Exclusive: Lyfegen gets $8M Series A for value-based drug contracting

Value-based drug contracting software startup Lyfegen collected $8 million in Series A funding to expand its U.S. presence with a focus on specialty drugs, CEO Girisha Fernando tells Axios exclusively.

Why it matters: Specialty drugs cost vastly more than traditional medicines, often requiring special handling and administration, and account for more than half of total pharmacy spending, per a recent CVS Health report.

Details: aMoon led the round, joined by Apex Ventures. The round brings Lyfegen's total funding to roughly $10 million.

• Lyfegen has contracts with several pharmaceutical companies, including Novartis, Pfizer and Roche.
• Fernando says it also has contracts with two integrated U.S. payers, for now.

What's next: The company foresees a Series B in about two years.

• "Current market conditions require us to be resourceful and focus on value-maximizing activities," says Fernando, "but in 24 months we see a huge opportunity to raise again and cover more ground."

Context: Myriad high-cost therapies — including treatments for AIDS, arthritis, cancer and multiple sclerosis — are coming to market, sending costs skyrocketing. Value-based contracting (VBC) may help lower those costs.

• "It’s like someone put a needle in the system and it’s going haywire. It was never built to accommodate these high-cost drugs," Fernando tells Axios.
• Meanwhile, although fee-for-service contracts still dominate in drug pricing, there's been a concerted transition in recent years toward VBC arrangements.

How it works: Based in the U.S. and Switzerland, Lyfegen provides its software — comprised of real-world data on specialty drug patient outcomes — to insurers, payers and pharmaceutical companies, which use it to negotiate VB contracts and pay a fee based on the number of contracts they ink.

State of play: Investors have been pouring money into real-world data (RWD) analytics companies in recent years, fueled in part by regulatory support from the Food and Drug Administration and other government agencies. For example:

• PurpleLab, a RWD startup that provides claims and clinical data to providers, in September collected $40 million in Series B financing.
• HealthVerity, another RWD company, focused on providers, last year raised $100 million in Series D funding.

Yes, and: RWD companies Aetion, Flatiron Health, IQVIA, Syapse and Tempus last year came together to form the RWE Alliance, an industry coalition that is pushing the FDA to use such information to support its regulatory decisions.