Clinical Trials Arena

Daily Newsletter

11 August 2023

Daily Newsletter

Signal: Wave of layoffs in medical start-ups exposes underlying vulnerability

Babylon, Galera and more are cutting staff, serving as a reminder that failure is easy in the medical world.

On 7 August, artificial intelligence (AI)-powered digital health company Babylon Health announced it was s huttering operations in the US, with 94 staff to be laid off. The UK-based firm has faced a number of difficulties this year as losses have spiralled out of control.

The final blow to US operations was dealt when its planned merger with competitor MindMaze fell through. Once the darling of the predicted telehealth wave, the company has said it will focus on its home market, but even its future in the UK is uncertain.

Meanwhile, 11-year-old biopharma company Galera Therapeutics has also announced a staff cut of 70% after the FDA rejected its experimental treatment for avasopasem, used to treat radiotherapy-induced severe oral mucositis, which causes difficulties in eating and drinking.

Curebase, a San Francisco-based digital clinical trials (DCT) start-up that was named in the top 6% of Y Combinator’s Top Private Companies list for 2023, has also announced layoffs amid a "refocus" that involves it scrapping its DCT business in favour of further developing its software offering.

The list goes on. Start-ups have high failure rates at the best of times, and even large medical companies often spend millions only for a lack of FDA approval or another regulatory hurdle to kill a product before it sees the light of day. The combination of the two leaves medical start-ups highly vulnerable.

Investors, too, are feeling less confident in the market. Venture capital funding for pharmaceutical companies by the beginning of August was 39% lower than the same time last year globally. Asia-Pacific, the second-largest market for funding, had a drop of 56.3%. This seeming lack of trust may indicate that the problems are deeper than just a few would-be unicorns going bust.

Our signals coverage is powered by GlobalData’s Disruptor data, which tracks all major deals, patents, company filings, hiring patterns and social media buzz across our sectors. These signals help us to uncover key innovation areas in the sector and the themes that drive them. They tell us about the topics on the minds of business leaders and investors, and indicate where leading companies are focusing their investment, deal-making and R&D efforts.

Healthcare companies are hesitant to invest in the metaverse

The COVID-19 pandemic pushed the healthcare industry to rapid digitalization. Increased use of telehealth, telepresence systems, remote diagnostics, predictive AI, and wearable technology is changing how healthcare is delivered and improving patient outcomes. Emerging technologies such as AR and VR are becoming increasingly routine for professional training, surgical assistance, and treatment of psychological and neurological disorders. In the pharma and medical devices industries, AR, VR, and AI are rapidly accelerating drug discovery and manufacturing and generating supply chain efficiencies. New digital opportunities will look to build upon disruptive technologies. However, affordability is a limiting factor to widespread adoption. Per GlobalData estimates, the metaverse market is expected to grow at a CAGR of more than 33% between 2023 and 2030. Although metaverse technologies could reinvent healthcare approaches and bring new experiences to healthcare providers and patients, adoption is still at an early stage. There are currently few use cases in the healthcare industry. The metaverse needs to overcome major challenges for healthcare, including regulation and data privacy concerns. Evidence of proven use cases and participation by a critical mass of users are imperative to drive a shift in metaverse investment.