SPOTLIGHT ON DIGITAL HEALTH

What does the digital health and wellness industry need to sustain rapid growth?

The global digital health and wellness sector is at a point of inflection. The public is receptive. Health systems are keener than ever to harness the cost and efficiency gains it promises; new and incumbent market players are eager to make the most of the opportunities.

But fresh capital, new technology and robust risk management are essential if the sector is to meet its potential.

90%

of digital health and wellness businesses expect to expand in 2021.

Growth expectations are significant

Some 90% of digital health and wellness firms expect to grow this year and 58% say they have experienced an increase in demand directly due to COVID-19 and its impact on consumer behaviour, according to our research. Against this backdrop, the US experienced a 50-175 times increase in the number of telehealth visits1 during 2020 and in the UK only one in 10 patients saw a doctor face to face.2 Visits to Singapore’s MyDoc digital health platform rose more than 160% in the first quarter of 2020 alone.3

Not only are more established telehealth organizations much busier, but a proliferation of mHealth apps, fitness trackers, telehealth systems and wearable devices has boosted the broader health and wellness sector.

Unsurprisingly, such growth is also drawing in many new players – with engineering businesses exploring options for medical ventilators,4 distilleries producing hand sanitizer and specialist medical centers repurposing as vaccination hubs, for example.

No wonder that an industry that in 2019 was estimated to be worth US$106bn was projected to top US$640bn in 2025,5 even before the arrival of COVID-19.

Ambition is global

In terms of geographic ambitions, our findings are very telling. Three-fifths (61%) of digital health and wellness businesses globally expect to expand internationally, and 29% in domestic markets in 2021.

Digital health firms in Spain were the most ambitious in terms of geographical expansion, where 79% favor international growth, followed by Canada (77%) and the UK (70%). Territories that are more focused on domestic markets include the US, where 41% plan overseas expansion and Asia (Hong Kong and Singapore) (40%).

73%

of mHealth firms have the strongest global expansion ambitions.

New sub-sectors leading the charge

In terms of industry sub-sectors, companies operating within the comparatively new area of mHealth (73%) showed the strongest ambitions to expand globally, followed by telemedicine (65%) and health technology (59%) businesses.

What are your geographic growth plans in the next 12 months?

Technology is the enabler

With demand for digital health services off the scale, technology is the enabler expected to underpin much of this market growth in 2021.

What are your priorities for driving growth in the next 12 months?

33%

of digital health and wellness business leaders cite innovations of products and services as their top priority for driving growth.

Innovation is key

One third of businesses (33%) cite innovation of products and services as their top priority for driving growth. Innovation can contribute to making care more efficient, optimizing systems, improving patient outcomes, reducing human error, and lowering costs through web and mobile interfaces.

Technology investments are also seen as a key growth driver by 29% of respondents.

AI-enabled medical devices, and blockchain electronic health records are just a few concrete examples of digital transformation in healthcare that are reshaping how we interact with health professionals, how personal data is shared among providers and how decisions are made about treatment plans and health outcomes.

Capital injection is needed

Almost two thirds (62%) of the companies surveyed plan to raise capital in the next year, but regional variations are substantial. In the US, 89% have capital raising on their radar for 2021, compared to 70% of businesses in the UK and only 50% of businesses in Europe and Asia.

Globally, over one third of businesses plan to take out loans, request trade credit or approach private equity (PE) and other professional investors. Crowdfunding is also on the radar for a quarter of businesses, with mergers and acquisitions (M&A) an option for one fifth. Only 14% are considering a full IPO.

In terms of the types of business most likely to be raising cash – the research points clearly to established businesses that have been trading for at least three years within more established industry segments – particularly life science technology businesses.

Businesses that need to raise cash to fund future growth palns will need to demonstrate they are well protected against a complex range of insurable risks.

Risk transfer is essential

The digital health and wellness industry meets many criteria that make it ripe for investment.6 It has grown extensively in recent years and outside investment has increased. Consequently, there has been a notable increase in venture capital firms, private equity houses and other investors targeting the digital health space.7

Companies with reasonable histories of financial performance, scalability and sustainability generally present the most attractive opportunities for investors, particularly as countries around the world look to reconfigure their health systems to include a higher proportion of digital health and wellness provision.

However, as competition for investment intensifies, businesses that need to raise cash to fund future growth plans will need to demonstrate they are well protected against a complex range of insurable risks that includes:

  • medical malpractice
  • regulatory risk
  • products liability
  • cyber and data protection
  • technology errors and omissions (E&O)
  • media liability
  • bodily injury

Risks are interconnected