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Health IT: Will Europe catch the wave?

By Steve Dickman, CEO, CBT Advisors

The US health IT space is white hot. Europe lags far behind both in the number of companies and in the amount of money being invested. There have been very few (no?) exits. I was wondering if Europe will ever catch up and which companies and geographies are emerging winners. So I decided to survey a half-dozen Europe-based VC partners active in healthcare investing some of whom have taken their first tentative steps into health IT investing. Here’s what I found out.

But first the impressive US benchmarks: HealthITNews reported in mid-July that VC investment into health IT surpassed $1.8 billion just in the second quarter of 2014, double the amount that had been raised in the previous quarter. Investors have cashed in on exits from companies such as Castlight Health (NASDAQ IPO in 2014); Humedica (acquired by United Health for a reported several hundred million dollars in 2013); and Healthy Circles (acquired by Qualcomm Life in 2013 for an undisclosed amount).

This makes sense given the obvious drivers for health IT activity in the United States: the mandated shift to electronic medical records (EMRs); consumer interest in web and especially mobile health apps; the boom in analytics in all areas including health; and especially the multi-payer system, one that heavily involves employers. Castlight would not even exist without the employer aspect. Rock Health reported in its excellent midyear funding report published in late June that startups developing payer administration tools took in more VC money (over $200 million in the first half of 2014) than any other subsector within health IT.

A Europe of borders

Meanwhile, as much as Europe has dismantled many of the internal impediments to the single market (local currencies, border crossings), there are many barriers to developing solutions to Europe-wide healthcare challenges. These include:

  • Language barriers. Start a web site for a consumer-facing business and you will see your user base fracture unless you can communicate in at least three (or four!) languages.
  • Scaling challenges. Try to remedy the challenges inherent in the healthcare system and you will soon realize that there has been virtually no harmonization yet. Single payer systems are fine as long as you stay within them. If you try to work cross-border, then look out! As Antoine Papiernik, a managing partner at Sofinnova Partners in Paris put it, “Our European system is also messed up, but in a different way than in the US. It is the fact that [EU healthcare systems] are completely state controlled and operated that makes it difficult for a Health-IT play to get to scale as well as it could in the US.”
  • Missing incentives. When it comes to reducing inefficiencies and shifting responsibility and benefit to the consumer, the US healthcare system is a target rich environment. Similar incentives are hard to find in Europe, especially across borders. Consumers are less incentivized when they get cradle to grave healthcare financed by payments much lower than those in typical US health plans. Therefore, said Anne Portwich, a partner at LSP in the Netherlands, it is hard to imagine a consumer-focused company gaining VC financing in Europe, at least before it has huge traction (some promising examples will come up later). This is because “Something the consumer has to pay for him or herself, even 1 Euro per month, that is a completely different [and more challenging] dynamic and a different business model than what we are familiar with.”
  • Big data not yet “in.” Finally, a less obvious example. The larger business environment in the States has been largely penetrated by the type of thinking that favors “big data” and “analytics” as solutions to real problems. This way of thinking is years away in Europe, said Simon Meier, investment director at Roche Venture in Basel, Switzerland. Meier went part-time for a year in 2013 to work with a startup in big data and advertising so he observed this firsthand. Even sectors ripe for analytics such as retail and advertising have not yet been overhauled in Europe, he says. Therefore, Meier said, “our data scientists are still occupied in resolving issues or setting up infrastructure in areas from which US scientists have already moved on. There are plenty of markets in the European Union that have not even started thinking about data science. Compared to the US, applying data science to healthcare in Europe is going from a simple sailor knot to a Gordian knot.”

For all of these reasons, successful early-stage European health IT companies (see inset below) seem to be primarily single-country focused for now. Sometimes that leads to companies in different countries occupying similar niches, such as helping consumers improve sleep. Consumer-focused sleep-aiders we found include sleepio in the UK and iSommeil in France. Either app could be used in any country. Sleepio, which offers online sleep therapy, even prices its services in US dollars, so perhaps these apps’ reach is very broad. However, iSommeil’s sample language is all in French so I suspect that a majority of their readers are in French-speaking countries. Its app is available in the US iPhone app store but there are no reviews.

The bulk of Euro health IT activity that we turned up is in the UK, where a couple of active VCs (SEP, Albion) and some pioneering companies are mining turf (e.g. practice management software, EMRs) that has either already proven fertile in the States (despite the vastly different healthcare system) or that, though initially local or Europe-focused, may later turn out to be interesting for expansion. Those rounds have been on the small side, in keeping with the early stage of the companies and the low initial capital needs of software businesses. We’ll see if even more international VC funds begin to follow the pioneers in later rounds. Those international VCs, some of whom we reached, are certainly paying keen attention.

Withings' connected (and stylish) blood pressure monitor

Take your BP at home – in style

Breaking the mold

One company that breaks the mold is Withings, an Apple-like consumer products company based in France that started out selling an internet-connected scale added a blood-pressure cuff and is now branching out into a stylish wristwatch that doubles as a self-tracking device. 

MyTomorrows, based in the Netherlands, also offers something novel and very intriguing: an online platform that allows patients who have exhausted standard therapies to be treated with medicines not yet approved by regulatory authorities. Self- and angel-funded with $6 million, MyTomorrows already offers patients with an impressive list of diseases the opportunity to ask biotech companies directly for medications on a compassionate basis. If it gets over what are likely to be some very challenging regulatory hurdles, this one has real promise. 

But there are not many outliers like these and even fewer that have been financed by top VC firms. Furthermore, outside of the UK, VC activity in European health IT in general has been very limited. 

Will Mint be the solution? 

Thus it was with great interest that I noted the recent $6M Series A investment by two top-tier European VC firms, LSP and Seventure, in Mint Solutions, an early-stage company that originated in Iceland and has relocated to the Netherlands. 

As much a device as an IT play, Mint Solutions illustrates what is working about European health IT and at the same time why scaling will be hard. The challenge Mint addresses is errors that hospital personnel sometimes make in administering medication. Mint features a small bedside scanner (PICTURE?) that images the pills and confirms their identity before they are dosed. “The real challenge is the oral meds,” said Portwich, “not infusions. Mint has a scanner, a box with a drawer that comes out. First it does a 3D scan – shape, size, accompanying instructions. An algorithm verifies the identity of each pill. Then it gives a readout in a couple of seconds. It’s connected to the e-prescribing system. And it puts into the chart: ‘Mr. Miller got 2 ibuprofen and Lasix at 10am.’” 

Demand among Dutch hospitals – the company’s test market – is strong, said Portwich, spurring optimism that Mint’s solution, dubbed “MedEye,” can be marketed in other countries as well. A good review of MedEye and Mint Solutions appears here.

MedEye scanner

What’s next, a robot nurse? Don’t answer that…

In the “avoiding medical errors” market, though, the technology that has already taken hold in the United States is barcoding. This does not trouble Portwich. “We know that barcode scanning is widely used [in the States]. There is not yet 100% penetration but big hospitals have implemented it. But when you look at the long-term care facilities, that is a different story. Barcoding is not so well established there. So that could be our entry market.” 

Though LSP was early to discover Mint, to encourage co-founder Gauti Reynisson and his team to set up shop in the Netherlands rather than his native Iceland and to make a commitment to invest, Portwich recalled that, until Seventure came along, the search for a syndication partner was not so simple. “It felt like we are the only one” investing in health IT, she said. We spoke to IT investors and they said, ‘We only do software and this has a hardware component. They also said, ‘Oh, you are selling to hospitals – the sales cycle is too long.’ And our healthcare colleagues said, ‘Wait, but this is IT. We don’t do IT. We prefer medical devices.’” 

It helped that in 2012 LSP had set up a “health economics fund (HEF)” backed by two Dutch insurers, among other investors, in order to invest specifically in private healthcare companies with products close to market. In most cases, Portwich said, the HEF’s investments will go into traditional medical technology. 

Mint Solutions represents a type of company that Meier of Roche Venture says he is seeing increasingly often in the diagnostics space. To capture an opportunity, Meier says, “You have to number-crunch AND design a small device that does its job well. Both for the company and the investor, the small device is more the focus than the big data.” 

“Big time” IT and data plays in the healthcare space such as Foundation Medicine, in which Roche Venture invested, are still rare in Europe. “Look at Flatiron Health,” Meier said, an oncology-focused cloud-based data and analytics platform in which Google invested $100 million: “I have not seen anything similar in Europe.” 

Language barriers, fragmented markets, a pot of gold across the ocean: no wonder many European health IT entrepreneurs I know either have already moved or are thinking of moving to the States

I suppose the best that Europe can hope for besides outliers is that some of its best companies hit it big in the States and then return and offer their services in their home markets. But it will take a while before that starts to happen. 

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This post originally appeared on The Healthcare Blog.

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Google Health is Dead, Long Live Google+

A Boston Biotech Watch guest post by Rich Whalley*

(Cross-posted to The Health Care Blog on July 20, 2011)

Now that Google has put its ill-fated Google Health project to rest, we are wondering who will make the next big attempt to establish a personal health record (PHR) platform for healthy people. Many have tried and many have failed, and there is still no popular platform for gathering, analyzing and sharing health data.

Adam Bosworth founded Google Health in 2006 to provide an online place for consumers to store their own health data. Bosworth left shortly thereafter and went on to found Keas, a SF-based web startup which takes a more social approach to tracking one’s health via a competitive point system. In a recent interview on TechCrunch, Bosworth spoke about why he thought Google Health had failed, “It’s not social,” and “Google didn’t push to see what they could do that people would want.”

Google Health failed in part because the user interface did not motivate most users to upload their health data. By contrast, one of the fastest-growing health sites on the internet, PatientsLikeMe.com, has built its online health community to an impressive 105,000 subscribers, focused first on patients suffering from chronic diseases like ALS (Lou Gehrig’s disease). The implied reward for this was high given the unmet health need, so it was an easy choice for patients to take the time to enter their valuable data. Healthy people have no such incentive for using PatientsLikeMe, but many seem to want to get in on the action. Armed with smartphones and social network memberships, a new health-savvy generation is looking to catalyze the growth of a new movement.

For every startup entering this field, the million dollar question is “just how easy can we make it for people to enter data and track their health?” It practically has to be automated in order to go viral, a prerequisite for aggregating the “big data” that could lead to marketable conclusions. There is a new line of VC-backed startups tackling this daunting task.

Withings internet-connected scale

Coming to a Twitter feed near you

Withings, based in France, has produced a Body Mass Index (BMI) weight scale which tracks BMI via iPhone or computer and even sends automatic tweets. Americans can get in-shape, and French people can laugh at the tweets of overweight Americans. With all parties happy, why haven’t we seen more development in this area of diagnostic innovation for healthy people? For one, there’s a large VC question around whether or not these startups can make a large ROI with their one-trick ponies. Won’t they be killed off by apps or hardware add-ons created for next-generation smart phones?

Consider Fitbit, a small, lightweight device that functions as a pedometer that tracks sleep and burnt calories throughout the day. One could argue that a small body clip is much more comfortable to wear than an iPhone 4, but Fitbit is primarily a consumer software play. Its hardware is no more than a tricked-out accelerometer, not unlike the ones found inside Nintendo Wii controllers. Recalling Flip Video, I can’t help but think the VCs at Softtech and True Ventures are losing some precious Fitbit-measured “actual sleep time” over certain prickly questions. Will next-gen smart phones eventually eat up FitBit’s market? Will Fitbit be lucky enough to get an exit before time runs out?

Sleeping Guy

Looking to share data on a universal personalized health platform? Dream on!

Withings, despite being partnered with the late Google Health, seems to have a flop-proof strategy of targeting diagnostic applications that are unlikely to be eaten up by new-fangled mobile devices. They recently released an FDA-approved blood pressure monitor that connects directly to the iPhone, and more impressively, already have two products on the market – with a baby monitor expected to hit the market later this year. While they may not be making big returns just yet, they might be able to become a leader in this space by putting up a solid enough barrier to entry.

What would need to happen for these companies to really take off? It’s probably going to involve a concerted effort from players in social networking to form better integrated health networks – a place for the data to live. Even though Google Health flopped, Adam Bosworth seems pretty confident about his new gig, but Keas is not exactly going viral just yet. So who’s left to take charge of the movement?

Google Health recycled

Is Google Health really going to waste, or will it be strategically recycled into a 100% post-consumer product?

PatientsLikeMe is currently limited to the chronically ill, and Facebook doesn’t seem to be making strides in this direction anytime soon. One of the most promising new platforms is Google+, termed “the Facebook killer.” If successful, Google has a golden opportunity to use Google+’s platform to provide a framework for people to manage personal healthcare data. For example, Circles allows users to select specific people and groups for sharing personal data of all varieties, including health data. Importantly, the platform can aggregate anonymized data across a very large user base. Will Google+ eventually become the personal health data platform? I would love to see this happen, but so far there is no hint that anyone at Google is working on healthcare apps for Google+. We can’t wait to see some startups tackle this. It’s only a matter of time.

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