<p>1 Our data-driven predictions on what could happen in healthcare in 2018 2018 Digital Health Trends 2 The presentation will also be sent to you. Feel free to share with colleagues. The resolution of some slides may be suboptimal due to the webinar software. Those slides will look fine in the presentation that we send you. Webinar recording will be distributed http://support.citrixonline.com/en_US/Webinar W I T H I N 2 4 H O U R S 3 @cbinsights @nikillinit #cbihealth2018 J O I N T H E C O N V E R S A T I O N O N T W I T T E R 4 W H O W E A R E The technology market intelligence platform. CB Insights software lets you predict, discuss, and communicate emerging technology trends using data in ways that are beyond human cognition. 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Beti Cung, Corporate Strategy, Microsoft Invitation-only membership network Membership is strictly by invitation only For leaders driving innovation & growth in their organizations Cross-industry membership of senior leaders from corporate strategy, innovation, venture, M&A, digital strategy and technology Curated peer- level groups Membership is limited to SVPs, EVPs, presidents and C-level executives from companies with $1 billion in revenue or more Access to innovators & big thinkers We augment experience- based insights by bringing in and connecting you with entrepreneurs, venture capitalists, academics and big thinkers who provide front-line perspectives and frameworks you can use to navigate the growth challenges you face About CB Insights Councils 7 Participating Companies 8 March 6-7, 2018 New York, NY Curriculum Research: analyzing competitor strategy Master class: business social graphs Case studies: Insights from a hyperscale business Digitization amidst high regulation Next Councils Session 9 APPLY FOR COUNCILS MEMBERSHIP EMAIL community@cbinsights.com VISIT www.events.cbinsights.com/councils 11 Nikhil Krishnan A B O U T T H E A N A L Y S T Nikhil Krishnan is a senior analyst at CB Insights, where he produces data- driven analysis and research reports on trends in digital health, ag tech, and construction. He sends the weekly Digital Health Insights newsletter to 30K+ members. His research has been featured in The Economist, New York Times, Wall Street Journal, and more. Prior to joining CB Insights, Nikhil worked at Uber, the Small Business Administration, and Relationship Science. Most popular analyses by Nikhil: Oscar Health Insurance Strategy Teardown Apple In Healthcare @nikillinit | nkrishnan@cbinsights.com Senior Analyst 12 Contents 1 3 2 1 27 35 49 55 Increased M&A of digital health companies Health giants get into each other's business lines Tech giants push further into healthcare Virtual trials increase in frequency Lab testing incumbents see challenges Medicaid becomes a focus area 64 7 1 78 85 96 Medical research into smartphone and internet usage on mental health More companies will target the intersection of sleep and healthcare Increasing use of light in diagnostics and therapeutics New patient financing options Blockchain hype continues to be just that 13 2 0 1 8 D I G I T A L H E A L T H T R E N D S Increased M&A of digital health companies 14 Digital health M&A has been declining Digital health first exits, 2013 - 2017 Digital health M&A Digital health M&A has been on the decline as a result of increasing available private capital, high valuations, and hesitance from existing healthcare incumbents. 15 Corporates are bringing money to the US Wall Street Journal 16 J&J chief Gorsky bullish on tax reform, plans $16B in repatriated overseas cash January 10th, 2018 We're already seeing money being spent 17 Digital health companies could provide complementary areas of expertise to different corporates Some possible areas of interest 18 Pharma corporates can use digital health to reach consumers directly + find AI expertise Possible acquisition areas: Companies like Recursion Pharmaceuticals and Atomwise could be attractive targets for their AI + biology expertise. As pharma moves into services, digital therapeutics could offer complementary services (Omada Health, Pear Therapeutics, etc.) Asynchronous telemedicine companies can use services and direct-to-consumer distribution for off patent, low risk products. 19 Medical devices corporates can find UX and software expertise Possible acquisition areas: Wearables companies which can provide consumer and user experience expertise (Jawbone, Owlet Baby Care, etc.) Companies that sell devices to improve the efficiency of doctors (Augmedix, Simplifeye, etc.) AI-enabled medical devices (Alivecor, Bigfoot, etc.) 20 Tech giants can find companies knowledgeable in healthcare analytics + data sources Possible acquisition areas: AI-enabled medical devices (Alivecor, Bigfoot, etc.) EMRs or APIs that sit between providers, labs, and consumers (Kareo, Health Gorilla, etc.) Existing players that have established their own distribution and relationships for a tech company to use as a jumping off point (Express Scripts, PillPack, etc.) 21 2 0 1 8 D I G I T A L H E A L T H T R E N D S Health giants get into each other's business lines 22 Health Care Cost Institute Consolidation = price increases? Despite utilization going down, prices continue to go up across the board. While there are several factors that could contribute to this, a leading one is the number of pseudo-monopolies created through consolidation, allowing giants to price higher. Prices keep going up 23 Walgreens Said to Tweak Rite Aid Deal to Gain U.S. Approval September 18th, 2017 You can only consolidate so far 24 Entrance of tech giants is forcing existing incumbents to bundle services together VS. 25 "I think there are 3 things triggering [the CVS-Aetna acquisition]. One of them is Amazon, not quite explicit yet what they're planning on doing but whatever it is it's scaring CVS." John Rowe, Aetna Ex-CEO CNBC T H E A M A Z O N E F F E C T 26 Large line-crossing initiatives will force others to respond Large acquisitions Co-branding + partnerships New business lines $69B Acquisition $4.9B Acquisition Joint Individual Health Plan Joint Medicare Advantage Plan Hospital Groups Creating Company to Make Cheap Generic Drugs January 18th, 2018 27 2 0 1 8 D I G I T A L H E A L T H T R E N D S Tech giants push further into health 28 Media attention on tech giants in healthcare is increasing 29 Tech companies are coming to healthcare As software becomes a point of differentiation in healthcare, tech giants have an advantage with expertise in the area as well as direct relationships with consumers. CB Insights Tech giants are investing in healthcare 2012 2017 YTD (5/18/2017) 30 Former FDA Commissioner joins Verily and more digital health hires May 18th, 2017 Talent With Health Expertise Is Going To Tech 31 Tech companies are working with regulators 32 More health patents are being filed Patent: Turning your phone into a monitoring device Patent: Automated abdominojugular reflux test Patent: Wireless heart rate detection Patent: Nutritional information/diet monitoring for augmented reality 33 Executives are talking most about Amazon 34 "We should all be acting like Amazon is getting into our business, because frankly we have to create a crisis to think about how to be more effective and efficient" Alex Gorsky, Johnson & Johnson CEO 35 2 0 1 8 D I G I T A L H E A L T H T R E N D S Virtual trials increase in frequency 36 Step 1: Get pharma and biotech companies comfortable with mobile studies 37 ResearchKit is demonstrating the benefits of mobile studies Enrollment is much larger, faster, and less expensive to acquire participants No overhead means no significant increased cost with scale Environmental data is captured as well as data during an episode (e.g. seizure) 38 "To get 10,000 people enrolled in a medical study normally, it would take a year and 50 medical centers around the country" B E F O R E Alan Yeung MD, Medical Director at Stanford Cardiovascular health 39 Apple enrolls 11,000 people in a heart study in one day More than 48K are participating in MyHeart Counts today N O W 40 How Purdue Pharma Hopes To Use The Apple ResearchKit May 1st, 2016 Drug Companies Are Testing ResearchKit 41 23andMe conducts at-home studies 42 "23andMe's research platform is currently the world's largest consented, re-contactable database for genetic research. This data will lead to a better understanding of the biological mechanisms of disease, and accelerate the discovery of novel treatments through human genetics." Fortune and is making its own drugs 43 Step 2: Demonstrate benefits of site-less trials 44 Site-less Trials: Uses mobile tools, continuous remote monitoring, and telemedicine to recruit patients, distribute supplies, monitor their reactions, follow their progress, and analyze the results 45 Physical sites are expensive for trials Department of Health and Human Services 46 Science37 delivers end-to-end fully virtual clinical trials using telemedicine, mobile, and remote workers Select Investors Lux Capital, Sanofi-Genzyme Bioventures, Redmile Group, dRx Capital C O M P A N I E S E N A B L I N G V I R T U A L C L I N I C A L T R I A L S Funding $66.5M S I M I L A R C O M P A N I E S $5.83M $130K $3.94M 47 First site-less trial completed, more to come? "AOBiome Therapeutics Reports Positive Efficacy Results from Phase 2b Clinical Trial of Ammonia Oxidizing Bacteria (AOB) for the Treatment of Acne Vulgaris The Phase 2b study was jointly conducted with Science 37, a clinical research company, that has pioneered a 'site-less' clinical trial model with its proprietary mobile technology, the Network Oriented Research Assistant (NORA) used in the trial to capture real-time data from patients at their homes." PR Newswire 48 2 0 1 8 D I G I T A L H E A L T H T R E N D S Lab testing incumbents see challenges 49 Lab testing saw $53B of industry revenue in 2017 IBISworld 50 November 22nd, 2017 Medicare will cut payments for clinical lab tests by $670M next year Medicare reimbursement changes are starting to pressure the industry 51 LabCorp has started investing outside of testing, Quest Diagnostics has been focused on consolidation Lab testing companies diversify? Feeling the pressure from lowered reimbursements, lab diagnostics companies like Quest Diagnostics and LabCorp might look to private markets for other business lines. LabCorp has increased investment activity into other businesses in the last year, Quest has focused on acquiring labs. 52 as a small start-up plan, Clover had little negotiating power with giant lab companies. So Clover started pushing back on the claims, telling the labs that it lacked sufficient proof that the tests were medically necessary. The startup outlined a list of items that it needed within 30 days before paying these bills. Rather than adhering to Clover's demands, the labs turned around and billed the patients Clover's elderly members. CNBC Could insurers get into labs? 53 Athelas develops instant, at-home blood diagnostics for oncology care. Select Investors Sequoia Capital, Initialized Capital S T A R T U P S A R E B R I N G I N G S I N G L E F U N C T I O N T E S T S D I R E C T L Y T O C O N S U M E R S Funding $4.08M O T H E R S I N G L E T E S T S $5.5M (Metabolism) $1.64M (STD testing) 54 There are more test to bring home still 55 2 0 1 8 D I G I T A L H E A L T H T R E N D S Medicaid becomes a focus area 56 Medicaid covers 68M Americans Medicaid.gov 57 It's a big part of the budget Total State Budget Including Federal Assistance, FY 2015 MacPac 28.2% 19.5% 10.1% 42.2% Medicaid Elementary And Secondary Education Higher Education All other 58 Proposed Louisiana health care cuts eliminate mental health, substance abuse, adult day care services May 1st, 2016 When regulatory flux settles, states will have to figure out how to manage care with less 59 States are spending more States are expecting their spend to grow faster due to an increasing number of people enrolling in the aged and disabled groups, high cost prescription drugs, and provider rate increases. Kaiser Family Foundation -4.0% 3.2% 6.8% 10.5% 3.5% 3.9% 5.2% 2.3% 1.5% 5.3% 13.2% 3.9% 2.7% 1.5% 2012 2013 2014 2015 2016 2017 2018 Projected Medicaid Enrollment Total Medicaid Spending Medicaid spending is outpacing enrollment 2012 2018 projected 60 Chronic disease and mental health are interrelated and unmet for Medicaid members have below fair mental health have >1 chronic condition people have mental health/chronic conditions such as comorbidities of total Medicaid dollars goes to 20% of Medicaid enrollees with behavioral health conditions Kaiser Family Foundation 26% 48% 38.6M 48% 61 Non-medical issues need to be addressed for the Medicaid population Housing issues Food insecurity Violence (domestic abuse and otherwise) Transportation Healthcare system complexity 62 Companies are addressing specific issues such as transportation enrollment and benefits explanation engagement and follow-ups 63 Or they're taking a holistic approach Companies are working within high Medicaid concentration communities Total Raised: $20.8M Total Raised: $9.72M 64 2 0 1 8 D I G I T A L H E A L T H T R E N D S Medical research into smartphone and internet usage on mental health 65 Nomophobia: Fear of being without access to a working cell phone 66 High screen time is starting to be linked to depression and suicide SagePub 67 Social media sentiment is turning Sean Parker, Facebook ex- president "I don't know if I really understood the consequences of what I was saying, because [of] the unintended consequences of a network when it grows to a billion or 2 billion people and ... it literally changes your relationship with society, with each other," Parker said. "It probably interferes with productivity in weird ways. God only knows what it's doing to our children's brains." Marc Benioff, Salesforce CEO "Here's a product cigarettes they're addictive, they're not good for you, maybe there's all kinds of different forces trying to get you to do certain things. There's a lot of parallels [to social media]. I think that for sure, technology has addictive qualities that we have to address, and that product designers are working to make those products more addictive and we need to rein that back." Chamath Palihapitiya, Early Facebook Employee It literally is a point now where I think we have created tools that are ripping apart the social fabric of how society works. That is truly where we are. The short-term, dopamine-driven feedback loops that we have created are destroying how society works. No civil discourse, no cooperation, misinformation, mistruth." 68 Investors are taking a stance "There is a growing body of evidence that, for at least some of the most frequent young users, this may be having unintentional negative consequencesgrowing societal unease is at some point is likely to impact even Apple." -Open Letter From Jana Partners And Calstrs To Apple Inc. "Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society." -Larry Fink's Annual Letter To CEO's 69 Onward is building a new approach to addiction recovery. D I G I T A L A D D I C T I O N S T A R T U P S A R E C O M I N G U P Funding $2M 70 "According to the research studies that Onward conducted for the past year, 1,400 self-identified pornography addicts and 2,500 screen over- users showed some interesting results. Roughly 89 percent of Onward's users reduced their screen time and the amount of time they spent watching pornography and 51 percent of those surveyed stopped watching porn entirely. Meanwhile, screen time users saw a reduction in their social media usage that equated to 75 fewer hours spent online per year." A P P S C A N F I G H T A P P S ? 71 2 0 1 8 D I G I T A L H E A L T H T R E N D S More companies will target the intersection of sleep and healthcare 72 Why sleep is an attractive area 1. Can target health-conscious buyers + people pay premiums to improve sleep 2. Creates valuable datasets to understand sleep and health relationship 3. Another avenue to create direct-to- consumer relationships ZZZzzz 73 Sleep apnea affects 25M+ People In The US American Academy of Sleep Medicine 74 There's more interest and studies being done to understand the role of sleep 36 59 66 70 76 91 113 164 2010 2011 2012 2013 2014 2015 2016 2017 Number of journal articles with "Sleep" in the title (via Nature) 75 Apple is looking into the sleep ecosystem Acquisition of a sleep tracker Sleep tracking is built in to the personal health record Studies building on Apple tools The Apple Watch can accurately detect hypertension and sleep apnea, a new study suggests November 13th 2017 76 Wearable makers are following suit Fitbit Ionic smartwatch introduces blood oxygen sensor August 28th, 2017 77 Different areas of sleep ecosystem are seeing development S L E E P A P N E A D E V I C E S S L E E P A S S I S T A N C E S L E E P S E R V I C E S S L E E P C O N T E N T 78 2 0 1 8 D I G I T A L H E A L T H T R E N D S Increasing use of light in diagnostics and therapeutics 79 DermaSensor is designing a handheld sensor that will be able to evaluate skin for potential cancer in seconds using spectroscopy S T A R T U P S U S I N G L I G H T F O R D I A G N O S T I C S Funding $4.5M O T H E R S T A R T U P S Otoscope Malaria detection Allergen detection 80 New chips, hardware, and light applications can turn phones into diagnostics tools 81 Tech companies want to use light to improve monitoring using hardware you're around Patent: Uses a camera, an ambient light sensor, and a proximity sensor to monitor different biomarkers Patent: Uses optical sensors and light projections to determine the functionality of different organs, starting with cardiovascular health 82 Improving phone cameras + UV light + faster processers = mobile fluorescence microscopes Fluorescence Detection: By combining disease markers with antibodies and shine different wavelengths of light and look under a microscope to see if cells are affected. This is useful for disease diagnostics, like malaria (below). Nature, CDC 83 "We describe here a compact smartphone-based fluorescence detector for mHealth. A key element to achieving high sensitivity using low sensitivity phone cameras is a capillary array, which increases sensitivity by 100. The capillary array was combined with a white LED illumination system to enable wide spectra fluorescent excitation in the range of 450- 740 nmMoreover, the capillary array required a sample volume of less than 10 l, which is an order of magnitude less than the 100 l required for the plate reader. As fluorescence detection is widely used in sensitive biomedical assays, the approach described here has the potential to increase mHealth clinical utility, especially for telemedicine and for resource-poor settings in global health applications." NCBI Using smartphones in fluorescence detection is useful in low resource settings 84 Neolight is a medical device company that develops phototherapy beds to cure jaundice in pre-term and full term babies. P H O T O T H E R A P Y : U S I N G L I G H T A S A T R E A T M E N T Funding $3.48M P H O T O T H E R A P Y S T A R T U P S Skin Conditions Neurological disorders 85 2 0 1 8 D I G I T A L H E A L T H T R E N D S New patient financing options 86 High deductible plans are becoming popular, making consumers "shoppers" Share of workers with $1000+ annual deductible for single coverage Kaiser/HRET Employer-Sponsored Health Benefits Survey 31% 34% 38% 41% 45% 51% 2011 2012 2013 2014 2015 2016 87 Paying for care is becoming difficult for people Kaiser Family Foundation 63% 58% 27% 37% 10% 5% 2015 2017 Don't know/ Refuse To Answer Difficult To Pay Easy To Pay 69% 64% 24% 31% 7% 5% 2015 2017 57% 50% 34% 43% 9% 7% 2015 2017 Monthly Health Insurance Copays Deductibles 88 They're postponing care due to inability to pay % of respondents or immediate family that have done the following due to costs in the last 12 months Kaiser Family Foundation 12% 16% 21% 23% 27% 29% 32% Had problems getting mental health care Cut pills in half or skipped doses of medicine Not filled a prescription for medicine Skipped a recommended medical treatment or test Put off or postponed getting care Relied on home remedies/OTC drugs instead of seeing a doctor Skipped dental care or checkups 89 Companies are focusing on ways to make it easier to pay for healthcare 90 Likeinsurance for insurance? 91 Flexible healthcare lines of credit Companies are helping with high-upfront payments via debt and credit lines 92 A healthcare company that originally started in patient and doctor matching + booking, recently released an HSA Select Investors Accel Partners, CRV, Highland Capital Management, Aspect Ventures N E W C R O P O F H S A C O M P A N I E S Funding $44.4M O T H E R H S A C O M P A N I E S $10.2M $4.32M 93 Blockchain startups hope to turn patient data into money 94 Blockchain startups hope to turn healthy behaviors into money 95 Sempre Health's behavior-based, dynamic pricing solution uses claims and EMR data to predict the optimal price for the right patient at the right time. Select Investors Social Capital, Alchemist Accelerator Funding $2.54M P E R S O N A L I Z E D P A Y M E N T C O M I N G T O H E A L T H C A R E ? 96 2 0 1 8 D I G I T A L H E A L T H T R E N D S Blockchain hype continues to be just that 97 Blockchain in theory addresses problems acutely faced in healthcare Data governance + interoperability Authenticity of goods and fraud management Faster + rules-based authorizations and adjudications 98 ICO funding is taking off, an easy way to get lots of money for an early stage project CB Insights, TokenData 99 Media is looking closer at how blockchain can impact healthcare CB Insights 100 We're starting to see healthcare ICOS 101 Across different parts of healthcare I D E N T I T Y + P R I O R A U T H O R I Z A T I O N S U P P L Y C H A I N T R A C K I N G D E C E N T R A L I Z E D E M R S T E L E M E D I C I N E / S E C O N D O P I N I O N S 102 Gem Partners With Philips for Blockchain Healthcare Initiative April 16th, 2016 Corporates Are Slowly Piloting Systems 103 Massive price swings demonstrate volatility in the space 104 Lack of regulation, eager investors, and the promise of new technology has made this area attractive for new companies But there are virtually no products, users, or success stories yet 105 The SEC is devoting a significant portion of its resources to the ICO market. Through statements, reports and enforcement actions the SEC has made it clear that federal securities laws apply regardless of whether the offered securitya purposefully broad and flexible termis labeled a "coin" or "utility token" rather than a stock, bond or investment contract. Market participants, including lawyers, trading venues and financial services firms, should be aware that we are disturbed by many examples of form being elevated over substance, with form-based arguments depriving investors of mandatory protections. Wall Street Journal The crackdown on bad actors is coming 106 Questions? Twitter: @nikillinit nkrishnan@cbinsights.com 107 The CB Insights platform has the underlying data included in this report W H E R E I S A L L T H I S D A T A F R O M ? CLICK HERE TO SIGN UP FOR FREE 108 cbinsights.com @cbinsights Nikhil Krishnan nkrishnan@cbinsights.com </p>