The German DiGA Market from the Investor’s Perspective
Part 3: Is DiGA an interesting investment case?
Investing in a DiGA manufacturer is not a straightforward case. The founder, retrospectively management team is fundamental for success, they need to have a very clear and focused Go to Market strategy in place and ideally concentrate on commercially attractive indications. Also platform companies with multiple DiGAs have clear advantages over one product companies because with a portfolio of complementary products for the same HCP target group you can generate economies of scale in sales. Overall the DNA of a DiGA company needs to be “Commercial first” what you often find instead is “Purpose first” which leads e.g. to wrong portfolio decisions prioritising “nice to have” indications.
From an investment horizon (and multiple expectation) perspective I would distinguish between three main strategies (not mutually exclusive):
- Short Term (< 3 years): Fast Exit
- Mid Term (3 to 5 years): Build a profitable business (in Germany)
- Long Term (> 5 years): Scale globally
We have already seen a few “Fast Exits” in the German DiGA market and generally there are three different scenarios:
Scenario one: Exit to Pharma/MedTech
- American ResMed acquired Mementor/somnio (Insomnia) in August 2022 (2 years on the market)
- German Pohl Boskamp acquired mynoise/Kalmeda (Tinnitus) in May 2023 (2 1/2 years on the market)
Scenario two: Exit to international Digital Health companies
- Icelandic Sidekick acquired airhere/zanadio (Obesity) in October 2023 (3 years on the market) after aidhere filed for bankruptcy and Sidekick also bought PINK! (Breast Cancer) in June 2024 (2 years on the market).
- American Mahana Therapeutics acquired CaraCare (IBD) in March 2024 (2 1/2 years on the market).
Scenario three: Consolidation/exit to German competitor
This has not been the case yet but I believe it is only a matter of time.
Kranus Health is an example of a DiGA manufacturer with a clear commercial focus on the way to profitability based on a DiGA platform strategy. The company focuses on Urology and has already launched two Urology DiGAs with several others in development.
GAIA and Kaia are two German Digital Health/DiGA manufacturers with a strong footprint in the US, scaling globally as a DiGA under the newly introduced approval and reimbursement schemes e.g. PECAN in France however will take some time and will not be as easily initially expected as the recent negative assessment for HelloBetter’s Insomnia DTx by French authorities illustrates. Nevertheless I am expecting a steep learning curve here for the DiGA manufacturers leading to a gradual globalisation of their revenues. Most likely commercialization issues will be similar to the German market.
Overall DiGA can be an interesting investment case if:
- The founder team has a “commercial first” mindset
- The therapeutic area/indications are commercially interesting
- All stakeholders (founders and investors) have a clear and common value creation strategy.
Marcus Bergler
Pharma Executive and Digital Health Expert