The healthtech revolution
From wearable devices and telemedicine to gene therapy and clinical trials, technology is transforming every aspect of healthcare, says Silvia Oteri, partner and head of healthcare at Permira
Q: How do you define healthtech?
Healthtech refers to the convergence of traditional healthcare – so, pharma, medtech, providers – with technology, or tech-enabled products and services, which support pharma, medtech, providers and indeed patients, in the provision and fruition of healthcare.
A major component of that convergence involves the ability to access, collect, aggregate and leverage data from different sources and systems, for example software to improve the efficiency of clinical trials; wearable devices that allow for remote patient monitoring or patient adherence; AI algorithms supporting disease diagnosis or telehealth platforms that have proved so critical in connecting patients with physicians throughout the pandemic.
Q: What makes it so attractive for Permira?
At Permira, we prioritise sectors that exhibit long-term growth and resiliency and we believe the adoption of technology in healthcare is both structural and long term: as our tech colleagues would say, it is where the puck is going. We are particularly attracted to the combination of the healthcare end markets characterised by resiliency and growth, coupled with the attractive technology business models – growing and recurring revenues, high margins and capex-light. Finally, the capabilities and heritage of Permira make us well placed to invest in healthtech. Permira can leverage its strong expertise in B2B and B2C technology investing from our strong technology and consumer teams, as well as the specific knowledge and expertise built by our Healthcare team around the complex areas of life sciences, pharma and medtech.
Q: Why is the timing right just now?
Healthcare has traditionally been relatively slow to embrace the opportunities that tech offers, but the onset of the pandemic has broken technological inertia, dramatically accelerating adoption and increasing the number of opportunities emerging at scale. At the same time, more capital is flowing into the sector, fuelling growth and helping companies reach a size where they hit our radar. While it is still early days, we have a long-term focus, and the plan is to be an early mover so that in four to five years, the Permira funds are amongst the strongest investors in this space.
Q: Why has healthcare been slower to adopt new technologies than many other industries?
It is ironic, really, because in the past healthcare has been one of the most innovative sectors, with constant development in biotech and medtech. Nevertheless, there are a number of reasons why healthcare has been slower to embrace this latest wave of technology.
First, there is the innate complexity of healthcare systems. Every country, region and even hospital has different IT systems, policies and reimbursement rules. It is also more difficult to monetise systems given this complexity – once they are built and any innovation comes with significant regulatory scrutiny. These challenges have been particularly relevant in Europe, given the variety of systems and policies.
Privacy concerns are also pervasive, even though in most cases we are talking about de-identified or even anonymised data. Competitive dynamics have also thwarted tech adoption with different platforms and hospitals un-willing to share information.
Finally, there is an engrained cultural resistance by both patients and physicians to using these new tools. Regardless of how tech savvy they are, when consumers become patients, they don’t necessarily want to interact directly with technology, particularly bearing in mind that the older generation represents a significant portion of healthcare demand. And some physicians have historically been more resistant to change.
Q: What do you believe will be the most transformative healthtech trends in the years to come?
The latest global events will drive a massive acceleration in the digital reconstruction of healthcare – finally shifting from ‘sick-care’ to actual ‘health-care’ and maintaining people for as long as possible in the preclinical stages of their lives, treating the lifestyle diseases away from the acute settings. This means the digital enablement of true value-based care through care co-ordination across the care settings into the home of the patient.
It also means the ability, after the massive surge in investment and innovation in medical technology and clinical research, to provide a liquid orchestration of data from disparate sources to converge to provide meaningful outcomes and artificial and other intelligence at precision level – for just a single patient – as well as for an entire population.
Q: How has covid impacted the healthcare space generally?
The covid pandemic has exposed a number of historical issues in the healthcare sector, including a lack of capacity; complex and bureaucratic processes and regulations; cost pressures, which have grown steadily across all developed countries and are now be-coming a significant burden on budgets and last, but not least, a chronic short-age of nurses and an acceleration of the burnout trend with physicians.
That said, covid-19 has also pushed healthcare providers to reinvent them-selves and their traditional business models – the industry has been forced to think outside the box. Some hospitals built entire new intensive care units in days, while others shifted to telemedicine effectively overnight, breaking down years of bureaucracy and regulation. Pharma companies streamlined product developments that take years into a matter of months.
Q: And how has the role of healthtech evolved throughout the pandemic?
Healthtech has played a critical role in facilitating patients’ access to care. Telehealth has become mainstream for many GPs and some speciality services providers – for example mental health – over the past 18 months. Data analytics, artificial intelligence and real-world evidence all significantly helped pharma companies speed up their development processes and advances in remote monitoring technologies and devices allowed for care outside traditional set-tings, including in patients’ homes. It is important to note, however, that structural evolution is now required if we want these changes to stay. Regulation will need to adapt, interoperability will need to improve and payment models will need to reflect and facilitate more out-of-pocket payments by patients.
Q: Which subsectors have benefitted the most from healthtech innovation and how?
Every sector within healthcare is being impacted. Within biopharma, tech is providing strong support throughout the lifecycle, from R&D to commercialisation. Artificial intelligence can support drug discovery and patient identification for clinical trials for ex-ample, real world evidence can accelerate clinicals trials and reduce the need for placebo groups, by using so-called synthetic control arms. Technology can also enable sales forces to become more targeted as the pharma industry is forced to rethink about its value chain.
Within medtech, robotic and navigation technologies are improving the effectiveness of surgery. For example, the Permira funds’ portfolio company Corin has acquired and developed the Omni robotic platform to support orthopaedic surgeons performing hip re-placements. And devices are becoming increasingly “connected” as hardware converges with software: examples include wearable devices that can monitor patients’ symptoms, collect data and in some cases even provide targeted treatment.
When it comes to providers, health-tech can help on two fronts. On the front end, it can help with patient tri-age and in supporting physicians in their clinical decisions. For example, one of the Permira funds’ portfolio companies, I-MED, the largest radiology network in Australia, has partnered with Harrison AI to build Annalise AI, leveraging the I-MED dataset and its radiologists’ expertise to build a leading AI tool to support radiologists in their reporting activity. At the backend, technology is also being developed to assist providers in workflow automation, practice management and the data analytics required to support value-based care.
Patients themselves are being directly impacted by healthtech, which connect patients with physicians using technology. And the online provision of medicines via e-prescriptions is be-coming increasingly common. Althea, another Permira funds’ portfolio company, has helped hospital systems pro-vide and maintain telemedicine services throughout the pandemic and will continue to do so.
Q: Given that this is such a competitive space, how do you intend to differentiate in investment approach?
Clearly, we are not the only investors to have been attracted by the afore-mentioned characteristics. However, Permira has a real heritage at that intersection of healthcare and technology and as mentioned above tech and investment in tech platforms has been an important value creation lever for our healthcare investments for some time. Healthtech is also a growth area and Permira has traditionally focused on growth and created meaningful differentiation in both identifying and developing growth opportunities.
This has been done both via the Permira funds’ traditional Buyout funds, focused on large control deals, as well as by the Permira Growth Opportunities (PGO) fund, which is focused on high growth minority ownership deals. PGO is ideally positioned to widen our investing aperture into more nascent healthtech spaces still in their early innings and strengthen the internal IP as the basis for decades of buyout investing as the sector matures.
Permira prides itself on its entrepreneurial nature, both in the people we hire as well as the management we partner with. Specifically, PGO has a track record of successfully partnering with strong founder CEOs and management teams in high growth and tech enabled companies. Some examples top of mind include Klarna and Mirakl where our ability to build a relationship with an entrepreneurial CEO was pivotal to the eventual in-vestment.
Finally, we have a global but local footprint, so are able to tap into the large healthtech markets (such as the US) but also support entrepreneurs from other smaller but important healthtech innovation hubs outside the US to scale their companies globally.
And we are spending significant time building a team with relevant experience, for instance we recently hired Philippe Houssiau as a healthcare senior adviser. Philippe led the digital transformation at Agfa and has also held executive and non-executive roles at HcTech, DxC, Lyniat, Mak-Systems, Corylus and Mach7. His experience will complement that of the functional experts in our portfolio teams, which include deep expertise in robotic pro-cess automation, artificial intelligence and data analytics.
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