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Healthcare is in the midst of a digital shift. Artificial intelligence offers physicians providers an new resource when making decisions, new data streams promise hyper-personalized treatments and digital therapeutics evangelists see are hawking the novel treatments as a companion, or even a replacement, to traditional biologic treatments. All in all, it’s a future that hopes to empower the individual while streamlining care and cutting costs — but only if pharma and other established players can identify its challenges and properly embrace what’s to come.

“The ecosystem has shifted, and it’s put more power into the hands of people who give the data, more power into the hands of the patients,” Dr. Ameet Nathwani, chief medical officer and chief digital officer at Sanofi, said yesterday to a packed room at BIO 2019 in Philadelphia. “[That] is a good thing, but we in the industry have to find out what is our role in that journey.”

Avoid mistakes from the past

Nathwani said that pharma has often fallen short with most promising innovations because it did not consider the ecosystem into which they would be introduced — take, for instance, the industry’s development and launch of therapies that required multi-hour infusions prior to infusion clinics becoming commonplace in health systems. The modern equivalent, he explained, is uncertainty as to whether or not the biologic treatments currently undergoing clinical trials will still make sense within the data-driven care ecosystem to come.

“Ask yourself, ‘Are people treated the same way that they are in your trial by the time the drug is actually approved and priced in the markets?” Nathwani advised. “Try and predict within three or four years after your product is available, how are people going to be treating their disease, how are patients expecting to be managed, and is that the same way that you’re developing your drug. Because if it isn’t, more people are going to ask the question: Well, this is great, you did your trials in five or six years in a very traditional manner, but in those five or six years … [patients] managed at home, there’s digital biomarkers, there are new devices that are probably used, the patient’s journey is probably completely different. If you have a more traditional approach, will your data still fit in that new model? I would ask yourself those questions now, and have those scenarios built in as you develop your drugs.”

Another consideration is growing presence of AI in everything from drug development to clinical decision support, he continued. On the one hand, there’s no reason for pharma not to lay the groundwork for tools that can address its biggest drivers of cost and inefficiency.

“My first message to everyone who is in our industry right now is to use technology to enable your trials, your conventional work,” he said. “We should be looking at that — how do we find patients, how do we codify them, how do we do the trials a completely different way? The technology is not there today, but we should maybe look at conducting trials more efficiently because the cost of R&D is still huge across our industry, and I think that’s ripe for disruption."

Much like other industries, however, healthcare is not immune to the broader threat AI and automation bring to the traditional workforce. Even beyond careful data governance, thoughtful system design and other efforts toward building responsible and transparent AI, Nathwani said it was important for pharma to begin preparing its people for the culture shift.

“The question is, how do we retool a generation to become more data driven, much more oriented to that,” he said. “We have a big program that we just kicked off internally to get our organization digitally literate to start with, and then we have to focus on building new capabilities. We certainly cannot hire everyone we need to, there’s already a shortage in the world of data engineers and data scientists … It’s a major problem, I don’t have a solution. It’s a society problem as well.”

Friend, not foe

And then there’s the question of the new kid on the block: digital therapeutics. For Nathwani and Sanofi, the maturing sector doesn’t necessarily represent a threat to the traditional business of biologic-based medications. Rather, he said, pharma companies should be carefully watching these smaller digital companies for signs of which parts of its business could be disrupted or replaced.

“We just have to be mindful. It’s the same as any other competition coming in, except it’s just very different and we have to have a different mindset,” he said. “A digital therapeutic can be a friend or a foe, we just have to open our eyes to the fact that competition is coming from new angles that we otherwise would not have considered. Our approach and response should be equal: Let’s embrace it, understand what it can do. If the patients are going to benefit in the end, that’s great for everyone. If we can’t differentiate our drug from a digital therapeutic we have a different problem, because I think digital therapeutics will be faster, they’ll be quicker, they won’t have the same safety burdens that you would encounter with our own drugs.”

That’s not to say that adopting these new modalities will be simple. While many digital therapeutics lack the adverse events of biologics and therefore may seem low risk to develop, there are are a number of logistic and regulatory unknowns that won’t be easy to untangle.

“The number one [risk to pharma] is just the complexity of developing these technologies,” he said. “Just imagine, when you develop a biologic drug and you make a slight modification, you have to go through this whole process. Just imagine that in the software world, where software changes over time. What’s the IP of it, can you IP a software? Well, actually, the regulations are not that clear and so there’s software’s copyright, and then what’s the generic version of it?”

Again, Nathwani said that pharma companies need to put more effort into investigating and anticipating which digital therapeutics or tools will drive the paradigm shift. To do so, he suggested that organizations should take a deeper look into the platforms being developed by tech companies in and out of the immediate space and, if it makes sense, follow their lead.

“There’s a number of tech companies working in this space. Take a scan of it and see how many other people are actually interested in those disease areas and see what they’re doing,” he said. “We’re very good at scanning [for] other biological competitors and understanding who’s developing similar products and similar drugs in the same ecosystem. We’re not very good at anticipating what are the technologies that are being developed that could fundamentally shift the ecosystem.”

Cutting costs, providing relief

Beyond simply keeping up with the changing landscape, Nathwani said that preparing for and embracing these new patient-friendly technologies is all but mandatory to combat ballooning price tags. As the cost of managing chronic conditions and delivering treatments is threatening to prohibit the development of novel treatments, he explained, any opportunity for pharma to remove costs from the system can’t be overlooked.

In 1993, Ruth Riechl, the new restaurant critic for the New York Times, penned a memorable review of Sirio Maccioni’s elegant Manhattan restaurant Le Cirque (which closed, at least temporarily, in January 2018). Riechl described two distinct experiences she had at the establishment, first as an anonymous diner, then as a recognized Times food critic; in the first instance, she received a bad seat after a long wait, was treated rudely, then served food that was (relatively) mediocre. But once she was recognized as a VIP, she was duly treated like royalty – felicitous seating, solicitous service, and sublime food. In presenting these experiences together, Riechl highlighted both the typical meal experience of most diners as well as the transcendent experience that was possible. (I went to Le Cirque in the mid-80s to celebrate my high school graduation, in my pre-low-carb days; while I can’t remember where we sat, the food, particularly the legendary potato-wrapped bass, was delicious).

It occurred to me that in many ways, innovation at large pharmas can be experienced very similarly – so often, disappointing and stifling, but occasionally, under the right circumstances, transformative and elating.

This dual-nature of pharma innovation may explain both why so many innovators are repelled by large pharma companies, yet some – including those focused on digital and data – are deliberately seeking out opportunities in these corporations.

In contrast to big drug companies, the appeal of startups is easy to understand – the self-actualization, the sense that your individual contribution not only matters but is essential, the feeling of David vs Goliath, the allure of significant upside, both in terms of impact (disruption, making the world a better place, etc.) and financial return.   You can really get a good feel for this by watching the HBO Theranos movie, The Inventor, where you can see how so many people were drawn to the startup for this powerful combination of reasons. According to this documentary at least, Theranos offered all these elements, lacking only an actual, functional product and an achievable plan to create one.  (My thoughts on Carreyrou's Theranos book, Bad Blood, are here.)

What’s interesting to me is the increasing number of well-trained, innovative people I seem to be running into, particularly on the digital and data side, who are coming to large companies after spending time in health tech startups, not because they’ve somehow given up on their dreams, but rather because, in some ways, they’re more serious about them, and are seeking more than the superficial accouterments of tech startups (so brutally described in Disrupted, by Dan Lyons). Moreover, these innovators are joining large companies with eyes wide open; they recognize the very real, and highly problematic challenges large companies have with agility and decision-making. Nevertheless, it seems like these innovators (at least the few I’ve met) hunger for the chance to really make a difference in the application of tech to health and drug discovery and development, to work towards a result not twitter-worthy but FDA-worthy, in the context of a well-resourced and credible organization capable of responsibly delivering it.

(Disclosure/reminder: as a corporate VC, I arguably have a foot in both pharma and startup camps.)

The Bad News

First, the bad news. The equivalent to entering Le Cirque as an anonymous patron in 1993 is joining pharma and trying to innovate against the grain. Everything is arrayed against you.

Large organizations tend to be remarkably risk-adverse, essentially because they have an established, successful enterprise and generally worry more about the downside risk of any given opportunity then the upside possibility it could represent. The implicit calculation is pretty simple: one screw-up could bring the whole organization down, while one striking success is unlikely to move the needle all that much. In contrast, startups tend to have very little to lose, and if they’re lucky and/or good, a lot to gain – hence their view of risk is quite different.

To be sure, in most large organizations, no one wants to inhibit innovation -- at least not explicitly. Innovation, like failure, is something to publicly cherish and visibly celebrate – the kind of thing that’s abstractly good for an organization to value, but generally not needed or welcome in your operational group, where you’re already plenty busy trying to get defined tasks completed, thank you very much.

But even if you’re skeptical about innovative proposals, to operate successfully in large, highly matrixed organization, you need to maintain generally cordial relationships with as many people as possible. The result is what I first wrote about in 2011, when a senior pharma executive who had recently transitioned to industry from a top Harvard hospital remarked to me that:

“his greatest shock upon joining the business world, the thing he was least prepared for, wasn’t the business vocabulary, the timelines, the quarterly expectations of wall street analysts – none of the above.  Instead, it was dealing with the passive aggressive behavior he discovered everywhere around him.”

It’s a phenomenon I’ve described as “innovation dissipation,” where no one explicitly says “no” to a new idea, it just winds up ping-ponging through an organization until it eventually peters out.

Recently, a colleague offered what I thought was an astute explanation for this phenomenon: “Why spend political capital saying ‘no?’” he asked me. He’s right. The savviest, most senior players in complex organizations seem especially adept at this, politely taking meetings and pursing their lips while listening thoughtfully, and then suggesting several follow-up meetings they know full well aren’t likely to lead anywhere.

It turns out, there’s even a phrase for this mindset: “trust the process.” This may not have started out as cynical in spirit, but in practice, in a large organization, it basically means let the process play out, and don’t try to rock the boat by interfering. The result – as Safi Bahcall brutally describes in Loonshots (my WSJ review here, and my more detailed discussion of this exact point here) – is a culture where everyone is highly attuned to the (perceived) views of those at the apex of the hierarchy, and original, orthogonal, or non-incremental perspectives will struggle to be heard. That’s the system, and often the fate of bottom-up innovation within it.

At this point, would be innovators out there might be ready to don their Allbirds, sling their Herschel backpacks over their shoulders, grab their Sightglass lattes, and head off the to closest WeWork.

Not so fast. I’ve recently spoken with several health tech innovators who actually did something more or less like this early in their careers, then quite deliberately choose to take their talents to large pharma companies with many of the liabilities enumerated above. What were they thinking?

The Good News: The Three Rs

Turns out that, like VIPs dining at Le Cirque, innovators who find themselves aligned with and integrated into pharma strategy may be treated to an exceptional experience. According to several such well-situated innovators, large, incumbent companies have a lot going for them; in particular: resources, redundancy, and results.

The resource aspect is fairly obvious: when a large company truly commits to a particular strategy, approach, or technology, they are able to pursue this goal in a deep, remarkably thorough way, deploying people, capital, and leveraging (as well as acquiring) institutional know-how. Example: a few months ago, I heard a senior pharma oncology leader describe the way they were approaching a particular category of high-priority targets, and it was mind-blowing in scope, staggeringly comprehensive. Multiple options were systematically evaluated at almost every step in the process – truly the “mutually exclusive, collectively exhaustive (MECE)” concept applied to a particular area of biological discovery. Offerings from many startups were considered at each of these stages, and it was hard not to be struck by the observation that while a small company could potentially optimize one particular solution or approach, the large pharma could effectively afford to choose from among these to pick the best one.

The second, often underappreciated aspect that several innovators kept returning to is the redundancy and depth you see in big pharma; I was regaled with stories of how, in startups, you often have only a single person in a key area like legal or regulatory, and you are disproportionately dependent on their expertise, not only in terms of what they know, but also their ability to recognize their own gaps. Obviously, there is a huge emphasis in startups in hiring excellent people, but in many ways, startups operate largely without a net, a precarious situation which can, and often does, prove disastrous to young companies.

The last, and in some ways most important difference between startups and large companies is that at the end of the day, many startups just need to look promising enough to justify an acquisition or an IPO – sizzle with the promise of steak. But at a large company, the buck stops with you in many ways; your business depends not on the glamor or glitz of an emerging technology, but on actually getting it to work, and getting it to market. Thus a buzzy startup like Stemcentrx could make billions for its investors, yet ultimately fail in the hands of the pharma company who acquired it and tried to bring the products to market. The jury still seems to be out for the early CAR-T companies (including Juno, acquired by Celgene [itself acquired by BMS], and Kite, acquired by Gilead). (Disclosure: my wife works at Gilead though not in oncology.)

Just as academia tends to attract researchers who pursue novel science, and biotech startups often attract researchers keen to turn raw science into promising therapeutics, pharma attracts many researchers with the determination and patience to see raw science and promising therapeutics through to approval and into the clinic. Their mission is achieving clinical impact at scale, and it’s a powerful draw for some innovators.

Bottom Line

Pharmas are attractive for innovators pursuing approaches that are strongly endorsed by senior leadership and reasonably welcomed by the operational areas of the organization. The way some pharmas are working through the complex supply-chain logistics required for delivering CAR-T therapy or gene therapy at scale offer striking examples.

On the other hand, pharma organizations generally prioritize caution over agility, and incremental change over radical new approaches. Thus even innovation welcomed by the C-suite (like a lot of the original digital and data efforts) can run into the grindstone when those in the trenches can’t see the benefit, and experience only burden.

In general, large pharmas, like other big companies, are likely to remain generally resistant to profound innovation, though they will embrace and really go after specific opportunities they view as adequately validated or promising. Such traction requires explicitly endorsement and constant, active support from the top echelons of management if the approach is to even have a chance. Meanwhile, detached innovation initiatives reliably garner transient publicity but tend to achieve little durable organizational impact.

Researchers have launched a clinical trial to develop a breath test, analysing molecules that could indicate the presence of cancer at an early stage.

This is the first test of its kind to investigate multiple cancer types.

[This] technology is the first to test across multiple cancer types, potentially paving the way for a universal breath test. - Professor Rebecca Fitzgerald

A cancer breath test has huge potential to provide a non-invasive look into what’s happening in the body and could help to find cancer early, when treatment is more likely to be effective.  

The Cancer Research UK Cambridge Centre is running the PAN Cancer trial for Early Detection of Cancer in Breath* in collaboration with Owlstone Medical** to test their Breath Biopsy® technology.

Breath samples from people will be collected in the clinical trial to see if odorous molecules called volatile organic compounds (VOCs) can be detected.

Professor Rebecca Fitzgerald, lead trial investigator at the Cancer Research UK Cambridge Centre, said: “We urgently need to develop new tools, like this breath test, which could help to detect and diagnose cancer earlier, giving patients the best chance of surviving their disease.

“Through this clinical trial we hope to find signatures in breath needed to detect cancers earlier – it’s the crucial next step in developing this technology. Owlstone Medical’s Breath Biopsy® technology is the first to test across multiple cancer types, potentially paving the way for a universal breath test.”

When cells carry out biochemical reactions as part of their metabolism they produce a range of VOCs. If their metabolism becomes altered, such as in cancer and various other conditions, cells can release a different pattern of VOCs. The researchers aim to identify these patterns using Owlstone Medical’s Breath Biopsy® technology.

The researchers in the trial will collect samples from 1,500 people, including healthy people as trial controls, to analyse VOCs in the breath to see if they can detect signals of different cancer types. The clinical trial will start with patients with suspected oesophageal and stomach cancers and then expand to prostate, kidney, bladder, liver and pancreatic cancers in the coming months.

The trial is recruiting patients to Addenbrooke’s Hospital in Cambridge who have been referred from their GP with these specific types of suspected cancer. They will be given the breath test prior to other diagnostic tests. Patients will breathe into the test for 10 minutes to collect a sample, which will then be processed in Owlstone Medical’s Breath Biopsy laboratory in Cambridge, UK.

By looking across cancer types, this trial will help unpick if cancer signals are similar or different, and how early it’s possible to pick these signals up. Some people will go on to be diagnosed with cancer, and their samples will be compared to those who don’t develop the disease.

If the technology proves to accurately identify cancer, the team hope that breath biopsies could in future be used in GP practices to determine whether to refer patients for further diagnostic tests.  

Billy Boyle, co-founder and CEO at Owlstone Medical, said: “There is increasing potential for breath-based tests to aid diagnosis, sitting alongside blood and urine tests in an effort to help doctors detect and treat disease. The concept of providing a whole-body snapshot in a completely non-invasive way is very powerful and could reduce harm by sparing patients from more invasive tests that they don’t need.

“Our technology has proven to be extremely effective at detecting VOCs in the breath, and we are proud to be working with Cancer Research UK as we look to apply it towards the incredibly important area of detecting early-stage disease in a range of cancers in patients.”

Almost half of cancers are diagnosed at a late stage in England***. This highlights the importance of early detection, particularly for diseases like oesophageal cancer where only 12% of oesophageal cancer patients survive their disease for 10 years or more.

Rebecca Coldrick, 54 from Cambridge, was diagnosed in her early 30s with Barrett’s oesophagus, a condition where the cells lining the oesophagus are abnormal – often caused by acid reflux. Out of 100 people with Barrett’s oesophagus in the UK, up to 13 could go on to develop oesophageal adenocarcinoma****.

Rebecca Coldrick said: “About 20 years ago I developed acid reflux, and I began to live on Gaviscon and other indigestion remedies. I went to the doctors and shortly after I was diagnosed with Barrett’s. Every two years I have an endoscopy to monitor my condition.”

Monitoring patients to find those at high risk of developing a cancer, like oesophageal, is very intrusive for patients, who may not even develop the disease. Rebecca Coldrick decided to take part in the PAN Cancer trial for Early Detection of Cancer in Breath. A non-invasive test using this technology could help to further differentiate those likely to develop oesophageal cancer from those less likely to develop the disease.

She added: “I was very happy to take part in the trial and I want to help with research however I can. Initially, I thought I might feel a bit claustrophobic wearing the mask, but I didn’t at all. I found watching the display on the computer during the test interesting and soon we were done, without any discomfort.

“I think the more research done to monitor conditions like mine and the kinder the detection tests developed, the better.”

Dr David Crosby, head of early detection research at Cancer Research UK, said: “Technologies such as this breath test have the potential to revolutionise the way we detect and diagnose cancer in the future.

“Early detection research has faced an historic lack of funding and industry interest, and this work is a shining example of Cancer Research UK’s commitment to reverse that trend and drive vital progress in shifting cancer diagnosis towards earlier stages.”

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Drugmakers like GlaxoSmithKline and Novartis have been making big plays to hire executives without pharmaceutical experience as they try to modernize an industry lagging in its approach to technology and customer experience.

Joe Jimenez, who stepped down as CEO of Novartis in February, is a prime example. Before taking a leadership role at the drugmaker in 2007, he had no pharmaceutical experience except for a stint as an AstraZeneca board member. Prior to that, he ran Heinz in Europe, selling ketchup and other consumer packaged food brands.

Here's what he brought to the table:

1. Speed. "If you think about pharma, they operate on very long product cycles," Jimenez said. "The thing I was able to bring was a sense of speed and action that wasn't innate in the company because it was a science-based organization that worked on such long lead times."

2. Digital innovation. Novartis is now known as a drugmaker that's willing to try new things. It was one of the first companies to talk up the benefit of value-based pricing agreements between health insurers and pharmaceutical companies, and it's been a pioneer in the field of digital therapeutics.

"I'm convinced that the intersection of biology and technology is going to be where there will be a step change in better patient outcomes than just with pharma alone," he said.

Earlier this month, the drugmaker announced two initiatives: a partnership with Pear Therapeutics to develop digital therapeutics for schizophrenia and multiple sclerosis, and an expanded alliance with Science 37 to conduct clinical trials using telemedicine in an effort to lower trial costs.

3. A consumer approach. In mid-2017, Novartis hired Bertrand Bodson, former exec at Sainsbury's, a British supermarket chain, with deep experience in e-commerce, as its first chief digital officer. He's charged with the company's digital transformation in three areas: how the company innovates, operates and the manner in which it sells its products. He also now reports directly to current CEO Vas Narasimhan.

E-commerce is "one area where pharma will be looking outside the four walls of pharma," Jimenez said. "You're going to still see the majority of leaders in the healthcare industry come from healthcare. But at different levels of the organization, you will see a lot more entries from other industries like technology to companies that are trying to digitally transform themselves."

During the years of Jimenez's tenure at Novartis, several pharmaceutical companies began enlisting non-healthcare execs. Last month Under Armour exec Kurt Kendall joined GlaxoSmithKline as chief insights and analytics officer. In fact, GSK's new CEO Emma Walmsley spent most of her career at L'Oreal. Sally Susman held communications roles at the Estee Lauder Companies and American Express before getting to Pfizer in 2007.

Other functions like procurement, human resources, finance, and most notably supply chain are also more likely to bring in new entrants during an era that's being shaped by Amazon-like customer experience expectations.

Jimenez's words of advice to pharma's newcomers?

Learn the science as quickly as you can.

"The toughest part was learning the science and ramping fast enough so that I could add value on the innovation side, in terms of deciding where we were going to place bets and resources," he said.

For more information, please visit: https://spark2018.health .

This year (2018), the Social Health Startup Bootcamp is teaming up with MIT Hacking Medicine, Abelson Taylor, HCB Health and JUICE Pharma to bring you HealthSpark 2018 -- a 1.5 day health tech innovation event, including the biggest Barracuda Bowl pitch contest that we have run to date and some amazing prizes for the winners. 

EVENT: HealthSpark 2018

DATE: March 11th--12th, 2018

LOCATION: MAX’s Underground (part of MAX’s Wine Dive)

REGISTER: On Eventbrite

URL: https://healthspark2018.com 

Our four themes for HealthSpark 2018 are:

Biosensors and Digital Therapeutics

AI and the Future of Healthcare

Hacking Healthcare

Scaling Health Tech Startups

If you are a health tech startup and would like to participate in our Barracuda Bowl (Health Tech Startup Pitch Contest), please submit an entry here.

Here’s the (almost) final agenda for HealthSpark 2018:

Day 1: 

Biosensors and Digital Therapeutics

Scarlet Shore (Verily) - Empowering People to Own Their Health Data

Dr. Tom Luby (JLABS, Texas) - TBD

Jenny Barnett (Cambridge Cognition) - Alexa, how is my brain today?

Barracuda Bowl #1 - Top 2 teams move on to finals on Day 2

AI and the Future of Healthcare

TBC: Amazon - Future of Machine Learning

Ed Leibowitz (BD Digital Health) - Is a SmartBot Your New Doctor?

Alexandra Philp Reeves & Dr. John Reeves (emojiHEALTH / Conversation Health) - Are Chatbots the Future of Healthcare?

Barracuda Bowl #2 - Top 2 teams move on to finals on Day 2

Hacking Healthcare

Eugene Borukhovich (Bayer G4A) - Hacking Corporate CultureBayer

Brian Rosnov (Philips HealthWorks) - Don’t do it alone – the importance of an eco-system

Dr. Michelle Longmire (Medable) - Is Blockchain the Elixir For Clinical Innovation?

Barracuda Bowl #3 - Top 2 teams move on to finals on Day 2

Day 2: 

Scaling Health Tech Startups

Mark Liber (StartUp Health) - State of Digital Health Funding 2018

Erik Halvorsen, Ph.D (TMC Innovation) - Digital Health Myths versus Realities

Panel: TBD - Tales from the (Health Tech Startup) Trenches

Emily Tower & Noah Lowenthal (Abelson Taylor) - The Pitch: Selling Your Disruptive Health Startup