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BFD Expert Voices - Health Tech Deals

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Marigold Health, a behavioral health company with a unique approach to substance use disorder, secured $6 million in fresh funding led by KdT Ventures and Felicis Ventures, Marigold CEO Shrenik Jain tells Erin.

Why it matters: Behavioral health startups are seeing a spike in investor interest as issues like pandemic-era burnout and job loss contribute to a rise in anxiety and depression, and Marigold is the latest example. In January alone, deals in the space include:

Silicon Valley-based Lyra raised $235 million and acquired ICAS World, tipping its valuation to $5.56 billion.

San Francisco- and London-based Big Health collected $75 million, bringing its total raised funds to just under $130 million.

New York-based Mantra Health, whose services are focused on students, raised $22 million after being founded last year.

How it works: Marigold's approach is distinct from the majority of behavioral health offerings on the market. 

The company gives people access to text-based, peer-monitored, anonymous group therapy and uses a combination of natural language processing and machine learning to keep tabs on client progress.

That can be an appealing onramp for people who might not have access to other evidence-based treatments for SUD, such as medication-assisted treatment, Jain tells Axios.

Marigold partners with providers including primary care clinics, substance use treatment providers and health systems, and Jain says the company has had a lot of success working with Medicaid plans.

Details: The company plans to use the seed financing to build its peer workforce and to offer its services in three additional states — Maryland, Rhode Island and Delaware — via new provider partnerships.

For example in Rhode Island, Marigold is teaming up with Wood River Health Services, a large provider of medical and social services, to help integrate mental health treatment into its primary care programs. 

Flare Capital Partners, Epsilon Health Ventures, Tau Ventures, SpringTide Investments and Stand Together Ventures also participated in Marigold's seed round. 

The bottom line: As the virtual behavioral health sector continues to expand, different forms of therapy will gain increased attention from investors and providers. That includes but is by no means limited to:

Treatments based on CBT, the primary type of evidence-based therapy that Lyra and Big Health provide virtually.

Moderated peer support, the type of therapy Marigold is focused on.

“Groups increase the capacity of a single certified peer by an order of magnitude,” says Jain. “As we expand nationally, our goal is to build the most diverse and qualified peer workforce."

🌻 1 big thing: Marigold secures its seed

Illustration of a watering can pouring dollar bills.

Confirming a previous Axios report, Kinderhook Partners unveiled a $500 million investment in Physician Partners, a value-based primary care physician group and managed service organization.

By the numbers: Sources told Sarah in January the PE firm had backed the Tampa-based company in a deal valued at around $2.5 billion. 

Kinderhook’s investment underwrote approximately $130 million of EBITDA, sources said then.

Moody's separately disclosed that proceeds from Physician Partners' $650 million of senior secured first-lien credit facilities combined with $500 million of new equity and $1.6 billion of rollover equity would be used to fund the transaction.

Why it matters: Investor enthusiasm behind value-based care models and platforms are here to stay, even as public market assets in this world see volatility. 

Other recent value-based care bets include Bain Capital's majority investment in InnovaCare Health in November, through which it joined Summit Partners as an investor. 

Kinderhook earlier in January inked a $105 million investment in AbsoluteCARE, a Baltimore-based value-based primary care platform.

More recently, Axios reported that TPG invested in Summit Partners' Pediatric Associates, although only around a quarter of the pediatrics-focused primary care group's revenue comes from capitated payments, a source tells Sarah.

One fun thing: The relationship between Kinderhook managing director Chris Michalik and Physician Partners dates back decades. 

Michalik is a former chairman and director of WellCare Health Plans, where Physician Partners' recently appointed CEO Michael Polen previously spent 15 years. 

2. The BFD: Another value-based care play

Illustration of a red cross multiplying into many red crosses. 

Peter Durlach, chief strategy officer for digital health company Nuance, is convinced that a "massive wipeout" is coming for the digital health sector, he tells Erin — but more is at play.

Context: Before joining Nuance, the AI-powered clinical documentation company Microsoft recently agreed to buy for $19.7 billion, Durlach founded two health startups and served as a University of Pittsburgh Medical Center entrepreneur in residence.

Why it matters: While previous phases of the digitization wave have ushered in innovation in areas like medical records and imaging, the current phase is seeing venture dollars pour into consumer-facing tools, many of which benefit the affluent.

That may be driving a wedge in the sector and accelerating inequity between clinicians and the so-called worried well.

“We’ve never seen a digital health phase like the one we’re in now,” Durlach says. “There are 30 startups for every problem statement you could imagine.”

Less attention is being paid to technologies designed to help clinicians, who are facing unprecedented demands on their time, attention and emotional capacity.

Flashback: Industry observers have raised the idea of a digital health bubble — and forthcoming burst — every few years since funding for the sector began an unprecedented and uninterrupted climb in 2011.

The pandemic has placed new cards on the table this time around.

What they’re saying: While consumer-facing health tech tools proliferate and dominate the public markets, there’s a need for innovation that benefits clinicians.

“Health tech is partying, health care is hurting,” startup adviser and practicing physician Benjamin Schwartz notes on LinkedIn.

“There aren’t a lot of folks invested in building great tools for providers,” Tanay Tandon, co-founder and CEO of remote patient monitoring company Athelas, tells Erin. “A lot of Silicon Valley tech dollars have gone towards building this kind of adjacent system for consumers.” 

The bottom line: The markets may soon begin to reflect this divergent reality, be it in the form of a popped bubble and consolidation wipeout or slow and steady trickle of M&A activity and fewer public market entries.

“We’re on a trajectory that will accelerate some disruption and we’re definitely going to hit the trough of disillusionment or some kind of consolidation,” says Durlach.

“Digital health is due for a market correction,” says Schwartz. “A more sensible, sustainable approach that … synergizes with traditional care and values reality over hype will emerge.”

3. A "massive wipeout" coming for health tech

Illustration of a syringe with a wave inside of it

Komodo Health is hinting that a public debut is on the horizon. 

Driving the news: After raking in significant funding and clinching two acquisitions in 2021, Arif Nathoo, co-founder and CEO of the life sciences data startup, tells Fierce Healthcare that Komodo ultimately intends to join the proliferation of recent technology and digital health public debuts. 

"We believe that our mission and thesis is something that the public markets need to hear and they need to have the ability to invest in. We believe very strongly in that. And so over the course of this year, you'll expect to see us take steps to get closer to the public markets," Nathoo tells the publication. 

Komodo, which last year attained a $3.3 billion valuation following a funding round led by Tiger Global and Casdin Capital, says the traditional IPO route versus a SPAC deal is a more likely scenario. 

The latest: Nathoo's comments come alongside Komodo's Monday announcement of a partnership with the Chan Zuckerberg Initiative. The partnership will provide patient advocacy organizations access to its data-driven software and intelligence to enhance rare-disease research. 

The bottom line: Ripe for disruption, the life sciences industry is driving major innovation in health care and the investment community is eager to participate. 

Whether it's Komodo, Tempus, Aetion or Evidation, more capital is flowing into the intersection of three categories: data analytics and tools, digital health and biopharma, and pharma services.

4. Komodo's public company aspirations

Illustration of a weekly pill dispenser box with a newspaper called "daily dose" in each compartment.

League, whose platform-as-a-service powers health care consumer experiences, raised $95m. TDM Growth Partners led the investment, with participation from Workday Ventures and existing investors, pushing its total funding to date over $205m. https://league.com/us/ 

Vynca, a Palo Alto-based provider of care solutions for those with serious illnesses, raised $30m in growth funding. Questa Capital led, and was joined by Generator Ventures, First Trust, 4100 Group and OCA Ventures. www.vyncahealth.com 

Summas Global, a virtual specialist platform, closed a $22m investment round led by Danaher Corp. co-founder and executive committee chairman Mitchell Rales and the Glenstone      Foundation. The investment brings total capital raised to $50m. https://www.summusglobal.com/ 

First Dollar, a digital health wallet for insurance members with tax-advantaged plans, raised $14m in Series A funding led by Blue Venture Fund. https://www.firstdollar.com

Apollo Medical Holdings Inc. (Nasdaq: AMEH) agreed to buy Orma Health, a Palo Alto-based remote patient monitoring platform. http://axios.link/yzub 

Becton, Dickinson completed the acquisition of Cytognos, expanding into post-treatment monitoring for cancer and other chronic diseases. https://www.cytognos.com/ 

Glooko, a diabetes-focused remote patient monitoring company, acquired xbird, a Berlin-based developer of AI-powered diabetes technologies. Glooko has raised over $230m from Health Catalyst Capital, Realization, Canaan Partners, Georgian Partners, Novo Nordisk, Insulet and Mayo Clinic. Xbird backers included Cascara Ventures. http://axios.link/F6UU 

ConvaTec, a U.K.-based medical device company, agreed to acquire Triad Life Sciences, a wound-healing therapy startup, for an initial payment of $125m with potential future performance-based payments bringing the total purchase price to $450m. http://axios.link/KGlM 

5. Deals o' the day

Evidation, a digital health testing, research, and data analysis company, named Raymond Cosey chief financial officer. Cosey previously served in the same position at companies including IBM, Nike, and Neato Robotics.

CloudMD's Daniel Lee stepped down as CFO effective Jan. 31, 2022, for personal reasons. Sean Carr, former SVP Finance, has been appointed interim CFO of the health care software company.

Capital Rx, a digital pharmacy benefits manager, hired Angela Jones as medical director to provide clinical support and consultation for its users. Jones previously served as an OB-GYN at Pampa Regional Medical Center.

The Public Health Company, which helps businesses and health systems contain disease outbreaks, promoted David Markman from acting director of public health to vice president of business development.

Sema4, an AI-powered health intelligence company, named Jerry Conway senior vice president of market access from Scipher Medicine, where he served in the same role.

6. It's Personnel

🐯 Happy Year of the Tiger, health tech enthusiasts.

Situational awareness: It's the first day of Lunar New Year and the start of Black History Month. 

👋 Investors, what strategies are you exploring — not only to diversify talent pools internally within your firms and externally across portfolio company leadership teams — but also to create a more inclusive culture? Write to us. 

🚨This just in: PointClickCare is buying Audacious Inquiry. Tune in tomorrow for financial deets and more. 

🚲 Stock and TV drama notwithstanding, Peloton has helped both Sarah and Erin stay sane on those cold and icy days when they don't manage to leave their homes. 

By the numbers: Sarah has tallied 21 rides since her Peloton arrived over the holidays. 

✔️ Thanks for reading Axios Pro Health Tech! Please ask your friends, colleagues and #PeloCrew to sign up.

February 01, 2022

🌻 1 big thing: Marigold secures its seed