Digital Health and Biotech Valuations: Lessons from Recent Market Shifts

The pandemic years triggered a surge in digital health and biotech valuations. From telemedicine platforms to vaccine developers, investor appetite was insatiable. Multiples skyrocketed as the world scrambled for solutions — with some firms raising at valuations that seemed untethered from fundamentals.

But when capital tightened and public markets corrected, many of those valuations collapsed. Once-hot IPOs like Teladoc and Amwell saw their market caps cut by more than half, while several biotech companies that had gone public in 2020–21 traded well below listing price. Down rounds became common, and startups that had once been investor darlings found themselves struggling for survival. Yet, through this shakeout, some resilient players emerged stronger, leaving important lessons for both founders and investors.

Take digital health. The pandemic proved that consumers were willing to adopt telemedicine at scale, but once restrictions lifted, growth plateaued. Companies like Teladoc, which traded at dizzying multiples in 2020, learned that long-term valuations depend not on pandemic-driven spikes, but on sustainable integration with healthcare systems and reimbursement models. At the same time, digital therapeutics startups that raised aggressively found themselves under pressure when payers hesitated to reimburse their offerings. Those that survived were the ones with clear regulatory pathways and scalable unit economics.

Biotech tells an equally sobering story. Moderna and BioNTech became household names, creating billions in value almost overnight. But beneath that, many smaller biotech firms discovered how fragile their valuations were when lead drug candidates failed in Phase 2 or Phase 3 trials. One example is Axovant, a once-hyped Alzheimer’s drug developer that saw its valuation crash after a trial flop, reminding investors of the binary risk inherent in the sector. Conversely, partnerships with big pharma have often been a lifeline: smaller biotechs with collaborations from Pfizer or Novartis were able to command higher valuations, even when broader market sentiment soured. In this space, cash runway often matters more than headline valuation — a company with 24 months of cash to fund trials is seen as more valuable than one with 12 months, even if both are at the same development stage.

Globally, sentiment has shifted in different ways. In the U.S., investors have become more selective, rewarding companies that combine innovation with real-world adoption. In Europe, the funding ecosystem remains active but multiples are conservative, shaped by cautious capital. Asia, particularly China and India, continues to see heavy biotech investment, though geopolitical risks cloud cross-border partnerships. In the Gulf, governments are pumping capital into digital health infrastructure, opening doors for startups that can localize and scale solutions.

What does this mean for today’s founders and investors? Valuations are being anchored less on potential and more on proof. Founders must show traction through regulatory approvals, payer adoption, or clinical milestones. Investors, on the other hand, must go beyond financial models and dive into the science, policy environment, and healthcare economics.

At Epoch Ventures, we help bridge these worlds by building valuation frameworks that account for regulatory pathways, clinical risks, adoption barriers, and capital runway. Because in sectors like digital health and biotech, valuation isn’t just about finance — it’s about strategy, science, and survival.

The digital health and biotech rollercoaster has offered a powerful reminder: markets may move fast, but fundamentals always catch up. The companies that combine innovation with discipline, and the investors who balance excitement with rigorous analysis, will define the next wave of winners.

If you’re a Biotech and Digital Health business, we can help you navigate your business reality and for investors looking to create value for their investments, we can help you pick the right investments to add to your portfolio. Feel free to reach out to us to take the conversation forward.