Tech enablement is having a transformative impact on the healthcare sector, helping to reduce costs and improve outcomes, says Permira principal Dimitrios Tzivelis.
How would you define technology enablement in the healthcare sector, and why is it such an important theme in today’s market?
For us, tech enablement means the integration of advanced technologies into every aspect of the healthcare value chain in order to drive efficiency, accessibility and quality of care. Tech enablement is front-and-centre of global healthcare today as the sector faces immense pressure to reduce costs, while simultaneously improving outcomes. Tech enablement can help achieve those dual objectives in multiple ways. Artificial intelligence, machine learning and robotics can, for example, help to reduce the time and cost associated with areas such as drug discovery and development, regulatory approvals, and patient care.
Technology can also support the evolution of precision medicine by enabling the development of targeted therapies based on genetic information. It can also automate routine tasks, thereby streamlining processes in healthcare services and increasing accessibility, particularly in remote or underserved areas. Meanwhile, tech enablement is also an important lever at the micro level, enhancing a company’s value proposition, allowing it to gain market share and to grow at an above-market rate, while improving its overall unit economics.
Where are you seeing the most interesting investment opportunities in this space, and what does it take to unlock them?
Technology is a key theme across everything that we do at Permira. Not only is it the sector where our funds have historically deployed the most capital, but it is also a value-creation lever that we leverage significantly when it comes to supercharging the growth of companies in every sector that we focus on, from consumer to services and, of course, healthcare.
In the context of healthcare, our strategy focuses on two verticals and two horizontals. The verticals are speciality pharma, and medical devices and life sciences tools; the horizontals are outsourcing and healthtech, which are then overlayed against both verticals. Fortunately, we are seeing attractive opportunities across all four buckets. For example, AI can be used to drive the value proposition in pharma services companies by helping to accelerate the drug development process for customers.
Meanwhile, when it comes to medical devices, we are seeing significant opportunities to utilise artificial intelligence software, as well as robotics-assisted surgery systems, to augment the differentiation of the medical devices that our portfolio companies develop, ultimately improving outcomes for end patients. We also see opportunities to invest behind software solutions that automate processes, saving time and money for customers, while providing quality information that can be used to support both managerial and patient decision making.
Finally, AI can be used to provide better services to patients and improve productivity of healthcare systems. For example, Permira-backed Australian diagnostic imaging services provider I-MED entered into a joint venture with AI partner harrison.ai to create annalise.ai, which is working with I-MED’s 20-plus years’ worth of data to allow radiologists to process x-rays faster and more accurately, driving productivity improvement in a sector where there is a major shortage of radiologists worldwide
What are some of the challenges associated with tech enablement within healthcare, and how can these be overcome?
The first key challenge is the cultural and regulatory backdrop. Healthcare is, of course, a highly regulated, risk-averse sector with significant sensitivities around patient protection. When you are dealing with patients’ lives, only 100 percent is good enough, so the regulatory and cultural backdrop behind that can slow down the development and adoption of new technologies. Changing that will take time and needs to be managed carefully.
The second challenge that is particular to healthcare involves access to and protection of data. There is a huge amount of data generated within the sector across patients, payors, providers and pharma, but accessing and structuring that data, while ensuring it is fully protected, creates significant barriers to entry. At Permira, our funds are making significant investments in tech enablement in our portfolio companies to demonstrate that positive outcomes which help to change the culture of the sector and break down barriers, while turbocharging company growth, can be achieved.
Could you share any other examples from your healthcare portfolio where you have put tech enablement into action?
I would point to Quotient Sciences, which is a global contract research organisation (CRO) and contract development and manufacturing organisation (CDMO). The company already has a high-quality service offering in that it combines research with development and manufacturing. Quotient is now leveraging AI, together with the masses of proprietary data it has accumulated over many years of projects, to optimise its activities, thereby delivering drugs faster and saving time (up to 18 months) and cost for clients (in the double digits millions of savings).
We also took another pharma services business, Ergomed, private in late 2023. Approximately half of Ergomed’s revenues stem from pharmacovigilance – the detection, assessment and prevention of drug side effects and other safety issues. In this area, the company has invested significantly in automation and AI implementation over the past 12 months to improve its workflows, increasing efficiency and execution as a result.
Finally, in the context of medtech, I would point to Corin, a UK-based orthopaedic implant specialist that serves customers globally. The company has augmented its already-strong implant offering through tech enablement in two primary ways. Corin is at the forefront of revolutionising technology-enabled hip replacements, having developed an AI-supported system to optimise the placement of hip implants that is personalised to the patient. Additionally, Corin has developed a robot-assisted surgical platform, Apollo, which creates a personalised knee replacement plan specific to each patient.
To what extent do you believe that tech enablement in the healthcare sector contributes to value creation?
As I mentioned before, tech enablement is fundamental to every value-creation plan that we underwrite. Firstly, technology helps to improve a company’s value proposition through delivering a better product and/or service and saving time and money for customers, thereby boosting its competitive position, driving market share and above-market growth rates.
Secondly, tech enablement is helping companies to streamline important parts of their operations and become more efficient, in turn delivering a better service to customers while generating incremental cashflows to be reinvested in growth. Using tech enablement to do what is best for customers ultimately feeds through to a company’s competitive edge, value proposition and financials as a result.
How transformative a role do you believe AI will have in the healthcare sector, and what are the key opportunities and challenges?
Within the realm of tech enablement, AI is clearly an area of real excitement. It is a lever that can be employed to generate value within businesses right across the healthcare value chain. As I have mentioned, AI is being used to expedite drug development at Quotient Sciences, to support diagnostic imaging and to optimise the placement of medical devices at Corin, and to improve productivity in healthcare services plagued by a shortage of qualified personnel, like we see with I-MED. AI has a very important role to play in the sector, and I think that role is only going to increase.
Digging into one of the use cases, we see a big opportunity in the drug development process, where the cost of developing a drug has significantly increased over time and timelines are very long (for example, on average it takes $2.6 billion and 13 years to bring a drug to market), with a long-term downward shift in ROI within pharma R&D. AI is already helping to reverse that trend by optimising the drug discovery process by, for example, allowing researchers to screen out potential molecules more effectively.
Early results are promising, with Phase I success rates for some AI-discovered drugs ahead of traditionally discovered ones, albeit still on a small sample, according to a recent Boston Consulting Group study. Additionally, AI is already helping to reduce clinical trial times by 5-10 percent, according to a recent analysis by McKinsey.
Additionally, the challenges relating to the use of AI are the same as those that we face regarding tech enablement in general: regulation, data and cultural mindset. There is a very low margin for error in this industry, so the regulatory burden is, rightly, going to be high. For AI to work its magic, access to data is critical. Inherent risk aversion in the cultural mindset of the sector is going to slow the rate of adoption. That said, I am optimistic about the role that AI is going to play in saving costs and improving outcomes. It certainly won’t replace the need for highly qualified personnel, but it will augment their effectiveness.
Aside from AI, are there any other emerging technologies or advances that you think are going to play an important role in the future?
Precision medicine is an interesting area. There are still many diseases without a treatment, and in the context of tightening budgets across healthcare systems globally, there is more and more pressure to develop effective therapies that have a high value proposition for the patients they treat. Greater availability of genome data combined with significant tech advancements is changing the treatment landscape dramatically, and the move towards precision medicine and personalised treatments is going to prove extremely exciting over the next few years, benefiting both healthcare systems and patients.
