Digital health funding in Q3 slides to 2019 levels on investor caution

 With the market under pressure, digital health funding continues to cool down as investors write smaller checks and focus on early-stage startups.

Digital health companies raised $2.2 billion across 125 deals in the third quarter, marking the smallest funding quarter for all of 2022—in fact, it’s the lowest quarter by dollars raised in digital health since the fourth quarter of 2019, according to the latest quarterly report from Rock Health, a venture fund dedicated to digital health. Startups raised $2.1 billion in Q4 2019.

Coming out of 2021’s breakthrough year when funding reached a record level $29.2 billion, industry watchers questioned whether digital health could keep up the momentum. Now the signs are pointing toward funding in 2021 standing out "as an anomaly" rather than the norm with 2022 shaping up to be a year of market adjustments.

Digital health funding slowed in the first quarter, with companies bringing in $6.1 billion, down from $6.7 billion during the same period in 2020. Funding then dropped to $4.1 billion in the second quarter, also down from $8.3 billion the same time a year ago.

With Q3 included, 2022 year-to-date funding totals $12.6 billion across 458 deals, raising doubts that this year’s digital health pot will reach even half of last year’s haul, according to Rock Health.

"Q3’s lack of funding isn’t altogether surprising. Earlier this year, we discussed funding froth drying up in digital health and in VC more broadly in response to macroeconomic forces (inflation, interest rates, supply chain woes) as well as a shift in investor mindset from the high times of 2021," wrote Rock Health research associate Mihir Somaiya in the report.

"However, the sharp decline in funding reflects a deeper underlying change: this quarter’s near-complete absence of late-stage digital health investments," he wrote.

In the first three quarters of 2022, several key themes have emerged: smaller checks across the board, a focus on early-stage funding and reprioritization of technology investments, Rock Health researchers wrote.

This past quarter also saw the exit market beginning to thaw. Digital therapeutics maker Akili Interactive's SPAC merger with Social Capital Suvretta Holdings Corp marked the first digital health public exit all year.

While overall funding dropped 48% from $4.2 billion in the second quarter, deal count fell less sharply, by 14%. Analysis of Rock Health’s funding database suggests that the number of smaller and generally earlier-stage deals remained relatively stable. Smaller deal size—rather than fewer deals—pushed down the overall quarterly total, according to the report.

There were only six funding raises of series C or higher in Q2, accounting for less than 5% of the quarter’s total deal volume—a marked departure from Q2’s 19 series C+ raises and Q1’s thirty-two, according to Rock Health data.

The third quarter logged just two digital health mega raises totaling $100 million or more: one from heart attack prediction app Cleerly ($223 million) and another from mental health provider support toolkit Alma ($130 million). By comparison, the quarterly average number of megadeals across 2021 was 22 deals, totaling 88 megadeals through the year. While 2021’s trend of $100 million+ raises held somewhat steady throughout Q1 of 2022 (18 megadeals), the pace of megadeal funding started to fall in Q2 (11 megadeals) before nose diving in Q3, the Rock Health report states.

Rock Health researchers surmise that late-stage deals were raised early to strike while the iron was hot in 2021 so many companies chose to accelerate rounds into 2021 that may otherwise have been offered in 2022. 

The pullback in late-stage digital health funding in Q3 also reflects more quiet cash infusions as growth-stage digital health startups in need of additional cash turned to investors for inside or extension rounds, bridge rounds, or venture debt.

The third quarter also saw a shift in technology investment that could signal digital health growth areas for quarters to come. In short: interest in telehealth is waning while immersive and decentralized health-tech enablers are on the upswing.

Digital health startups catalyzing R&D for biopharma and medtech fell from first place to third place with $1.7 billion raised so far in 2022, while digital health players specializing in nonclinical workflow solutions jumped to first place with $1.8 billion in funding, led by Alma’s megadeal, Grow Therapy’s $75 million haul, and a $72 million check for practice management suite Tebra. Strong funding flows to workflow tools  mean that addressing healthcare staff shortages and employee burnout remain top priorities, the researchers wrote.

This trend is also reflected in funding for healthcare marketplaces, the fifth most-funded value proposition, led by nurse staffing platform Incredible Health’s $80 million raise in August.

Funding for digital health startups applying augmented and virtual reality (AR/VR) technologies reached a new high, logging $239 million through Q3 2022 compared to $198 million in all of 2021. Average deal size in this sector has doubled from $18 million in 2021 to $34.2 million through Q3 2022, bolstered by rounds like Apprentice.io’s $100 million in January. Other hot areas of investment include digital health startups addressing complex disease states with oncology care-focused companies raising $946 million in Q3.

While startups incorporating telehealth retained the second-top spot in investment activity—a position held since 2015—an oversupplied market, declining yields on direct-to-consumer advertising, virtual prescribing scrutiny, and difficult trajectories of public telemedicine leaders like Teladoc have increased investor skepticism toward telemedicine’s cash crop of virtual care providers, Rock Health researchers wrote.

Telehealth startups raised only $2 billion so far this year. If this funding pace holds steady, investment in telemedicine startups will close 2022 with $2.7 billion—just over one-third of the category’s 2021 total and its lowest funding pot since 2019. 

While 2022 started off as an adjustment period from the funding fever pitch in 2021, Rock Health researchers view Q3 as a clear departure from the COVID-driven digital health financial market, including "changed market dynamics, shifts in investor focus to prioritize workflow support and complex diseases, and growing excitement for new technologies and immersive solutions."

It remains to be seen how these trends will shape the investment market going into 2023.

Investors at Rock Health Capital have seen a gradual return to pre-pandemic asset pricing in the pre-seed through series A deal flow.

"Rational prices promote long-term market health and, if anything, diminish near-term worries," the researchers wrote. 

https://www.fiercehealthcare.com/digital-health/digital-health-funding-drops-2019-levels-investors-make-more-cautious-bets

Acne is a 'disease of Western civilization'

 In the Western world, it’s rare to find someone who hasn’t faced a bout of acne at least once. Regardless of race, everyone seems to succumb to this unsightly skin condition, which occurs when hair follicles become plugged with oil and dead skin cells. At 80% to 90% prevalence among adolescents living in modernized countries, acne is basically a rite of passage. It persists for about half of people over age 25.

But fascinatingly, researchers have discovered that acne is essentially nonexistent among non-industrialized communities. The Kitavan people living on the Trobriand Islands near Papua New Guinea, the Aché hunter-gatherers of Paraguay, the Okinawans prior to the colonization of their island during World War II, the Inuit before becoming more Westernized, and many others have no pimples, whiteheads, or blackheads — not even on the faces of hormone-filled teenagers.

This isn’t simply due to genetics, either. When individuals from these cultures move to the U.S., Europe, Australia, industrialized parts of Asia, or pretty much anywhere where modernization has taken hold, they get acne just as much as the rest of us. This implies that a few, or many, facets of modern society predispose people to pimples. So what are these factors?

Pimple factors

For the acne sufferers out there, a simple answer would certainly be convenient, but unfortunately there isn’t one. Science hasn’t pinpointed one overriding cause. Comparing how we live with how acne-free cultures live can yield insights, however.

• Our diets are much different. Particularly, acne-free peoples tend to consume far fewer refined carbohydrates and simple sugars that spike insulin levels and are devoid of fiber. Although when studies have been pooled and analyzed together, there really isn’t a clear signal linking any aspect of diet to acne.
• We exercise less. Regular physical activity can lower stress, reduce inflammation, and increase blood flow to the skin, all of which can reduce acne. But again, studies haven’t revealed a clear link between exercise and acne.
• We are exposed to less sunlight. Humans obtain much of our Vitamin D from sunlight. The vitamin may speed wound healing and lower inflammation. A 2016 study found that people with acne are more than twice as likely to suffer from Vitamin D deficiency as people without acne.
• We are more stressed out. The relentless grind of modern life may exact a toll on our skin by messing with hormone levels and diminishing the immune response.
• We shower too much. Maybe all the hygiene products we apply and the excessive scrubbing we do throw the skin microbiome out of balance? If left to its own devices, our skin might take care of itself just fine, although probably with more pungency.
• We tend to be exposed to more air pollution. Exposure to nitrous dioxide and other air pollutants may exacerbate inflammatory acne

Though we still don’t know exactly why modern society predisposes its citizens to acne, one thing we can say with some certainty is that acne’s prevalence is rapidly increasing. Last year, researchers noted a global rise of about 48% since 1990, with the burden “most pronounced in Western Europe and high-income countries in Asia Pacific and East Asia”.

https://bigthink.com/health/acne-is-a-disease-of-western-civilization/

Why We Will Never Control Medical Costs

 The purposes of medicine are expanding rapidly beyond treating actual illnesses/injuries and promoting wellness, to also facilitating life fulfillment and making personal dreams come true.

Latest case in point: A gay couple has filed a class-action complaint with the U.S. Equal Employment Opportunity Commission (EEOC) against the City of New York, suing for unlawful workplace discrimination because they were denied coverage for fertility services. If successful, health insurance nationally may eventually be required to pay for IVF/surrogacy services for male gay couples. From the Guardian story:

Corey Briskin and Nicholas Maggipinto met in law school in 2011, were engaged by 2014, and had their 2016 wedding announced in the New York Times. They moved to a waterfront apartment block in Williamsburg, Brooklyn, with a bright playroom for families on the ground floor. “We got married and then we wanted all the trappings: house, children, 401K [retirement saving plan], etc,” Maggipinto, 37, tells me in their building’s shared meeting room, tapping the table in sequence with the progression of each idea.

Briskin, 30, grew up assuming he’d have children. He came out in college. “Once I had come out to myself and others, I don’t think my expectation of what my life would look like changed all that much.” With marriage equality won years ago, they expected to be able to have a conventional married life.

But the couple, both being male, cannot have children together. Hence, the litigation.

Briskin used to work for the City of New York as an assistant district attorney, earning about $60,000 a year. His employment benefits had included generous health insurance. But when they read the policy, they discovered they were the only class of people to be excluded from IVF coverage. Infertility was defined as an inability to have a child through heterosexual sex or intrauterine insemination. That meant straight people and lesbians working for the City of New York would have the costs of IVF covered, but gay male couples could never be eligible.

This isn’t an oversight, it’s discrimination, Briskin says. “The policy is the product of a time when there was a misconception, a stereotype, a prejudice against couples that were made up of two men – that they were not capable of raising children because there was no female figure in that relationship.”

Wait a minute. In the examples given, fertility services were covered because the patients experienced a pathology, i.e., an inability to conceive. Neither of the gentlemen suing, as far as we know, is infertile. They are gay. They cannot conceive together because both are male. That is not a pathology. It’s basic biology. Hence, refusing coverage is not discrimination.

But these days, saying such a truth is often called hateful as political pressure is brought to bear to ensure that insurance pays for services that are about attaining lifestyle desires, not overcoming actual health impairments. For example, California passed a law some time ago requiring group health insurance to cover gay couples as they do infertile heterosexual couples — which actually discriminates against heterosexual couples because they have to demonstrate a medical inability to conceive, while gay couples do not.

But what about this?

Briskin was working alongside colleagues who were happily availing themselves of the benefits he wasn’t entitled to. One of his co-workers – an older, single woman – became a mother using donor sperm, IVF and surrogacy.

The story doesn’t say, but if the woman in question was beyond normal childbearing years, it should not have been covered either because inability to conceive would be caused by biology, not a medical problem.

So, we grind our teeth about the gargantuan cost of health care in this country — as we continually expand the circumstances in which non-health-care services are required to be covered by health insurance. For example, arguments are already being made that transgender women should be eligible for uterus transplants so they can experience gestation.

We need to find the courage at some point to say no to the expansion of medicine’s jurisdiction, or there won’t be enough money in the pot to pay for it all.

WESLEY J. SMITH is an author and a senior fellow at the Discovery Institute’s Center on Human Exceptionalism. 

https://www.nationalreview.com/corner/why-we-will-never-control-medical-costs/

IRA’s Drug Price ‘Negotiation’ Provisions Are the Wrong Answer

 The Inflation Reduction Act (IRA), signed by President Biden on August 16^th, includes provisions to address prescription drug prices. While the measure is billed as a step toward stemming the drug pricing crisis, it is a baby step at best. A better approach would be to incentivize innovations that deliver better medicines more cheaply.

The IRA allows Medicare, starting in 2026, to set  prices for 10 drugs, ultimately increasing to 20 per year from 2029. Even after a decade, this will impact only a small proportion of the thousands of drugs covered under Medicare Part D. In total, these provisions amount to an incremental change in drug pricing. According to the Congressional Budget Office, negotiations will save $101.8 billion over ten years, or less than 1.5% of the more than $7 trillion Americans will likely spend on drugs over the same period. This amounts to barely bending the cost curve when our goal should be to break it.

For Washington to be more effective in its efforts to lower drug pricing, it should focus instead on setting the right goals for pharmaceutical innovation and providing incentives to reach them. The government should support moonshot technological breakthroughs that allow for cheaper production and distribution of vital medications, particularly for chronic conditions.

FDA Commissioner Robert Califf, M.D., took a noteworthy step toward setting this goal in an op-ed last month. He argued that the biopharma industry should “review its priorities” and shift focus to developing more new treatments for common chronic diseases. Along with mental health, chronic conditions drive 90 percent of the nation’s $4.1 trillion in annual healthcare expenditures.

Lower cost treatments are well within reach. Revolutionary technologies are currently in development that can treat and prevent chronic conditions such as coronary heart disease and Alzheimer’s for a fraction of the cost of current drugs. Eradicating either of these diseases through broad, cost-effective access to preventive medicine would save over $350 billion per year. Even preventing a portion of annual diagnoses would save Americans far more than the IRA ever could.

If Washington wanted to support these innovations, it could. The U.S. government has proven that when it sets a national priority and dedicates the necessary resources to achieving it, almost anything can be done, and done quickly.

The moon landing, for example, became a reality only eight years after President Kennedy set the initial goal, despite representing one of the most daunting engineering challenges of all time. Operation Warp Speed (OWS) spurred the development of not one, but three vaccines for COVID-19 in less than one year, far faster than most thought possible.

How did the U.S. accomplish these feats? Vision setting, prioritization, and investment. NASA funding accounted for 4.4% of the federal budget in 1966, while OWS allocated $18 billion on COVID-19 drug development in 2020. Today, the entire budget for the National Institutes of Health is $46 billion, or approximately 1% of the federal budget, and it is spread amongst so many different research topics that the largest priority, cancer, gets only $6.35 billion.

Imagine what could happen if we made innovations in lower-cost therapies a true moonshot priority. The playbook could be similar to OWS: federal funding for grants, advanced purchase contracts, and manufacturing investments, combined with development partnerships in the form of FDA regulatory engagement and NIH collaboration on developing research models, cross-sharing of data, and running clinical trials. This full measure of support for innovation would be exponentially better than the half measure of price fixing contained in the IRA.

Solving this crisis is worth it. A 2019 study found that in the previous five years, one in eight Americans lost a loved one because they could not afford the cost of their medication. That figure is double for people of color. In the developing world the situation is far worse.

The IRA represents an evolution in Congress’s approach to drug pricing, but not the revolution that is needed. To spark a real revolution, we must acknowledge that drugs are only a fraction of overall health care costs, and that the best way to lower costs is to prevent the diseases that make expensive care and treatment necessary.

While it may be incomplete, the IRA is nonetheless welcomed by many in the healthcare advocacy space. Patients and their families – those who have lost much more than money to the high price of today’s drugs and treatments – deserve better. Now that Washington has broken the seal on reform, let’s double down and make this the national priority it deserves to be.

Mei Mei Hu is co-founder and CEO of Vaxxinity, a biotech company developing vaccines for chronic diseases such as coronary heart disease and Alzheimer's.

https://www.realclearhealth.com/articles/2022/10/03/iras_drug_price_negotiation_provisions_are_the_wrong_answer_to_the_right_question_111418.html

Y-mAbs: Pivotal Data for Omburtamab

 For 32 patients enrolled in the Company’s ongoing pivotal 101 multicenter study of omburtamab radiolabeled with Iodine-131, the results showed a twelve-month overall survival (“OS”) of 73.5%, with a median follow-up of 25 months. Further, the interim results showed an objective response rate (“ORR”) of 31.3% in the patients with measurable disease after central review based on Response Assessment in Neuro-Oncology (“RANO”) criteria and European Association of Neuro-Oncology (“EANO")/European Society for Medical Oncology (“ESMO”) criteria, and that a total of 75.0% of the patient with measurable disease achieved disease control. Serious Adverse Events (“SAE”) was found in 40.6% of the patients and were mostly related to myelosuppression.

https://www.biospace.com/article/releases/y-mabs-announces-pivotal-data-for-omburtamab/

Heart Failure Treatment Guided by Daxor BVA-100 Lowers Hospital Stay 55%

  Daxor Corporation, the global leader in blood volume measurement technology, today announces new data validating the benefits of the Company’s BVA-100 diagnostic blood test in reducing hospital length of stay (LOS) for heart failure (HF) patients. Data were presented at the Heart Failure Society of America (HFSA) Annual Scientific Meeting (ASM) 2022 – which brought together the world’s leading experts in heart failure from September 30th thru October 3rd, 2022, in Washington, DC.

https://www.biospace.com/article/releases/new-data-shows-heart-failure-treatment-guided-by-daxor-s-bva-100-lowers-hospital-length-of-stay-by-55-percent-/

Enanta Starts Phase 2b Study of EDP-938 in Respiratory Syncytial Virus

  Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA), a clinical stage biotechnology company dedicated to creating small molecule drugs for viral infections and liver diseases, today announced the initiation of a Phase 2b, randomized, double-blind, placebo-controlled study to evaluate the efficacy and safety of EDP-938, its novel N-protein inhibitor, in adults with acute respiratory syncytial virus (RSV) infection who are at high risk of complications, including the elderly and/or those with congestive heart failure, chronic obstructive pulmonary disease (COPD) or asthma.

https://www.biospace.com/article/releases/enanta-pharmaceuticals-initiates-a-phase-2b-clinical-study-of-edp-938-in-high-risk-adults-with-respiratory-syncytial-virus/