Sema4 Layoffs - Are Digital Health Companies Scaling & Diversifying Too Fast?

Sema4, the AI-backed genomic and clinical data company, announced on Tuesday they were laying off approximately 250 workers, and their founder was stepping down as part of a larger restructuring. 

Why it’s Notable: 

• Sema4’s lay-offs are the most recent in a trend of digital health companies downsizing their workforce. This week alone, there have been announcements that Signify will lay-off close to 500 employees and Butterfly Network has reduced their workforce by 10%. Other lay-offs have been seen across the sector this year including Pear Therapeutics, Ro, Cedar and Carbon Health. 

• There are a number of reasons for the recent lay-offs across the digital health space.  Sema4 will be restructuring to improve their cost structure and have a more targeted commercial model by optimizing their product development strategy. Virtual care company Ro have let go of 18% of their staff and are narrowing their focus to prepare for a possible downturn. Meanwhile the weight-loss app, Noom is laying-off almost 25% of their coaching staff in a strategy to pivot towards a more structured coaching model. 

Industry Implications: 

• A root cause of cut-backs may be due to companies scaling and diversifying their portfolio too fast, resulting in a need to back-track. Pear Therapeutics, for instance, will be cutting down on the sales of new products and instead focusing on selling FDA-approved treatments with an aim to save $28m over the next 18 months. Due to the current macroeconomic situation, continuing to scale without profit is no longer an option for digital health companies. 

• Investors have already begun to focus on more commercially viable products, rather than broader investments. It is likely that investors will be more strategic, focusing investments on digital health companies that can show a return on investment of their product and profitability over time. 

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