This article was previously published by the author on LinkedIn.
Biotechnology is an industry that focuses on novel drug development and clinical research, aimed at treating medical conditions and diseases. The biotech industry offers an opportunity to invest in tangible solutions for public health, economic security and environmental sustainability. The COVID-19 pandemic is a reality check on how our start-up ecosystem over the past several years has been focusing primarily on ventures which are working in the fields of Augmented Reality, Robotics, Machine Learning and IoT while largely ignoring biotech and health related initiatives.
The global emergency for better healthcare facilities, screening, bio-therapeutics, biotechnology, diagnostics, gene therapy, disease prevention and control has exposed how much we are deviating from the original and wanting to live in a fantasized artificial world. Ironically, the general perception of technology was related to IT and IoT only. The COVID-19 pandemic has not just been an eye opener, it has most certainly shifted our focus from augmented reality to the reality of pandemic at present where we are unable to save the lives of thousands of people who have died and more than a million people who have been infected and hanging in between life and death around the globe. The U.S., a super power of the world has now become the epicentre of the Covid-19 pandemic, and China, another super power, dealt with the pandemic with isolation and social distancing, the two very basic methods that did not need any sophisticated augmented reality techniques.
Considering the investment scene in biotech worldwide, this sector’s stocks are the highest value but high risk investment. However, we have invested very insignificantly on academic founders, and research work. The dearth of health conscious entrepreneurs and investors not keenly interested in investing in health start-ups should be blamed equally. One reason is that many academics are simply worried about stepping into the world of business because of lack of knowledge of the field. As a result, research remained confined within the four walls of these institutions. Another perspective is that, scientists are often reluctant to bring their research into a business setting because there are not many investors available who are ready to put their money in a research based start-up. Investors are always tempted to look for start-ups with a high ROI, however, investment in biotech comes with risks, in part due to the fact that many of the products being researched or developed will never make it to market or will take years before a product is available.
Biotech companies, are generally small enterprises that engage solely in R&D of medicines. These companies use biotechnology to use microorganisms and enzymes to develop large molecule drugs that can be used for a specific disease or condition. Because biotech companies mimic cellular processes, the time span from research and development is extremely long, averaging 10-15 years. Biotech initiatives also need to involve many regulatory authorities hence a delay is expected. This highlights the importance of a unique strategy for investment in biotech companies that facilitates the investors to invest in biotech firms. Post COVID-19, we might see a surge in biotech initiatives and investment due to a lucrative approach of curing communicable diseases. Along with the opportunity to make huge gains comes the potential for some very devastating losses. We now need to figure out strategies for bringing investment in biotech that offers good ROI to the investors.
Healthcare investing requires a multifaceted approach to understand the underlying drivers. One approach could be to bring pharmaceutical companies in the start-up ecosystem. These companies often spend a significant percentage of revenue on research and development (R&D) to discover new compounds and can fund research based institutions and academics.
According to World Bank, the current health expenditure (% of GDP, 2016) for China: 4.98, UK: 9.76, US: 17.07, Italy: 8.94, UAE: 3.52, and for Pakistan: 2.75. The recent release of the Organisation for Economic Co-operation and Development’s (OECD) 2019 Health Statistics — a comprehensive source of comparable statistics on healthcare systems across OECD member countries; The U.S. devotes more of its national income to healthcare relative to other OECD countries. This means that US spends more on healthcare per person than other wealthy countries. Healthcare spending is driven by utilization (the number of services used) and price (the amount charged per service). An increase in either of these factors can result in higher healthcare costs. Higher healthcare spending can be beneficial if it results in better health outcomes. However, despite higher healthcare spending, America’s recent COVID-19 crises is an eye opener. The United States ranks first in the number of biotech firms, followed by Spain, France and Korea however, US and France are the two top countries spending more on research and development (OECD, 2012). Meanwhile, China doubled its expenditure on R&D between 2008 and 2012 and became the leader spender in R&D in 2019. The way China handled COVID-19 crises and now helping other countries is exemplary.
Interestingly, in 2015, venture capital firms invested a record $16.1 billion in U.S. healthcare companies, up from about $12 billion the year before. More than half of that investment ($8.95 billion) went to biotechnology firms. There is an enormous amount of health research coming out every day but the dearth of available digital tools makes it a slow process to connect the research with the stakeholders. The efforts to integrate digital solutions have been difficult because the current system does not easily adapt to digital disruption.
Considering it a blessing in disguise, with the rise of health concerns amid the COVID-19 pandemic and economic instability, investors have started funding health start-ups, an area which was fairly ignored. Health start-ups raised $124M in venture capital funding during the last week of March 2020. One report estimated that the retail health clinic market would grow at a combined annual growth rate of 18.3% between 2019 and 2030. (MarketWatch). Due to the customer centric models, digital health solution companies are an important part of changing the healthcare system. Venture capitalists are now recognizing this opportunity and digital health start-ups have raised over $10 billion in two years, according to TechCrunch. However, the focus is still on fitness and wellness and not on diseases, contagious or communicable diseases, epidemiology, and diagnostics.
Speaking of Augmented Reality (AR), nevertheless, there is some great work that is being done specifically for health. AR works on virtual content in the form of digital imagery or sound, and being applied to 3D models and videos. AR can assist medical professionals in diagnosing, treating, and performing surgery on their critical patients more precisely. The technology can provide them accurate and real-time data. However, this is again an end-user model engagement where doctors and patients are getting connected but no significant work has been offered for research and biotechnology. Let’s take the example of Block Chain here. The most basic use of blockchain in healthcare is to facilitate tracking capability in the supply chain, from production to arrival at the retail pharmacy, it is theoretically possible to track the entire chain. By adding further functionality, and in present scenario of COVID-19, we can monitor how many PPEs, medical supplies, medicines and ventilators are available in each hospital thereby creating an efficient system to address the shortages and take actions timely in maintaining adequate stock.
Our healthcare system is at a crossroads. Many people are fed up with rising costs, long wait times and the quality of the services being offered. In Pakistan, there are many health problems and the quality treatment is limited due to poor financial, economic, and environmental conditions. Few health start-ups successfully surfaced in start-up ecosystem in Pakistan like Sehat Kahani, doctHers, Marham, CareActions and few others but they can merely a handful. Lahore-based healthtech start-up InstaCare has raised ~$140,000 (PKR 22 million) investment from Khaleef Technologies. Marham received an investment of 1.5 million dollars. However, all these start-ups are more on delivery side than on research. Healthcare is a basic and essential human need and it is more than just connecting doctors with patients. Absence of focus on our country’s talented scientists, microbiologists, virologists and biotechnologists who are the backbone of our health industry clearly shows that we only value who has a degree of MBBS while ignoring the work of researchers and technologists without whom our doctors would be unable to identify the etiological agent of any disease and prescribe the right drugs. The valuable work of our researchers and PhD health scholars need to be incorporated into the mainstream healthcare system of the country. According to the Higher Education Commission, PhD output of Pakistan between 2010 and 2014 was only 5,155 in public sector institutes and 381 in private sector institutes. These figures also shows how unappreciated we are towards research and our researchers. We need tremendous support for Health Entrepreneurship in Pakistan.
Consumers are now becoming increasingly proactive about their health due to the COVID-19 pandemic. There’s never been a better time than now for health entrepreneurs to employ B2C marketing strategies as well as B2B strategies for a greater impact and revenue generation. We need health entrepreneurs, people who share transformational mindset principles and a commitment to achieving landmark developments in health. The COVID-19 pandemic and failure to prevent loss of precious lives, is a reality check that we need to collaborate with a global network of high-quality investors, partners and entrepreneurs who share the mindset and sense of urgency to invest in biotech start-ups.
Zia S. Hasan is a community builder, trainer, microbiologist, Team Leader, Connected Women Pakistan and Director, NShield Solutions
Image by Miguel Á. Padriñán from Pixabay