Pharmaceutical and laboratory equipment industries transition to digital health

22/11/2018
Insights
Pierre-Georges Roy

The healthcare industry has largely been a late market entrant when it comes to digital technology, but this trend is changing rapidly as pharmaceutical and laboratory equipment companies increasingly develop digital health capabilities.

Several factors have led these two healthcare subsectors to focus on digital health. On the pharmaceutical front, stricter regulation, changing reimbursement models, a decline in R&D productivity, and an increased focus on payers reducing costs have all forced the pharmaceutical industry to rethink how it operates, and what initiatives drive growth. As for laboratory equipment companies, shrinking revenue and pricing pressure have served as catalysts for these companies to think outside of their traditional confines, and explore opportunities in digital health.

For pharmaceutical companies, pursuing digital health as a growth initiative has resulted in the top pharmaceutical companies developing venture arms that are active in digital health. In addition to establishing these in-house venture arms, pharmaceutical companies have become more acquisitive in digital health. Roche’s acquisition of Flatiron has become a media favorite, however Roche’s acquisition of Viewics is more representative of the type of acquisitions pharmaceutical companies have been focusing on. Viewics, a California-based SaaS company concentrates on visualisation and analytics solutions for clinical, operational, sales, and marketing teams. This acquisition highlights the pharmaceutical industry’s commitment to generating new insights, creating improvements along the value chain, and developing user-oriented services.

Laboratory equipment companies have also expanded into digital health in order to become more user-centric. As data becomes increasingly available and ubiquitous, laboratory equipment companies have devoted a great deal of their resources to finding ways to use this data. Agilent’s acquisition of Switzerland-based Genohm is a prime example of laboratory equipment companies building competences that help their users do more with the data they are already generating. Genohm is a cloud-based company whose laboratory software suite provides users with laboratory information management system (LIMS) and electronic lab notebook (ELN) capabilities that allow Agilent to contextualise analytical data. This in turn enables Agilent’s users in the scientific field to generate results more efficiently. This trend of integrating digital health technology into analytical instruments to support the operations of modern laboratories has increasingly gained popularity, as is demonstrated by similar acquisition strategies at Thermo Fisher Scientific and Danaher. Private equity has also recognised the value of such platforms, attracted by the high quality of earnings and strong underlying market conditions, and are becoming increasingly active in the space. Scottish Equity Partners, advised by Results International, invested in cloud-based LIMS provider Dotmatics last year and Montagu was an investor in CliniSys before it was acquired by Roper in 2016.

Moving forward, we expect pharmaceutical and laboratory equipment companies to continue their foray into digital health. For the pharmaceutical subsector, digital health initiatives will likely be focussed on medication adherence and reducing R&D cycle times. As for laboratory equipment companies, we foresee these companies taking advantage of the availability of data from various instruments to serve biobanks, research laboratories, and sequencing facilities. Digital health is in the process of reshaping legacy healthcare subsectors like pharmaceuticals and laboratory equipment. As this trend continues, we anticipate that the healthcare industry will enter a new era where data, samples, tests, workflows, and results are all tracked for the benefit of end-users.

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