Green Room Technologies
Turning Good Ideas into Good Business.
Green Room specializes in business, market and technology readiness. Our clients are health tech companies with medical device and software products and investors interested in health technology. Our services enhance innovation, interoperability, growth and investment potential.
The Health Tech Market: A US Equity Market Point of View
Digital Health Market: The Bridge to 2022
Can Digital Health Gain Momentum in the New Year?
The bridge from health tech market 2021 to health tech market 2022 is Covid.
The healthcare markets in 2021 were wild and unpredictable but mostly underperformed as investments, though there were certainly individual companies that did more than well – Covid winners like Moderna (MRNA) and BioNTech (BNTX).
The impact of the SARS-CoV-2 virus was multiplied by its ability to defy prediction.
As we enter the third year of the pandemic, the virus has established itself as a forever event. Perhaps the main human heuristic that must be obliterated is anchoring the definition of normal to 2019. Even in the absence of Covid we wouldn’t be doing 2019 again.
Considering the five industry segments that make up the public market sector of healthcare –
Providers – payers, medical equipment & devices, medical supplies, pharmaceuticals, and biotechnology – outside of individual Covid winners, only providers – payers were investable according to those following the money.
Providers received fiscal stimulus money, but they are faced with an excessive focus on Covid to the expense of other healthcare delivery. One assumes that elective procedures and chronic care management return. But maybe like other parts of life, there are permanent shifts in the way individuals assess their need for marginal, elective care.
In 2022 like other businesses, providers face an exodus of older workers and a paucity of replacements that may impact how fast they can “reopen.” Nonetheless, Tenet Healthcare (THC), HCA (HCA), Quest (DGX) as examples have had big years for stock-price in 2021.
Payers in 2021 did better than expected largely related to not delivering care they otherwise would have. Anthem (ANTM), United Health (UNH), and Centene (CNC) have all had large outperformance.
The big story in health tech was vaccines, biotech, and the acceleration of digital health funding and market appearance. That said, the worst performing public healthcare sectors were biotech and pharma. As the year turns, money is flowing into these underperforming sectors. Will they be leaders in 2022?
Big Pharma, like biotech, had a couple of big Covid winners in Pfizer (PFE) and Lilly (LLY). But both biotech and pharma in the broader sector underperformed significantly.
Digital health leaves most of us scratching our heads. On the private investment front, 2021 had record investment >$20 billion by Q3, an exponential increase over 2019 when you couldn’t give away a digital health company.
Many biotech and digital health companies rushed to go to the public markets via IPO, SPAC, or M&A. Their subsequent stock performance for the most part has been shockingly bad – see Teladoc (TLDC) or Amwell (AMWL) as poster children for this effect. Even direct-to-consumer was questionable with performance of Hims & Hers Health (HIMS) as an example.
There have been too many product failures as in biotech, a slowing of the rapid acceleration of acceptance of digital solutions due to Covid, and too many public offerings to keep the stock prices up. The SPAC market is particularly hairy.
One suspects the divergence in valuation between the public and private markets will not persist for digital health and biotech in 2022.
Going into 2022 the nagging questions for health tech markets are these:
- Can they deliver value, both clinical and economic? In other words, can they grow their organic market or will they be stuck doing M&A with another underperforming asset?
- Are we completing a Gartner hype cycle event for digital health? Is this peak digital health for this cycle? Are we headed into the valley of disappointment?
- How will Covid impact Providers and other individual stock winners of 2021?
- Will big pharma finally perform? The Covid winners like Pfizer are worth watching to see what happens next
2022 will bring its share of surprises. Simple extrapolations from 2021 are likely to bring us pain. Trust only movement.
Bob Teague, MD
Chief Medical Officer
Green Room Technologies
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