Investing in behavioral health
Modern analyses that look at Global Burden of Disease (GBD) research place mental health disorders as the leading causes of disability worldwide.
These analyses do not solely focus on death, but also look at Disability-Adjusted Life Years (DALY) to examine the full weight of cost and disability. This is not to say that mental health-related rates of death are not high since both addictions and suicide are leading causes of death. Suicide rates have increased steadily and are a top ten killer in the United States, and the second leading cause of teen deaths. Studies by groups such as the Bill and Melinda Gates Foundation find that mental health conditions account for approximately 7.4% of the global disease burden which is more than that for disorders like HIV/AIDS, tuberculosis, and diabetes.
I don’t think discussing diseases based on organ systems is necessarily the best approach—it can leave a holistic solution off the road map—but it does provide a useful way to look at certain aspects of both problems and solutions. Put another way: we can discuss cardiac illness, in terms of an organ (the heart), yet this may limit the reality that an individual’s behavior is actually the most important factor for good cardiac health, even though our discussion isn’t focused on a person’s behavioral center (the brain).
The tremendous costs associated with mental illness haven’t gone unnoticed by investors and potential investors. In addition, the current strains and stresses on our global citizenry have mental health implications related to anxiety disorders, mood disorders, insomnia, and not surprisingly suicide (all of which are associated with natural disasters and financial stresses).
Mental/behavioral health is really a broad area with several subcategories. Interest in investment opportunities for these various subsectors abound. The ecosystem is complex and nuanced, but the ability to have significant and lasting positive clinical and economic impact is among the largest in health care.
Evidence of this interest includes recent transactions such as the acquisition of AbleTo, a tele-mental health provider, by UnitedHealth Group’s Optum subsidiary for a reported price of about $500 million. Additionally, in the first half of 2020, even in the setting of COVID-19, digital behavioral health companies raised more than a half billion dollars in venture funding. This made up about 11% of all digital health investing and is up from approximately 7% in 2019.
Behavioral and brain health are tricky. At a very high level it can make sense to use the cardiac analogy when considering what a potential investment opportunity might bring in terms of impact. When we think about cardiac health there are two basic domains: prevention and intervention. Areas considered preventive are about cardiac wellness, such as diet, exercise, blood pressure and cholesterol control. Investment opportunities can encompass fitness companies, nutrition, medications that are FDA approved, and over the counter supplements. Brain and behavioral health have all these categories too, but investors often struggle to think in similar terms because until recently mental health has not been talked about as much. Here, the prevention sector can include brain training programs and approaches like mindfulness meditation. The latter example, in particular, has received significant attention from both investors and companies. Headspace, Calm, and eMindful, for instance, have raised several hundred million dollars in total.
Interventions, on the other hand, within the cardiac world, include medications for diseases such as heart failure and arrhythmias, as well as medical devices like pacemakers. The mental and behavioral disease intervention space is similar. There are medications for a variety of conditions including major depressive disorder, schizophrenia, and the emerging “digital therapeutics” arena that can now receive FDA clearance. In fact, several digital therapeutics products have already been approved for use with substance abuse disorders, ADHD, and insomnia. This space is also receiving significant interest from investors and businesses. The companies Pear Therapeutics and Akili have raised several hundred million dollars already.
Other novel tools include digitally enabled health services. This would include AbleTo, mentioned above, as well as the companies Livongo, Teladoc, and Talkspace. These organizations are built around new ways of delivering care ranging from telephonic, to video, to text-based communications (some of these techniques can also be combined with smartphone apps). The businesses have raised hundreds of millions of dollars thus far, and as of this writing the public market returns have been staggering. Livongo and Teladoc, for example, have a combined public market value of more than $25 billion dollars without yet reaching profitability. This is a compelling indicator of how more liquid markets are viewing the tremendous unmet needs and opportunities to positively impact care and cost in the behavioral health care ecosystem.
Please note: The writer is an advisor to investors and also an independent director at Talkspace and eMindful.
