Now that it?s Dec. 21 and the world hasn?t ended, let?s talk about 2013.
Venture capital investors have expressed confidence in the coming year for healthcare IT markets, while listing biotech among the sectors they?re least confident about. While investors are running a tight ship, ?good companies are still being funded,? said Bill Trainor of Mutual Capital Partners Fund.
Here?s a look at which healthcare markets are ripe, and over-ripe, for investment in 2013.
Best
Diagnostics
As we inch toward personalized medicine, sensitive and precise diagnostic tools become increasingly valuable. And if Q4 2012 is any indication of how 2013 is going to go, diagnostics is going to be hot. This quarter has brought about some big deals in the space ? from NanoString Technologies? $15.3 million round to Provista Diagnostics? second tranche of its $7.5 million Series A and Cleveland HeartLab?s $14.7 million raise.
Reenita Das, senior vice president of global healthcare with Frost & Sullivan, pointed especially to 3D imaging as an area of interest. ?Diagnostics is less than 15 percent of healthcare spending in the U.S.,? she said. ?As we move forward, there?s going to be more money and innovation happening in diagnostic testing and ease of use in these tests.?
Cloud-based software
A 2012 market report estimated that revenue from cloud computing software will grow more than 20 percent annually through 2017. That growth may be especially prevalent in applications connected to electronic health records.
We may see some of the 300+ companies that offer Meaningful Use-compliant EHR software begin to consolidate. The big players will want to enhance their products with added functionalities (some have even opened their API to other developers), like data analysis and practice management tools.
?What we are looking for are unique hospital IT opportunities that can be an instrumental add-on,? Trainor said. ?Big players are spending big money on companies building solutions where you can pilot in 200 or 300 hospitals and attract enough attention that someone would make a buy versus build proposition.?
Dr. Lyle Berkowitz, the associate chief medical officer of innovation at Northwestern Memorial Hospital and Medical Director of IT & Innovation at for Northwest Memorial Physicians Group in Chicago, expressed the same idea in an October interview. ?A whole ecosystem is going to build up on top of EMR systems to make them easier and faster to use,? he said.
Remote patient monitoring
?Patient portal? and ?quantified self? are now part of the healthcare lexicon, thanks to the rise in remote patient monitoring. That includes telemedicine programs and vital signs or blood glucose monitors that deliver data to providers ? a process AT&T?s CMIO likened to a virtual house call.
Companies like EveryMove and Vivonoetics, which take data created by consumers and turn it into something actionable, will continue to see support from providers, payers and investors. We?re already seeing some exits, too: In 2012, Verizon bought Hughes Telematics, and Alere bought home health device company MedApps.
?One of the biggest challenges in this market will be reimbursement,? Das said. ?To get this to the next level, consumers will have to start paying for this and seeing the value of doing that, and the success of doing that will largely come from the ability of these companies to be able to collaborate with different users and suppliers, to be able to tie in their data with electronic medical records.?
Worst
Medical devices
In a LinkedIn poll that drew responses from more than 550 members of the Medical Devices Group, 35 percent of respondents said they expected 2013 to be a bad year for the medical device industry, citing problems with senior managers and higher-priced devices that provide minimal advantages among areas of concern.
Investments already took a nosedive last quarter, and they?ll probably continue to drop off. Devices, especially invasive medical devices, require increasingly expensive clinical trials, and companies will find their budgets even more constrained as the medical device tax sets in.
?It?s only 2.3 percent, but that?s still 2.3 percent that you could put elsewhere,? Trainor said. ?That?s probably two to three employees that you can?t hire.?
Given that much of the innovation we?ve seen in medical devices is coming from smaller companies who get acquired by or license their technology to the major players, the coming years will require the industry to look at new business models, Das said. ?We have to change the game we?re playing.?
Das noted that for medical device deals that will come through this year, interoperability will be key.
Stand-alone mobile apps
VCs invested nearly $4 billion in mobile startups during the first six months of the year, and there?s definitely excitement around mobile technologies related to health. While the industry is maturing, there are just too many apps. While 90 percent of healthcare professionals with smartphones have downloaded 10 or more apps, research has suggested they?re only using a few of them regularly.
Then there?s everyone?s favorite issue ? ?regulatory uncertainty? ? around mobile apps, as the FDA hasn?t spelled out a clear regulatory path for them. New York company Happtique, meanwhile, is developing its own program to evaluate and certify healthcare apps based on quality and performance standards that would help weed out the bad ones.
In its predictions for 2013, AT&T suggests that a shift will occur from stand-alone apps to ?meaningful mHealth solutions? sponsored by institutions. Those that earn that institutional support as part of a bigger solution are the ones that will survive ? and get an exit. We got the first glimpse of this last year when Aetna acquired iTriage maker Healthagen, and again this year when Azumio acquired SkyHealth, maker of Fitness Buddy and Glucose Buddy, and Medivo acquired WellApps. Apps without a platform, meanwhile, have limited us.
?The differentiation is going to be the interoperability of that app ? if it has ability to communicate with EMRs and with the doctor seamlessly and without problems,? Das said.
Obesity drugs
It?s a huge market. Several obesity drugs in development got funded this year, and there are more in the works. There was optimism after the FDA approval of two new drugs this year. Yes, the payoff could be huge, but the risk is continuously proving to be tremendous.
Both drugs approved this year were first rejected by the FDA in 2010, and both Vivus? (NASDAQ:VVUS) and Arena?s (NASDAQ:ARNA) stocks are down from when their drugs were approved. Vivus? obesity pill got off to a slow start and, even after being approved by the FDA, was rejected by European regulators due to safety concerns with long-term use.
Although the FDA is said to be considering a faster approval pathway for obesity treatments, safety is still a big concern. (AstraZeneca reportedly shelved an experimental obesity drug this year.)
There?s also a growing gap between the European and U.S. markets for obesity treatments, as noted in this blog post by Patrick Driscoll. Other, less-risky methods of addressing obesity, including bariatric surgery, gastric balloons, neurostimulation devices and digital consumer tools, have gained investor and consumer interest.
What are your predictions for 2013?
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Source: http://medcitynews.com/2012/12/the-best-worst-bets-for-healthcare-investing-in-2013/
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