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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

Everly Health is gearing up to partner with a leading home cancer testing company to offer its early-detection home cancer test to members of employer health plans, the company tells Erin exclusively.

Why it matters: Besides giving Austin-based Everly Health a potential foothold in clinical testing, the deal serves as an early test of its (newish) enterprise division for employers and health plans. 

The division, Everly Health Solutions, could serve to lock elbows with large pools of employees and beneficiaries, a welcome addition to the company's existing, mostly consumer user base.

Driving the news: The pandemic-fueled boom in home testing crowded the playing field with businesses including Ro, Amazon and most recently Labcorp, which launched a new home testing platform last week.

Everly Health subsidiary Everlywell already sells a direct-to-consumer fecal immunochemical test for cancer that looks for hidden blood in the stool, which may be an early sign of colon cancer. 

Flashback: Everly Health got its start as Everlywell in 2015.

In 2021, Everly scooped up three businesses — the national clinician network PWNHealth, home testing company Home Access Health and fertility and pregnancy company Natalist.

By the numbers: Everly Health is currently valued at $2.9 billion, according to PitchBook.

Its latest infusion of venture capital came in March 2021 in the form of a $200 million Series E round.

The company's revenue grew 300% in 2021, Everly CEO Julia Cheek previously told Axios.

💭 Erin's thought bubble: In addition to giving Everly a presence in clinical testing, the deal shores up its national clinician network and underscores several trends that will dominate the digital health sector in 2022: 

A proliferation of at-home testing and diagnostics services.

The continued M&A-driven consolidation of health tech companies large and small.

The addition of B2B divisions by companies that started out as direct-to-consumer operations.

What they're saying: Everly's move into B2B operations is a smart one, analysts and industry observers say, but it will come with challenges.

"Right now the employer budget is the best budget and the hottest budget in digital health," Steven Wardell, a growth consultant to health care companies, tells Erin.

That said, employers haven't yet taken a noticeable interest in at-home testing, so Everly will have to do a fair amount of education to prove its utility.

"Sometimes new arrivals get beachfront property in Malibu, sometimes they get arrows in their back," says Wardell.

📪 What we're watching: Will Everly's beta test portend more activity for the company in the clinical home testing space? We'll be keeping an eye on our mailboxes.

1 big thing: Everly brings testing home

Illustration of a repeating pattern of IV drips with random ones highlighted. 

New York-based Thirty Madison and women's-focused digital health startup Nurx, based in San Francisco, have agreed to merge under the Thirty Madison brand, the company's executives tell Axios.

As part of the stock deal, Nurx CEO Varsha Rao will join the company as head of Nurx.

Why it matters: Digital health consolidation wave? Try tsunami. 

As public markets tighten their belts on digital health, mergers and acquisitions will rule the months ahead, and this is only the latest example.

In 2021 alone, there were 574 total M&A deals in the health tech sector, up 44% from 2020, according to a report from CB Insights.

Details: Thirty Madison's deal with Nurx gives the combined company significantly more heft in the digital health sector:

More than doubles its number of active patients to 750,000 from 350,000.

Boosting its B2B presence by giving Thirty Madison access to Nurx' relationships with pharmacy benefits managers.

Adding reproductive and sexual services to its list of available treatments, which currently includes hair loss, migraines, allergies and digestive issues.

"We met Rao in the Nurx office and the first three values listed on their wall were the same as ours: Patient first, better every day and one team," says Thirty Madison president Michelle Carnahan. "It was a real values connection."

By the numbers: Thirty Madison was last valued at $1.04 billion, according to PitchBook.

Since it launched in 2017, it's raised over $210 million.

Nurx, founded in 2015, has raised $110 million, according to Carnahan, and was last valued at $322.5 million, according to PitchBook.

The combined company expects to bring in $325 million in revenue by year's end and have 1 million active patients, says Carnahan. 

Reality check: The "house-of-brands" strategy presents some potential challenges in the digital health sector, including long-term leadership issues and difficulties turning a profit, analysts say.

Bringing in a company's existing leaders presents the age-old problem of too many cooks in the kitchen. "(Those leaders may eventually) want to take another swing at the entrepreneurial piñata," says Lisa Suennen of Manatt Health.

Assembling an army of brands — especially when those companies may not be profitable — may also present difficulties maintaining trust and could risk duplicative efforts, say Suennen and Natalie Schibell, a health care analyst with Forrester.

"You can’t add a bunch of unprofitable businesses together and somehow get a profitable one without a lot of focus and some pain," Suennen adds.

Flashback: In January, Thirty Madison told Axios Pro it was expanding into two new condition areas — sleep and dermatology — and had hired new leaders for those verticals.

Considering that Nurx has a significant dermatology offering, it will be interesting to watch how these plays come together.

The bottom line: Alt-hip-hop group Jurassic 5 put it best with their 1999 ode to the classic children's game Concentration, and we added a health tech twist:

"Consolidation, consolidation is the game. Keep the rhythm, or you'll be out of the game..."

In less nostalgic words, "I think we'll see more and more roll-ups of vertical care delivery 'systems,'" says Suennen.

2. The BFD: The consolidation tsunami

Symplr today closed its $340 million acquisition of Midas Health Analytics Solutions, Symplr's 15th acquisition in the last six years and 10th under its current majority owner. 

By the numbers: Midas, acquired from Conduent, puts the health care operations technology and SaaS company on track to generate $240 million to $260 million EBITDA for 2022, a source tells Sarah.

The price tag equates to a modest 11x EBITDA multiple, the source says, adding that Symplr's EBITDA margins are close to 50%. 

Why it matters: Symplr, backed by Clearlake Capital and Charlesbank Partners, has emerged as an aggressive acquirer of everything touching health care operations. 

That has included governance, risk management and compliance (GRC) solutions,  as well as workforce management, contract management offerings and more.  

With Midas, Symplr now aims to address a void in the market around patient safety and outcomes.

Be smart: The beauty of a consolidation strategy in the GRC-plus-plus market is you don't find a lot of hospitals that want yet another vendor. 

Health systems are buying a variety of solutions, and these aren't typically optional purchases. 

The argument? The more pillars of GRC and operations management you have to offer, the more relevant you become. 

Another prolific acquirer with scale to watch is TA Associate's RLDatix, which is focused exclusively on health care GRC. 

What they're saying: "If I'm in Microsoft or Oracle's shoes, this is a conglomeration of point solutions rather than a massive market in which they can step over overnight," one source told Sarah late last year. 

Catch up quick: Symplr was valued around $3.5 billion-plus when Charlesbank took a minority stake last summer, according to sources.

Subsequently, Santa Monica-based Clearlake completed a single-asset deal for the company that moved it into a continuation pool in January. 

The result? With access to an additional $1.6 billion in equity capital, Clearlake scored more time and capital to grow Symplr.

Flashback: In October 2018, when Clearlake took a majority stake in Symplr, sources then put enterprise value at about $550 million.

Its largest acquisition under Clearlake so far is TractManager, which valued the business north of $500 million, sources said then. 

The bottom line: Now that its majority owner has pressed the reset button, expect Symplr to remain an aggressive acquirer.

3. Clearlake's Symplr rides the M&A train

Illustration of train car silhouettes connected by red crosses.

Expressable, a provider of virtual speech therapy, completed a $15m Series A round led by F-Prime Capital and joined by existing investors  Lerer Hippeau, NextView Ventures and Amplifyher Ventures. https://www.expressable.io/ 

Boston Technology Research, a validation and compliance company for health care and life science companies, raised $15m in Series A funding led by Insight Partners and joined by LRV Health, NewStack Ventures and others. https://www.bostontr.com/ 

VisuWell, a maker of a primary and specialty care telemedicine platform, raised $10m in Series B funding led by Fulcrum Equity Partners with support from existing investors Longmeadow Capital, PJC and UltraGroup. https://visuwell.io/ 

Epicore Biosystems closed an oversubscribed $10m Series A round from Chevron Technology Ventures, Alumni Ventures and seed investor Joyance Partners, joining existing backers including PepsiCo, the U.S. Air Force, U.S. Army, National Institutes of Health and NextFlex. https://www.epicorebiosystems.com/ 

Reveri Health, a San Francisco-based self-hypnosis startup, raised $1.8m in seed funding led by InReach Ventures. www.reveri.com

Vesey Street Capital Partners and MD Healthcare Partners announced they will partner to build a health care services platform. http://www.vscpllc.com/ 

Doximity, a maker of a social networking platform and news feed for clinicians, has agreed to acquire Amion, an on-call physician scheduling site, for $53.5m in cash plus up to $29m in earnouts and equity compensation over four years. https://www.doximity.com 

Imagia Cybernetics, an oncology care-focused AI company, is merging with Canexia Health. The combined company raised C$20m in funding from BDC Capital’s Women in Technology Venture Fund, Desjardins Capital and PacBridge Capital. https://canexiahealth.com/

ModMed, a specialty-specific EHR platform backed by Warburg Pincus, acquired Klara. https://www.klara.com/

nThrive, a health care revenue cycle management and SaaS company backed by Clearlake Capital Group, agreed to acquire PELITAS. https://www.pelitas.com/ 

DirectMed, a Poway, Calif.-based portfolio company of NMS Capital, acquired LBN Medical, a Danish reseller of aftermarket diagnostic imaging equipment. www.diretmedparts.com

YPrime, a Malvern, Pa.-based portfolio company of Flexpoint Ford, acquired Tryl, a Portland, Ore.-based provider of patient engagement solutions. www.yprime.com

CooperSurgical (NYSE: COO) agreed to buy the reproductive health portfolio of Indiana-based medical device maker Cook Medical for $875m. http://axios.link/1XzY

4. Deals o' the day

Vida Health, maker of a chronic virtual care platform, named Krysti (Lan Chi) Vo and Richard Frank heads of psychiatry. Vo was previously the medical director of telehealth psychiatry at Children's Hospital of Philadelphia, while Frank was chief innovation officer at myNexus.

Brightline, a telemental health startup for kids and teens, named Chris Mack commercial vice president. Mack was previously regional vice president of client sales at Teladoc Health. 

5. It's Personnel

🐪 Happy hump day, health tech readers. Find out Sarah's culture fix for the week at the end of today's email.

Situational awareness: The same day we shared Accenture's plans in health tech, Deloitte unveiled a $750m investment in a new business called Converge by Deloitte. 

🎭 Sarah is hitting the theater this week, attending Four Quartets, a solo show expressing a poet's wartime epic, on the BAM stage in Brooklyn. 

🙏 Thanks for reading Axios Pro Health Tech! Please ask your friends, ski buddies and colleagues to sign up.

February 09, 2022

1 big thing: Everly brings testing home