Pharma deal-making trends in digital health · Top Med Device Deal Volume 69 deals . 28. 20. 11. 11. 5. 3. 3. 2. 1. 0-50. 50. 150. 250. 0. 10. 20. 30. Top Tech Deal Volume • Pharma

Pharma deal-making trends in digital healthHow digital is disrupting business development and where the pharma and tech industries are placing bets

Lisa Riggio, PhD & Jennifer Berbaum, PhD

03.17.2020

1© 2020 Clarivate Analytics

Agenda Who is leading in digital integration: cross-industry comparisons

Pharma deal trends and structures

Activity focus within the digital health landscape

Conclusions and future outlook

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© 2020 Clarivate Analytics 2

All deals reported here were made between 2016 and 2019, with the exception of the first section (cross-industry comparisons), which is from 2018-2019

What is a deal?• Transaction with a “seller” (“principal”) and “buyer” (“partner”)They come in multiple forms:• Transactions with a transfer or sharing of IP: Merger, acquisition,

asset purchase, licenses, JV, equity investment• Transactions with no transfer of IP, but exchange of money or fee: Co-

promotion, distribution, service agreement• Transaction with no provision for commercialization of IP: Research

collaborations and grants• Note: deals do not include VC/PE investmentsWhen were these deals made?• Deal download was performed in February, 2020


What is a deal?

Solutions centered around consumers that enable health management or patient care in real-life settings and generate insights on behaviors and outcomes

4

What is digital health?

Technology

Device / hardware Wearable Sensor Connected device Gaming, virtual/augmented reality

Software Mobile health app Software as Medical Device Telemedicine, remote care Connected healthcare platform Digital imaging, remote diagnostics Advanced analytics for clinical data

Function

Other workflows – Clinical research, health/disease monitoring, healthcare operations, data sharing, drug retail, consumer health

Use in clinical practice – Prevention, disease management, diagnosis, treatment, medication optimization, personalized health program

© 2020 Clarivate Analytics

• Deal-making represents a company’s ability and need to build, borrow, or acquire resources necessary to expand and innovate in an extremely broad area.

• Digital health deal trends indicate magnitude of pharma industry’s involvement and adoption of digital health.

• Deals are also a proxy for the progression of a new technology, like digital health: the greater activity, the greater the impact in the broader healthcare market.


Why look at the digital health deal-making landscape?

Digital Health

Treatment

Dx

Overall patient

care

Drug research

Therapy access

A situation ripe for collaboration

Not easy to be an expert or leverage internal resources

Who is leading in digital integration: cross-industry comparisons


Poll question:Which distribution would you expect

among tech, medical device, and pharma deals?


Top MedDev

30%

Top Pharma33%

Top Tech37%

33%

Digital health deal volume, 2018-2019: Top 10 “Big Companies”Comparable activity across sectors: Pharma is holding their own in digital health


37% 30%

*Based on 2019 revenue. With the addition of Bayer, BMS, AZ, and Lilly, 41 digital health deals are added, making pharma own 40% of the pie.

*Sources for revenue: Cortellis, MPO, Forbes, Fortune

Pharma remains the traditional buyer, while tech and med dev take predominately seller roles

• Big tech’s and med dev’s tight integration into digital health market, already in existence

• Pharma has a larger gap, compared to tech and med dev

• Big tech and device have stronger internal expertise


Seller Buyer

Startups, Researchers Larger companies

Top Tech58% as SELLER

Top Pharma90% as BUYER

Top MedDev52% as SELLER

More evenly spread pharma activity, while med dev and tech have established players


16 14 13 11 103 3 2 2 1

0

25

50

0

10

20

30Top Pharma Deal Volume 75 deals

29

12 106 3 3 3 2 1 0

0

25

50

0

10

20

30

DH Deals Revenue ($, B)

Top Med Device Deal Volume69 deals 28

20

11 115 3 3 2 1 0

-50

50

150

250

0

10

20

30

Top Tech Deal Volume

• Pharma deal-makers are “trying out” digital health, with biomodal distribution across top cos

• Med device is more imbedded in DH, thus increased enrichment for a select few top players – Philips, GE, Google, and Microsoft

84 deals

*Deal volume is combination of sellers and buyers, for all deal types, from 2018-2019

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More evenly spread pharma activity, while med dev and tech have established players


25

16 14 13 13 11 10 95 3 3 2 2 1

0

25

50

0

10

20

30Top Pharma Deal Volume 75 deals

29

12 106 3 3 3 2 1 0

0

25

50

0

10

20

30

DH Deals Revenue ($, B)

Top Med Device Deal Volume69 deals 28

20

11 115 3 3 2 1 0

-50

50

150

250

0

10

20

30

Top Tech Deal Volume

• With addition of 4 top pharma cos (by revenue), the biomodal distribution flattens out even further

84 deals

*Deal volume is combination of sellers and buyers, for all deal types, from 2018-2019

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How pharma is being disrupted: deal trends and structures


Poll question:Which deal structure would you expect

to be most common when a digital health company is partnering with a

pharma company?


25 25 18 17 14 13 13 9 9 8 8 7 6 6 5 5 4 4 4 4 3 2 2 2 1

56

167

76

143 141153

127

188

79

29

137

18

73

22

57

77

40 39

21

79

61

87

178

35

18

0

50

100

150

200

Digital Health (DH) Deals LS (Life Sciences) Deals

• LS deals dominate, as expected, with almost 10x more LS deals

• Bayer, Roche, Sanofi, Novartis are leading the industry

• While GSK, Abbvie, Merck and Gilead are lagging

• Deals are diverse, emphasizing various innovation opportunities


Life science deals dominate, yet digital innovation is prevalent

Digital Health Deals (2016-2019) LS/Drug Deals (2016-2019)

Volume: 212Value: $2.76 B

~90% undisclosed

Volume: 2038Value: $723.0 B

~73% undisclosed

*Top 25 pharma are based on a blend of revenue and digital health deal making activityDeal volume includes all transaction types for parent company as both seller and buyer. Deal values indicated for publicly reported financials


• Pharma activity is building, with DH deals more than doubling from 2018 to 2019

• This trend follows that of digital health funding, which jumped 30% from 2017 to 2018, one year prior to the deals jump

Digital health deal activity builds rapidly – similar to funding

2016

25

2017

29

2018

46

2019

112

Number of Top Pharma Deals

Largest increase, more than double

Median start date for pharma deals

Median start date for all DH deals

Source: Torreya Digital Therapeutics and the Future of Pharma, Feb 2020. Primary source: RockHealth

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Top M&A deals (2016-2019):• Dassault Systèmes acquires Medidata ($5.8 B)• Google to acquire Fitbit ($2.1B)• Roche acquires Flatiron ($1.9B)Top Licenses (2019):• Otsuka and Click develop and commercialize digital Tx for

major depressive disorder ($302M, $272 MS); License• GSK and 23andMe discover drug targets ($300M); License,

Equity Option• Astellas develop and commercialize WellDoc's BlueStar for

diabetes ($15M UF)• ResApp and Sanofi develop and commercialize respiratory

app ($, undisclosed); License• Rx.Health and Roche collaborate to develop digital care

solutions for IBD ($, undisclosed); License

Top M&A deals (2016-2019):• BMS merger with Celgene ($74B)• Abbvie acquisition of Allergan ($63B)• Takeda acquisition of Shire ($62B)Top Licenses (2019): I/O deals dominate• Merck and Eisai develop and commercialize Lenvima + Keytruda

WW ($5.7B total, $0.3B UF; $4.3B MS)• Roche develop and commercialize Sarepta’s SRP-9001 outside

US for DMD ($2.9B total; $ 0.75B UF; $1.7B MS)• Celgene and Jounce develop cancer immunotherapies WW

($2.8B total; $ 0.22B UF; $2.3B MS)• Eli Lilly and AC Immune develop tau aggregation inhibitors for

neurodegenerative diseases WW ($1.9B total; $ 0.08B UF; $1.8B MS)

• Gilead Sciences and Agenus develop immuno-oncology therapies WW ($1.9B total; $ 0.12B UF; $1.6B MS)

Digital health top dealsLife sciences top deals

Digital health has emerged as a low-risk way for pharma to collaborate

License/JV38%

Service34%

Research21%

Other4%

M&A, Asset Purch

2%

Equity1%

• DH deals predominately service agreements –instead of licenses –indicating a fee for service structure, rather than a risk-sharing model.

• DH licenses are not as easy to define.

• Top pharma applying licensing know-how to DH arena; service agreements still prevalent


Digital Health Deals, 2016-2019 Life Sciences Deals 2016-2019

*0.007% of LS deals were unassigned

License/JV36%

Research35%

Service17%

M&A, Asset Purch11%

Equity1%

Other0%

License/JV55%Research

24%

Service11%

M&A, Purchase

9%

Equity1%

Life Sciences Deals 2016-2019

Service50%

License/JV25%

M&A, Asset Purch12%

Research10%

Other3%

Equity0%

Digital Health Deals, 2016-2019AL

L DE

ALS

TOP

25

PHAR

MA-

ON

LY

ALL

DEAL

STO

P 25

PH

ARM

A-O

NLY

Activity focus within the digital health landscape


Software & Analytics

40%

Digital Health Device

18%

Connected HC Platform

16%

Telemedicine & Remote Care

11%

Digital Imaging & Pathology

5%

Digital Therapeutics

4%

Digital Health Clinical Trial

Research4%

Remote Diagnostics & Testing

2%


DH company activity: software and analytics dominate, while patient-centricity is the common underlying theme

1/4 combination with DH device

1/5 standalone software (incl apps)

Remaining are digital Tx, digital imaging, and support services

*Based on deal buyer field of activity, DH company activity accounts for approx. 40% of buyer company activity out of entire deal set (3158 deals)

Company Activity, Digital Health

Software & Analytics

40%

Digital Health Device

18%

Connected HC Platform

16%

Telemedicine & Remote Care

11%

Digital Imaging & Pathology

5%

Digital Therapeutics

4%

Digital Health Clinical Trial

Research4%

Remote Diagnostics & Testing

2%


DH company activity: software and analytics dominate, while patient-centricity is the common underlying theme

1/4 combination with DH device

1/5 standalone software (incl apps)

Remaining are digital Tx, digital imaging, and support services

*Based on deal buyer field of activity, DH company activity accounts for approx. 40% of buyer company activity out of entire deal set (3158 deals)


Broader digital health deals landscape demonstrates highest activity from providers and healthcare services companies

17

18

35

56

60

65

119

134

203

274

299

578

0 100 200 300 400 500 600

Electronics

Clinical Research

Pharmacy Services

Consulting & Commercial Services

Investors

Payer/Benefits Services

Academic/Research

Medical Device & Equip

Software & Technology

Pharma

Business Support Services

HCP/Healthcare Services

Deal Volume

Company Activity, Non-Digital Health

Shift in health care investments:• Patient engagement• Clinical decision support• Access to care• Electronic data capture• Data aggregation and analytics• Personalized medicine

*Based on deal buyer field of activity, non-DH company activity accounts for approx. 60% of buyer company activity out of entire deal set (3158 deals)

• Cost of treating chronic conditions continues to increase, the population lives longer, and technology access improves.

• What’s holding this back?

– Regulatory bodies - slow-moving to establish approval pathways for digital therapies

– Clinical trial sponsors and CROs – reluctance to adopt novel digital and patient-centric approaches to clinical trials

– Payer model – does not reimburse digital therapies or adjuncts that promote long-term prevention and behavior/lifestyle changes

– Cultural transformation of providers – reluctance to adopt digital practices and shared patient-provider decision making

• Within 20 years, 90% of all jobs in the NHS will require some element of digital skills. – TopolReport, Feb 2019

• 64% of patients use a digital device to manage their health….

• …71 percent believe it would be helpful for their doctor to have access to this information. –Transcend Insights (Humana) March 2017


Healthcare is under similar pressure to massively shift the way care is delivered

There remains room for innovative digital solutions across multiple therapy areas


*Not pictured: Not applicable and Unknown therapy areas

*Based on therapy area for full DH deals data set (3158 deals, 2016-2019)

Therapy areas with innovation potential


Innovation hot spots among larger therapy areas

Psychiatric

NeurodegenerativeSleepPain/Migraine

Stroke/Hemorrhage

Cognitive/Neuro (General)

Disease/Injury

Developmental

Motor Neuron Epilepsy

Neuro/Psych

Heart Disease/Failu

re

Arrhythmia/Afib

HypertensionOther

Cardiovascular

Respiratory/Lung

Disease (General)

Asthma

COPD

Fibrosis Cough

Respiratory

Womens Health

Renal Injury/Diseas

e

Pregnancy/Labor

Complication

Breast Disease

Infertility

Urinary Tract Infection

Other

Incontinence

OB/Genitourinary

*Based on therapy area for full DH deals data set (3158 deals, 2016-2019)

Conclusions and future outlook



A digital-savvy organization finds the perfect balance between internal initiatives and operations and external innovation

What trends do we expect in 2020?

Digital health deals will increase in 2020 for the pharma industry, across various players, while big tech and med dev will infiltrate the health market, not as buyers, but as sellers and through internal innovations.

More targeted approach to digital asset development; deal structures transitioning from less fee-for-service to more risk-sharing, as pharma and digital health companies work together from inception.

Patient uptake of digital health services and remote treatment will remain an obstacle to generating a return on investment, unless we see payers and providers incentivizing and regulatory bodies making larger changes to policies.

Thank you!

For more information on how you can understand the global digital health ecosystem via one single source, visit our website


https://clarivate.com/cortellis/solutions/digital-health-intelligence-analytics/

Appendix


Top MedDev

25%

Top Pharma

40%

Top Tech35%

40%

Comparable activity across sectors; pharma is no longer lagging behind – 2016-2018, Top 18 Companies


35% 25%

Top MedDev

25%

Top Pharma42%

Top Tech33%

42%



33%25%

Top MedDev

31%

Top Pharma

33%

Top Tech36%

33%



36% 31%

Documents

Pharma deal-making trends in digital health · Top Med Device Deal Volume 69 deals . 28. 20. 11. 11. 5. 3. 3. 2. 1. 0-50. 50. 150. 250. 0. 10. 20. 30. Top Tech Deal Volume • Pharma