In a challenging economic market, some medical device companies are facing cost-cutting measures and layoffs. Still, others see an opportunity as procedure rates and tangled supply chains continue to recover from the pandemic.
“We’re very lucky in that our firm philosophy is about building enduring companies,” said Elena Viboch, a partner at venture capital firm General Catalyst, which has backed prominent startups in healthcare and technology including Livongo, which sold to Teladoc for $18.5 billion in 2020, health insurance startup Oscar, and musculoskeletal care provider Sword Health. The firm is currently investing its Fund XI, which has raised more than $5 billion.
“We’ve been through multiple market cycles before, giving [companies] that consistency and stability,” Viboch added.
Viboch discussed some of Cambridge, Mass.-based General Catalyst’s recent investments and shared her predictions for 2023:
1. Continued use of AI in radiology and adoption in pathology
Radiology has been the first “vertical” for AI in healthcare, because the formatting and sharing of data has been standardized, Viboch said. Companies including Tel Aviv-based Aidoc have made strides by fitting into clinician workflows and providing immediate value that doctors can see, she added.
Aidoc received multiple clearances from the Food and Drug Administration for triage software to flag potential cases of pulmonary embolism, brain aneurysm and other serious conditions. General Catalyst was a lead investor in the company’s Series C funding round in 2021.
“You’re not replacing the physician,” Viboch said. “You’re enabling the physician to provide higher quality care to patients.”
Viboch sees pathology as another field where AI could be used, although the pivot to digital tools is less advanced compared to radiology. She expects pharmaceutical companies to partner with digital pathology companies where the need is greatest, leading to broader adoption.
2. Ongoing workforce changes
Hospital staffing shortages remain a challenge in 2023, as hospitals struggle to hire enough nurses to keep up with staff turnover, or in some cases, cut jobs.
“One thing that is here to stay unfortunately is workforce transformation,” Viboch said. “Even though the peak pandemic is over, health system burnout and health care provider burnout is here as well.”
This has a knock-on effect on medical device companies when procedures are delayed. But companies that make software directed at hospitals are finding interest in tools that can help make work more efficient, enhance consistency of care, or reduce burnout.
“It’s an opportunity for software and it’s an opportunity for companies that take a user-first approach: thinking about what are a physician’s goals and how they accomplish them today,” Viboch said.
3. Technology plays a bigger role in clinical trials
In late 2022, General Catalyst made an investment in Vial, a startup contract research organization that uses technology to build faster, high-quality clinical trials. Earlier this month, it also invested in Faro Health, a company that makes software to help researchers design clinical trials. Currently, most clinical trial protocols, which provide the instructions for how a trial will run, are written from scratch.
“A huge trend during the pandemic was the decentralization of clinical trials,” Viboch said. “The protocol comes before that. … Everything downstream is determined by the protocol.”
The software helps researchers quickly design and run clinical trials that achieve their goals, are accessible to patients and are cost effective. “It’s about knowledge-sharing and designing better protocols,” Viboch said.