Digital Health Report 2022

The Digital Health technology boom began 30 years ago. This increased in technological quantity and complexity occurred in a relatively short period of time and changed the way of life in society. It is important to clarify that the technological revolution not only modifies our daily life but also modifies the productive and scientific processes. Technological progress traversed almost transversally all the sciences, increasing productivity, and changing the way of practicing the different scientific disciplines.

When these technological advances began to enter the field of health, the term digital health appeared. Frank (2000)proposed the first definition of digital health as the applications and media that use the Internet to improve the practice of medicine. On the other hand, institutions such as the FDA (Food and Drug Administration) include digital health activities related to mobile health (mHealth), health information technology (IT), and telemedicine, among others.

This process of expanding the use of technology in health increased in a way, an example of this is the case of Australia, the use of digital health increased on average by approximately 225% in the last five years (Australian Digital Health Agency, 2020). Additionally, in some cases, the states promote the growth of digital health, allowing the growth of this market and the possibilities it offers. One of these cases is the German one, which in 2019 put into practice the digital health law, which promotes the use of telehealth and establishes that insurers must provide access to telehealth to beneficiaries of health insurance (Gerke et al., 2020).

So, the rapid technological progress and the transformation of health that this progress generated are interesting for investors, due to the generation of new needs, and new markets that require capital to meet the growing demand for these services. Therefore at Ax3.bio, we want to offer you a brief study of this market so that you can stay up to date on the digital health market and make some investment decisions.

Projection of Digital Health Users

An important first point to understanding the world of digital health is to understand the number of users of these services. According to the Department of Health & Human Services of the United States, by 2020, 40% of its population used at least one product of digital health, that is, approximately 133 million people made use of new health technologies. Based on this rate of use and population growth projections from the United States Census Bureau, we estimate the possible users of digital health for the United States and other countries and regions relevant to their population, purchasing power, and poverty in the period 2020- 2030 (See Methodological Annex I).

For this period, a total CARG of 1% per year can be observed, that is, an increase of approximately 64 million people who use digital health services. The largest increase in users will take place in the European Union, explaining about 40% of the increase in the total use of digital health, this could be due to the low birth rate and a high proportion of the long-lived population. Latin America leads the second place, accounting for almost 35% of the increase in the use of digital health, this is due to the high population growth rate for the period studied and the low use of technology compared to the other regions surveyed. On the other hand, China and the United States explain 11% and 14% of the increase in the use of Digital Health, respectively, for the period 2020-2030 (Graph 1).

Graph 1. Digital Health users Trend. Period 2020-2030

Source: Ax3.Bio elaboration with the world bank, Healthit, and USA Census Bureau data.

Therefore, although the most marked increase in the use of digital health is observed for the period 2020-2024, its trend is growing towards the year 2030. Therefore, the increase in users will generate new needs in the digital market. health, giving the opportunity to the development of new companies or the growth of already established companies to cover those needs.

Digital Health companies' characteristics and market size

Although the digital health market is a multi-vendor market, the main companies that provide these services are listed on the US stock market. For the year 2021, the 5 main companies that carry out some tasks related to digital health listed on the United States stock exchange, presented revenues of approximately one thousand billion (Table 1). It is important to note that all these companies, although they operate at a multinational level, originate in the United States.

Based on the financial results of these companies, the GDP of the digital health market was calculated and subsequently the size of this market for companies listed on the United States stock market (see methodological annex II). This market presents a growing trend on its size, presenting a dimension in 2021 of approximately USD 168 billion, and an accumulated growth of 181% for the period 2012-2021. Based on the growing trend in the size of the digital health market for the period 2012-2021, it is estimated that it will grow at an annual CARG of 12.17% between the period 2022-2030. Thus, the size of the market for companies listed on the US stock market will be approximately 479 billion by the year 2030 (Graph 2). In this way, the estimated cumulative growth for the 2022-2030 period would be approximately 150%. Therefore, the digital health market is a market in notable expansion and will have significant growth in the next 10 years, this will generate new spaces for profitable investments, since, as previously seen, the number of users and the needs to be covered in this market will increase.

Graph 2. Digital Health Market Size and Growth Projection

Source: Ax3.Bio elaboration with Reuters data.

Five Digital Health Startups to watch in 2022

The growing demand for services linked to digital health has resulted in the emergence of new companies or startups. In this article, 5 of the potential startups in the sector are listed, considering their market capitalization, their developments and the financing obtained.

1. Cerebral

Cerebral is an American startup that provides digital mental health and medication management services. This company was founded in 2020 and is in San Francisco, California. In its Series C that took place in December 2021, it obtained financing for USD 300 million. The company's current valuation is estimated to be approximately $4.8 billion.

Web site: https://cerebral.com/

2. Hinge Health

Founded in 2015, this company located in California, United States, is building the world's most patient-centered Digital Musculoskeletal Clinic. This service consists of a digital clinic dedicated to the remote treatment of diseases of the muscles and skeleton. In its Series E, in October 2021, it raised $400 million in financing. It is estimated that this company is valued at USD 6.2 billion.

Web site: https://www.hingehealth.com/

3. Learn to Live

Learn to Live is an American startup founded in 2012. This company is dedicated to offering remote personalized services for the treatment of psychological illnesses based on cognitive behavioral therapy. With 7 rounds of financing, this company managed to raise USD 15.3 million and currently has 33 million clients.

Web site: https://www.learntolive.com/

4. Spring Health

Founded in 2016, this American startup provides a digital platform for employers, which monitors the cognitive and psychological conditions of employees and allows access to personalized sessions to treat psychological problems. In its 7 financing rounds, this company obtained financing for USD 295.5 million.

Web site: https://springhealth.com/

5. Workit Health

This American startup founded in 2014 provides a digital system for the treatment and recovery of people with addictions, providing psychological and social support, etc. In October 2021, this startup in its Series C financing raised USD 118 million.

Web site: https://www.workithealth.com/

Mergers and Acquisitions (M&A)

So far in 2022, several mergers and acquisitions have taken place within the digital health market. For example, Microsoft acquired the company Nuance which is dedicated to the development of transcription and medical dictation tools. This acquisition was made for an amount of U$D 19.7 million. This acquisition is intended to expand the services provided by Microsoft from the cloud in the health industry. Another relevant acquisition is that of Athenahealth by the private equity firms Hellman & Friedman and Bian Capital for US$17 billion. On the other hand, the revenue cycle management company will acquire the company Cloudmed for an amount of U$D 4.1 billion. This acquisition is expected to take place in the coming months.

Methodology Annex I. Digital Health users Projection

To calculate the number of potential users of products or services linked to digital health, the rate of use of these products and services in the United States and the population projections of the Census Bureau of this country were used. For the European Union, China,Latin America and the Caribbean, access to digital health products and services was adjusted by the GDP and poverty gap between these countries/areas and the United States (Equation 1).

The subscripts i and j represent the years and the countries/regions, respectively.

Methodology Annex II. Market Size estimation and Projection

To calculate the size of the market, the GDP of the 5 highest-income companies that develop some digital health services or biotech products and are listed on the United States stock exchange was estimated. This GDP was calculated as the sum of profits, salaries, indirect taxes and depreciation and amortization of each company (Equation 2).

Subsequently, the previously calculated GDP was extrapolated to all companies listed on the United States stock market. To do this, Digital Health GDP was multiplied by the quotient of the market capitalization of all the companies that develop at least one digital health service or product with respect to the total market capitalization (Equation 3).

Finally, the following formula was used to calculate the CARG:

Where:

References and Data Sources

Australian Digital Health Agency. (2020). Australian Digital Health Agency 2020 anual report.

Frank, S. R. (2000). Atención médica digital: La convergencia de la atención médica e Internet. Gerencia de Cuidado, 23, 8–17.

Gerke, S., Stern, A. D., & Minssen, T. (2020). Germany’s digital health reforms in the COVID-19 era: Lessons and opportunities for other countries. NPJ Digital Medicine, 3(1), 1–6.

Data Sources:

Helathit: https://www.healthit.gov/data