Digital Health Due Diligence

Regulatory and Clinical Check by Independent Experts

The first and most important step in any digital health due diligence is a complete regulatory and clinical review by independent third parties. This point is frequently underestimated, not because it is overlooked, but because it appears to have already been addressed: the documents sound technically convincing, the certificates are in place, the studies look solid. But technical jargon is not proof of quality. Independent experts with operational experience in approval and clinical validation can assess whether the regulatory strategy is viable, whether the clinical evidence truly meets the requirements of the relevant authorities, and whether the product delivers in clinical practice what it promises.

Realistic Planning: Resources, Competencies, Costs and Timelines

Almost every due diligence in the digital health sector reveals the same pattern: the plans are too optimistic. Timelines for approval processes are systematically underestimated, personnel costs for regulatory and clinical expertise are missing from the budget, and the effort required to build operational structures (prescription management, customer service, technical support) is regularly neglected. Sound due diligence questions not only the numbers but also the assumptions behind them: are the resources available to execute the plan? Do the key people have the necessary competencies? Are the time buffers sufficient for remediation in a regulated environment?

Comprehensive Risk Analysis: Mitigable Risks and Total Loss Risks

Not all risks are equal. A professional risk analysis clearly distinguishes between (1) risks that can be mitigated through appropriate measures, such as delays in the development process or staff absences, and (2) total loss risks that call the entire business model into question. The most prominent example in the digital health sector is approval risk: if a DiGA application fails at BfArM or CE marking is refused, the product is not reimbursable or commercialisable. This risk cannot be diversified away. Investors must explicitly identify and assess this category of risk, and ultimately decide whether they are prepared to bear it.

Conclusion

Due diligence in the digital health sector is a specialist discipline. It requires the interplay of regulatory, clinical, operational and financial expertise. Those who rely solely on classic M&A instruments systematically overlook the risks that determine success or failure in this sector.