastructure is not universal. Countries such as Germany, Belgium and Poland remain in a developing stage where enhancement of existing

regulatory frameworks and reimbursement systems is necessary for realising telemedicine potential. Furthermore Italy, Austria the Czech Republic and many other nations are lagging behind and only at the initial stage of implementing these digital health solutions due to a general lack of policies, strategies and infrastructure. The European market therefore still remains rife with innovation and investment opportunities.

The Middle East and Africa also have a significant combined share of 25%. In Africa, the growing burden of disease and deficient health infrastructure, emphasises a clear need for affordable and easy-to-access technological solutions. Of particular note, East Africa has cemented its status as a hub of experimentation in digital health as these governments have continuously and actively sought out corporate investment into healthcare services and products. In particular, the strong internet coverage and high density of mobile phone ownership in Tanzania and Kenya has laid a strong

foundation for the continued scaling up of telemedicine solutions on the continent.

Latin America Opportunity

The Telemedicine landscape in Latin America is incredibly varied and countries are adopting technologies at inconsistent rates. Whilst the use of telemedicine was already routine in Argentina back in 2019, research from the same period shows that the adoption of telemedicine technology of some form was as low as 25% in Colombia.

Whilst Guillaume Corpart, CEO of Global

Health Intelligence, notes that the region has a very good hospital infrastructure, this is fragmented and made of small players. He, therefore, notes that it is a great challenge to build expertise centres which have the capability to acquire the necessary technology for digital health solutions.

Despite this, significant progress in the vertical has still been made across the region. Chile and Uruguay are currently regional leaders due to significant public sector investment into these solutions. And Colombia, even with low adoption in 2019, has still held 9,000,000 virtual appointment since the start of the pandemic, a 7000% increase on pre Covid-19 levels. In Peru alliances between banks and NGOs have even seen the development of broadband enabled rural health centres, serving 3000 inhabitants of the Peruvian Amazon.

17 Latin America countries reveals that approximately 15% percent of considered hospitals have a dedicated telemedicine programme and just 1% are part of an international telemedicine system, which has remained stable between 2020 and 2021.

U.S. Digital Health Funding and Deal Size (2016 – 2021)

Focusing on investment in the US market reveals a strong compound annual growth rate of 35.51% over the past five years. As expected, the number of deals was on the rise for this period, more than doubling to a total of 729 in 2021. Interestingly, we can also see a general trend of an increasing deal size for this period with average deal in 2021 being 3x that of 2016. Unpacking this further, there were 97 more 25M+ deals in 2020 than 2016 and 79 additional 10M-25M deals over the same period.

The Unicorns of Telehealth

Babylon

Babylon founder and CEO Ali Parsa has a clear vision for the future of Telemedicine and his mission is ‘to do to healthcare what Google did for information’ by making it accessible, affordable and in the hands of every human being on earth. With hospital visits being an infrequent occurrence for most, he imagines a reality where the majority of healthcare is delivered over devices. In doing so he envisages a Babylon enabled reality which does what Tesla did for cars; a constant monitoring of problems to allow for them to be pre-empted rather than waiting for a complete breakdown.

This re-engineering of healthcare from sick care to preventative care has the benefit of both improving patient’s overall health and reducing their long-term costs. Babylon has achieved this by leveraging a highly scalable, digital-first platform combined with high quality, virtual clinical operations to provide integrated, personalised healthcare. It is subsequently the fastest growing primary care provider in the history of the NHS.

Ping An Good Doctor

Considering Chinese telemedicine solutions, Ping An Good Doctor is a key player. The Chinese healthcare system is characterised by relatively scarce and unevenly distributed high-quality healthcare services, with over 80% of hospitals located in the east of the country.

They are committed to developing four key business segments: online medical services, which provide users with online consultations and referrals, consumer healthcare which provides standardised healthcare packages consisting of medical check-ups, an online marketplace for pharmaceuticals and healthcare products, and a health management and wellness interaction which provides highly engaging, personalised health courses and activities for users. By partnering with healthcare players Ping An Good Doctor has been able to build a “closed-loop” of telehealth services are able to provide 24/7 online consultations nationwide and prior to Covid-19 Ping An Good Doctor already carried out half a million tele consultations a day.

Instead of disrupting the existing industry they have allowed medical resources address market demand more effectively.

Reflecting on operational highlights, since its launch In April 2015 Ping An Good Doctor has amassed 400 million registered users and the number of monthly active users has rocketed from 5.6 million in 2015 to 72.62 million in 2020. In the period from 2020 to 2021 cumulative consultations also grew by 17.8% to 1.18 billion. Going public within just four years of its birth, Ping An Good Doctor is undoubtedly a force to be reckoned with but it should also be noted that they are still operating at a net loss, albeit one decreasing 65.6% year on year.

TELADOC

Another standout performer is Teladoc, the world leader at providing integrated virtual whole-person healthcare. Currently the second largest holding of ARK Invest, the $1.24 billion position in the company could be set for the portfolio top spot as Cathie Wood continues to sell off their $1.25 billion Tesla stake to buy more Teladoc. Having experienced a compound annual revenue growth of 75.19% and an increase in its number of paying members 4x in a 4-year period, it is clear why Teladoc has proven an attractive investment opportunity.

LIVI

Kry, which operates under the brand of Livi in the UK, is a primary example of the investment potential of telemedicine. One of Europe’s largest providers of online doctor’s appointments, facilitating over 3 million medical consultations since its launch in 2015, raised a $312 million Series D round in April 2021 almost tripling its value to $2 billion.

NOOM

Noom, who provide a subscription-based diet coaching app with an emphasis on behaviour change and mental wellness, raised a $540 million Series F round in May 2021. They have since hired Goldman Sachs to lead preparations for its IPO which is anticipated early this year, targeting an $8B valuation.

Notable Funds

Given the Telemedicine opportunities, it is not surprising news that Swiftarc Ventures has just launched the first dedicated telehealth fund which has committed $75 million to “fundamentally disrupt standard, antiquated healthcare delivery models and to find innovative solutions to improve access to high-quality care, ultimately reshaping the patient health experience”

Verge HealthTech, founded in 2018 and based in the Asia-Pacific region, is the first fund dedicated to making Seed investments in global healthcare technology companies that address prevention, disease management, and health system efficiency. Having recently led the $650,000 round raised by Saludtools, Colombia’s leading telemedicine, and cloud EHR provider, they are a key investor to watch.

Barriers to Efficiency

One key issue which still remains in telehealth, and the healthcare sector generally, is the high level of administrative work required for each consultation. Currently this consumes a staggering 48% of the time of each consultation. We therefore anticipate that disruptive software which streamlines this process, saving precious time for clinicians, will be a key investment trend for the forthcoming year. One renowned solution currently on the market is offered by Colombian start-up Saludtools who provide a cloud-based medical record solution:

Telemedicine Exits

During the last year there has also been an unprecedented shift in the favoured public offering method, with the digital health landscape having undergone a notable SPAC surge. As a faster alternative to the traditional IPO process, bringing price certainty early in the process and limiting the risk from fluctuating market conditions, it is likely that this was seen as a more reliable option during the uncertainty in public markets which resulted from Covid-19. But will this trend continue moving forward? Whilst Evercore have earmarked over 60 healthcare SPACs still looking for targets, meaning we can still expect to see a significant proportion during the next two years, the pace of SPAC mergers has nonetheless slowed since their first-quarter frenzy.

Overall, the rapidly growing number of exits in the Telemedicine space, increasing nearly 3x between 2020 and 2021, brings us confidence in the ability of Telemedicine start-ups to bring real value to patients and the healthcare industry, allowing them to subsequently trace a full path of growth to being publicly listed.

Exits of Note

(Same as above) During the last year there has also been an unprecedented shift in the favoured public offering method, with the digital health landscape having undergone a notable SPAC surge. As a faster alternative to the traditional IPO process, bringing price certainty early in the process and limiting the risk from fluctuating market conditions, it is likely that this was seen as a more reliable option during the uncertainty in public markets which resulted from Covid-19. But will this trend continue moving forward? Whilst Evercore have earmarked over 60 healthcare SPACs still looking for targets, meaning we can still expect to see a significant proportion during the next two years, the pace of SPAC mergers has nonetheless slowed since their first-quarter frenzy.

Looking to the Future

Whilst the Telehealth market has undergone a lot of short-term growth it is still yet to reach its peak. Considering the global market size, we anticipate that it is poised to grow over 5x in the next 9 years, skyrocketing from its 2021 valuation of $41 Billion to $224.8 Billion by 2030. This compounded annual growth of 20.8% shows longer term promise which we anticipate being driven by a key range of growth factors:

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AGING POPULATION

The World Health Organisation anticipates that by 2030 1 in 6 adults will be over 60, approximately a 40% increase on current levels. This will drastically increase care demands which telemedicine efficiencies will

allow care providers to address.

CHRONIC DISEASE

The World Economic Forum has revealed that 1 in 3 adults worldwide are living with multiple chronic health conditions. This continues to be exacerbated by a shift towards sedentary lifestyles. There is thus a huge

and growing need to monitor existing long-term conditions which telemedicine can meet.

RISING HEALTHCARE COST

In the US, national health spending is anticipated to grow at an average rate of 5.5%. As health insurance premiums rise, drugs become more expensive and consumers demand high tech solutions there will be an increasing focus on more cost-efficient telemedicine alternatives moving forward.