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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

If you're not waking up every day thinking about health care, that's a big problem, according to Geeta Nayyar, the chief medical officer of Salesforce. "Every business is a health care business now," she tells Erin.

Why it matters: Salesforce's roughly two-decade history in health care notwithstanding, the pandemic has vaulted the company's role in keeping employees safe and healthy to new heights.

The company recently raised the curtain on its latest product, Safety Cloud, which gives companies a platform to manage COVID-19 testing and vaccine history, worker re-entry and event planning.

Two large companies are currently using Safety Cloud: Accenture and Traction on Demand, a dedicated Salesforce consulting firm and app developer, Nayyar says.

Driving the news: On day 694 of the pandemic, businesses are beginning to transition back to in-person environments, infectious virus be darned.

"There’s a lot of anxiety out in the world and embracing health care is now everyone’s business," says Nayyar.

"I think that’s the next step in pandemic — how do we lead through it, put it kind of on the side, and go about our lives?" she adds.

The intrigue: Several large, non-health care businesses have made big bets in the sector of late, only to exit soon after (cough, cough: IBM), so is Salesforce playing a long game, or placing a series of shorter-term bets?

Salesforce is "in it to win it," Nayyar says. "We're very much committed to continuing to invest in health care."

To be clear, Salesforce isn't just placing a few bets in health and safety: Several high-profile payers, providers, and medical device makers use its customer relationship management (CRM) platform, and it also has a cloud offering specific to health care.

What's next: As the transition "back to normal" begins, tools for vetting people's vaccination history and conducting and recording regular tests will become table stakes.

Virtually every business with plans to return to some kind of in-person environment will need integrated systems for securely collecting, storing, and updating health data. 

"I’m sure we’ll talk again when there’s a new variant," says Nayyar.

🚀 1 big thing: Salesforce's COVID rocket

Illustration of a syringe going into the Salesforce logo.

In a 180-degree turnaround, Patient Square Capital is taking SOC Telemed private in what appears to be a bargain deal, just 15 months after the telehealth company joined the public markets through a SPAC merger.

Why it matters: SOC Telemed (TLMD) is one of many digital health companies that seemed to have benefited from the IPO party that was 2020 and 2021.

Telehealth companies in particular made up a good chunk of the go-public fever, with businesses including Amwell, Hims & Hers and One Medical dominating headlines.

Flashback: TLMD bought acute telehealth provider Access Physicians last April for $194 million. 

The deal was intended to boost the company’s ability to provide specialty consults and virtual care services for more than 700 hospitals across 47 states.

The big question: Amid talk of a digital health bubble, is TLMD's turnaround a portent of things to come?

Maybe, but maybe not: TLMD has been in a unique position because of its deep liquidity overhang, with no path to resolution. 

As much as other digital health stocks have been decimated, many don’t have TLMD's immediate funding needs (consider Amwell, for example, had nearly $800 million in cash at Q3's end.)

"You need to have some unique need from a buyer or seller perspective to get this done," one source tells Sarah.

🗯️ Our thought bubble: Besides its poor public market performance, TLMD lacks glaring issues.

That could give Patient Square, a health care-focused PE firm, the advantage, so long as the long-term trends they're betting on remain in place. 

By the numbers: Patient Square says it plans to acquire TLMD for $3 per share, a roughly 366.1% premium over yesterday's closing share price.

That implies a valuation of approximately $340 million based on calculations — a significant discount to SOC Telemed's initial enterprise value of about $720 million when it went public in Oct. 2020. 

Shares popped more than 330% on the news in trading this morning. 

The deal includes a 30-day “go-shop” period that lets TLMD solicit and consider alternative third-party acquisition proposals.

Yes, and: TLMD's stock has been under enormous pressure, with shares declining 83.7% in 2021 and retreating another 52% this year (and it's only February). 

This lines up with the recent volatility being faced by other public telehealth companies including Amwell and Teladoc.

What they're saying: Several analysts view the deal in a positive light, noting that by announcing the deal now, TLMD avoids further downside risk related to challenges presented by the Omicron variant.

"We like [chief executive officer] Chris Gallagher, and we believe this is a good move for the business and clients of TLMD," BTIG's David Larsen and Aron Corin say in an investor note.

"As a private business," they add, "TLMD will be more able to invest in internal operations ... without having to focus as much on quarterly earnings progression."

Details: Backed by Warburg Pincus, TLMD merged with Healthcare Merger Corp., a SPAC co-sponsored by Shulman Ventures and MTS Health Partners. 

TLMD works exclusively with health systems and hospitals to leverage specialists in fields including neurology and psychology. 

Unlike rivals Teladoc and Amwell, TLMD lacks a consumer-facing product. 

The bottom line: The brakes are on as the digital health IPO fete of 2020 and 2021 slows, and M&A is the name of the game for 2022. 

2. The BFD: SOC Telemed's 180°

A computer keyboard and mouse attached to a medical case.

Tech may represent half of the word "health tech," but without people, even the best digital tools will never make it to the market, Andy Mychovsky notes.

Why it matters: While we're obviously bullish on the "tech" part of health tech, digital innovations alone won't spell success for a company.

Adopting new technology typically requires trust, and building trust almost always requires human relationships.

"Most companies will require B2B partnerships with some sort of healthcare enterprise," Mychkovsky adds. "Not impossible, but harder to cold call your way in."

🗯️ Our thought bubble: We'd also add that in health care, even the right combination of technology and people won't necessarily be enough. Other things to consider:

Choosing the right indication — that is, the right disease or condition for the company to home in on — based on things including market size and potential rivals in the space.

Ensuring your tool or platform adds to, rather than detracts from, existing workflows.

Generating evidence in the form of clinical trials or peer-reviewed studies that back up your claims. 

3. A formula for health (tech)

Screenshot of a Tweet by Andy Mychkovsky that reads: Multiple repeat healthcare entrepreneurs have told me the same advice:  Your Network = Distribution  Distribution > Tech

Future, a digital fitness company that matches coaches with users, raised $75m in funding. SC Holdings and Trustbridge led the round, joined by celebrity investors including Fabletics cofounder Kate Hudson, her brother and actor Oliver Hudson, golfer Rory McIlroy, the NFL’s J.J. Watt and Thirty Five Ventures, which is NBA star Kevin Durant’s firm. http://axios.link/7v2y

Koya Medical, a med tech company focused on lymphatic and venous care platforms and devices, raised $26m in Series B financing led by 3x5 Partners. They are joined by new investors Asahi Kasei Ventures and Cadence Healthcare Ventures and existing investors Arboretum Ventures and Scientific Health Development, among others. https://www.koyamedical.com 

Jasper Health, a maker of a cancer care navigation platform, raised $25m Series A round led by General Catalyst with participation from Human Capital, W Health Ventures, Redesign Health, and 7wireVentures, bringing Jasper’s total funding to roughly $31m. https://www.hellojasper.com 

Getlabs, an infrastructure provider for remote care delivery, raised $20m in Series A funding led by Emerson Collective and the Minderoo Foundation with participation from Tusk Venture Partners, Labcorp, Healthworx, Byers Capital, Anne and Susan Wojcicki (23andMe, YouTube), Eric Kinariwala (Capsule) and Mattieu Gamache-Asselin (Alto Pharmacy). https://getlabs.com/

Codoxo, a provider of health care artificial intelligence solutions, closed a $20m oversubscribed Series B round led by QED Investors with support from new investors Sands Capital Management and 111 West Capital. https://www.codoxo.com/

Neura Health, a virtual neurology clinic that links patients to neurologists and includes symptom monitoring and diagnostics, closed a $2.2m seed round led by Pear VC, Next Play Ventures (the fund of former LinkedIn CEO Jeff Weiner) and Global Founders Capital with participation from Norwest Venture Partners, Index Ventures and angel investor Nikhil Krishan. https://www.neurahealth.co/

Lover, a sexual wellness app, raised $2m from Lerer Hippeau, Manta Ray, Global Founders Capital and FJ Labs. www.lover.io

Kindbody, a fertility startup, acquired Vios Fertility Institute and its network of clinics, giving the company a $1.15b valuation. http://axios.link/IE4s

Medable Inc., a clinical trials software provider, acquired LEO Innovation Lab’s Omhu A/S, a Denmark-based digital health company that supports patients and doctors when diagnosing, managing, and treating skin conditions. Medable will take over Omhu's mobile apps and its 38 staff members will join the company. https://www.medable.com/

Deals o' the day

Big Health, a digital mental health company, named Gabriela Perez chief commercial officer from Ovia Health, where she was executive vice president and general manager.

Clayton, Dubilier & Rice named Anand Shah operating advisor to its funds. Shah currently serves as a senior advisor to Morgan Stanley and sits on the boards of Adagio Therapeutics, Hero and most recently Big Health.  

COTA, a real-world data and analytics company focused on oncology, named Paige Whitney senior vice president of life sciences, from Aetion, where she was VP of business development.

Elation Health, a primary care-focused EHR company, named Sarah Kasten chief people officer, Lennart Lepner chief financial officer and Blake Wolff head of customer. Kasten comes from Kaplan, Lepner from AppDirect and Wolff from Salesloft.

Kalderos, a health tech company building data-driven platform tools for drug discount management, named Brent Dover chief executive officer. Former CEO Jeremy Docken will serve as chief strategy officer and maintain his position on the company's board.

Verily named Andrew Matzkin strategy lead for health platforms. Matzkin was previously a partner with the firm Health Advances.

It's Personnel

Hello, health tech readers, and happy Friday eve.

🍿 Situational awareness: After a few days of relative calm, the digital health sector is starting to pop again, and we've got the butter and salt.

🧘‍♀ Sarah made a return to in-person hot yoga this week. The verdict? Classroom studio > apartment floor, masks and all.

💙 Thanks for reading Axios Pro Health Tech! Please ask your friends, colleagues and family members to sign up.

February 03, 2022

🚀 1 big thing: Salesforce's COVID rocket