Digital Therapeutics – medical intervention beyond the pill

Digital Therapeutics, the fastest-growing area of healthtech with transformational potential for medical outcomes. We take a closer look at the innovation and investment landscape of DTx, in partnership with Inkef, MTIP and Speedinvest.  

Report - Digital Therapeutics – medical intervention beyond the pill

  • Digital therapeutics has grown the fastest of any healthtech segment since 2017.
  • Global VC funding in digital therapeutics has increased 4x since 2017 to $1.2B in 2022 year to date.
  • Combined enterprise value of global digital therapeutics startups has grown 8x in the last five years, now totalling $31B.
  • Regulation and reimbursement of digital therapeutics is gradually happening over Europe, which is a frontrunner compared to the US and Asia.
  • Pharma is taking big interest in digital therapeutics innovation, including through partnerships with and investments in startups 

Digital therapeutics (DTx) are software-based medical interventions designed to directly treat a disease. These are tested for safety and efficacy in clinical trials, evaluated by regulatory bodies, and prescribed by healthcare providers. DTx are designed and tested much like traditional prescription drugs, with one distinction: rather than taking a pill or an injection, patients are treated with software.

Graphic showing that Digital Medicine is a subset of Digital Health, and that Digital Therapeutics is a subset of Digital Medicine,

These companies are now worth a combined $31B.

Chart showing the combined enterprise value of Digital Therapeutics startups, which are now collectively worth $31B, up from $4 in 2017.

“We fundamentally believe that DTx will become a central tool for providers in an increasingly digitized healthcare system.  "Activation of users is an underestimated step in building DTx companies: you need to convince doctors (through guidelines, training, integration into EMR systems) to drive user engagement by training patients to accept and continue using the DTx, as well as payers to settle the payment for the intervention and take care of the administrative side of billing. "In other words, like in traditional therapeutics, DTx companies need to grow up and transform from a small Biotech that is focused on drug discovery and market approval into a more Pharma-like company that also can execute on distribution, market access and marketing to capture the true value potential of a DTx.”

Thijs Cohen Tervaert, Junior Partner, and Amanda Stenbaek, Associate at Inkef

Global VC funding in digital therapeutics has increased 4x since 2017 to $1.2B in 2022YTD. Though VC activity in 2022 so far is down 63% compared to full year 2021 amid a global pullback in venture capital investment, 2022 funding has already surpassed 2020 levels.

Chart showing the total venture capital funding for Digital Therapeutics startups over time, with $1.2 billion raised in the first three quarters of 2022, down from $3.2 billion in full year 2021, but up from $1 billion raised in full year 2020.

DTx is a nascent healthtech segment on the rise, with relatively high growth in VC funding and low combined enterprise value compared to other healthtech segments.

Digital therapeutics has been the fastest-growing segment in healthtech since 2017, raising 4.3x ​​2017’s funding. 

And the space itself is also diverse, covering applications including cardiology, diabetes, femtech and mental health.

Treemap showing the breakdown of Digital Therapeutics by application area. With behavioural and mental health, and diabetes and dietary the two largest segments.

In Europe, the growth in early-stage startup investment is even more pronounced compared to the US. Europe has grown 9.0x compared to 2016 and the US increased 3.6x. Europe is just a few years behind the US. Early stage VC investment in Europe in 2020 almost equals the US in 2016.

Charts showing early-stage digital therapeutics startup investment in the US and Europe. The US raises more capital, but Europe is growing faster.

“Digital therapeutics combine the power of technology with evidence-based treatments tailored to an individual’s needs, allowing healthcare providers to monitor progress and adjust treatments as needed. At MTIP, we recognize the complexity of the ecosystem and want to support teams with a deep understanding of the current challenges to the broader market adoption, including the still-evolving regulatory environment and the need for appropriate data protection and robust clinical trials to prove clinical efficacy. We look for market strategies that align incentives across healthcare stakeholders to ensure benefits to all parties involved, from greater patient engagement and improved health outcomes to reduced medical costs and optimized clinical workflows.”

Magdalena Plotczyk, Investment Associate at MTIP

"Digital therapeutics represent an exciting therapeutic for the treatment of patients suffering from chronic and hard to treat diseases, and have the potential to decrease dependency on non-specific pain medication such as opioids. Trials are very likely to continue in the future, which is great news for patients that will receive clinically validated therapies tailored to their needs. But unlike drugs or implants, DTx apps constantly need to prove themselves to users to make sure their interest does not wane off over time. In addition to therapeutic efficacy, long-term use will rely on gamification, bug fixes, system upgrades, live support, and intuitive UI/UX. Not adjusting the product intelligently runs the risk of patients deviating from their treatment plan and creating unwanted effects."

Estelle Botbol, Associate at Speedinvest

Report - Digital Therapeutics – medical intervention beyond the pill