Surviving Digital Healthcare... "A BM to Prove Value Is Necessary"

On the 11th, at the Conrad Hotel in Yeongdeungpo-gu, Seoul, Kim Chi-won, Managing Director of Kakao Ventures, is giving a presentation at 'JNP Medi Connect 2022'. / Photo by Lee Chun-hee

[Asia Economy Reporter Lee Chun-hee] Although the digital healthcare industry is rapidly growing, the recent deterioration of global investment sentiment has led to an increasing number of companies experiencing funding shortages. To overcome this, it was pointed out that not only making good products but also having a business model (BM) that properly recognizes value and a solid investment attraction strategy are necessary.

At the 'JNP Medi Connect 2022' held on the afternoon of the 11th at the Conrad Hotel in Yeongdeungpo-gu, Seoul, opinions were shared on strategies for both making investments and attracting investments under the theme of 'Digital Healthcare VC Investment Keywords.'

Kim Chi-won, Managing Director of Kakao Ventures, emphasized the importance of BM, saying, "In the healthcare business, the person who uses the product (patient), the person who decides to use it (doctor), and the person who pays (insurance) are all different," adding, "It is a really complicated and difficult business that must satisfy all three." He said that for a successful business, since doctors and insurance must ultimately be satisfied, "what ultimately matters is the impact on the final treatment outcome."

Kim cited examples such as acquired immunodeficiency syndrome (AIDS) and national cancer screening, advising that "even if the same technology is developed, it is important at which stage and for which patients it is used," and that through this, proper value verification for reimbursement should be done. He gave examples of successful commercialization cases where value was easily proven: 'HeartFlow,' which complements existing tests, and 'IDx-DR,' which has streamlined existing screening.

HeartFlow's AI-Based Arterial Blood Flow Prediction Technology (Photo by HeartFlow)

HeartFlow diagnoses coronary artery diseases such as angina using artificial intelligence (AI). The most definitive test for this disease is 'coronary angiography,' but it is considered a high-cost and high-risk test. Therefore, in many cases, computed tomography (CT) is used to determine whether the blood vessels are narrowed, but it was problematic that it could not actually determine if blood flow was impaired. However, by inputting CT images into HeartFlow, HeartFlow can indicate blood flow levels, making it possible to know everything with just CT.

Kim said, "Coronary angiography is a necessary test, but there was a concern that many patients undergo it unnecessarily," emphasizing, "The important thing is not the accuracy of HeartFlow's interpretation, but that many expensive and risky tests can be avoided." In fact, HeartFlow estimates the accuracy of blood flow calculation to be about 80%. Kim added, "From the insurance perspective, as the number of people not undergoing expensive tests increases, reimbursement rates decrease," and "Based on this, although still provisional, HeartFlow has received reimbursement from Medicare, the U.S. public insurance, and is also covered by insurance in the UK and Japan."

IDx-DR is a technology where AI performs retinal diagnosis, which was not well conducted despite its high efficacy. Kim said that unlike almost all AI technologies that "assist doctors," IDx-DR is different. IDx-DR diagnoses diabetic retinopathy (DR), a major complication of diabetes. Diabetic patients must have retinal photos taken annually to check for DR. However, since they must visit ophthalmology separately from internal medicine that diagnoses diabetes, many diabetic patients do not properly receive retinal photography.

Kim explained, "Instead of installing it in ophthalmology, IDx-DR can be installed in internal medicine clinics where diabetic patients come to get their medication, allowing them to receive retinal exams," adding, "It enables patients to undergo tests they previously did not despite proven value." He emphasized, "This makes value verification easier," and "Most AI technologies that have received reimbursement in the U.S. have provisional reimbursement, but IDx-DR received formal reimbursement because its value verification was simple."

On the 11th, Park Gye-hoon, Head of Division at Aju IB Investment, is giving a presentation at 'JNP Medi Connect 2022' held at Conrad Hotel in Yeongdeungpo-gu, Seoul. Photo by Lee Chun-hee

Along with such business models, specific advice on investment attraction strategies was also given. Park Gye-hoon, Head of Division at Ajou IB Investment, who gave a presentation on 'Changes in the Bio Investment Environment and Bio Startup Fundraising Strategies,' analyzed the recent bio industry investment situation, saying, "Globally, venture investment scale is rapidly decreasing," and "In the second quarter, venture funding is concentrated on new modalities such as cell and gene therapy (CGT) and messenger RNA (mRNA), and there is also significant interest in discovery platforms."

Regarding the domestic market, he said, "Investment in later stages is increasing, and the public offering market has slowed considerably due to overseas influences," but offered a hopeful analysis, saying, "Looking at the recent bio sector, Nasdaq is gradually rising after bottoming out in the second quarter, and KOSDAQ is also stabilizing and rising."

Regarding funding strategies for biotech and startups in response, Park emphasized, "New risks have emerged recently, and investors' perspectives have changed, leading to new standards," adding, "It is necessary to secure a 'runway' for how long you can operate without investment, while also having appropriate valuation and segmented milestones."

This content was produced with the assistance of AI translation services.