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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

Dental support organizations (DSOs) have for decades drawn big checks from private equity, and now investment in the technology to directly support dentists is following. 

Why it matters: Running dental clinics more efficiently is increasingly important amid today’s labor shortages and war for talent.  

DSO consolidators typically achieve synergies through a traditional buy-and-build strategy, but investing in technology can enhance value while also helping recruit dentists. 

Driving the news: Bregal Sagemount's majority investment in DentalXChange, which partner Blair Greenberg calls the “connective tissue between dentists and payers."

DentalXChange is an electronic data interchange (EDI) platform that lets dentists electronically submit claims to payers.

It also helps dental insurers ingest claims.  

DentalXChange is unique as a pure-play dental EDI, but broader platforms like Jordan Co.’s Vyne and Change Healthcare have offerings in this niche. 

Yes, and: DentalXChange is just “scratching the surface," Greenberg says, with a bigger opportunity to take data and help DSOs understand their claims and individual practice performance. 

“This piece that we provide today is the fabric of the claims space but there’s a lot more that we can do with it,” Greenberg tells Sarah. 

DentalXChange also fits with Bregal Sagemount’s focus on recurring segments largely uncorrelated to the macro environment: “Sectors that have low volatility and are increasingly adopting tech — that’s exactly what we try to find every day,” the investor adds. 

State of play: Dental tech could be about to undergo a significant period of investment as a proliferation of new companies gain traction.

A Healthcare Growth Partners report states that deal-making is picking up across four dental health IT segments: patient engagement and marketing, data-driven care, practice management solutions and payer tech and benefits. 

Practice management has seen the most activity, HGP says, highlighting Henry Schein’s eAssist acquisition and Level Equity’s Planet DDS investment.   

In recent deals of note, General Catalyst and Insight Partners in August led a $27 million Series A financing in Overjet, which uses AI to automate parts of the clinical review process.

The bottom line: New technology and automation tools are driving a much-needed cleaning of the dental industry. 

1 big thing: Dentists get their tech fillings

Illustration of a computer keyboard key with an icon of a tooth on it.

Startups prescribing mental health meds online are making (venture capital) bank, and Minded, which just raised $25 million in seed funding, is only the latest example.

Why it's the BFD: The sky appears to be the limit when it comes to interest in behavioral health, as reflected by the fact that New York-based Minded hasn't even reached its Series A yet.

$25 million for a seed round? As Macklemore might say, "That's hella dough."

Context: Medication management startups are one subsector that's seen a particular pickup of late.

That is in part thanks to a pandemic-era waiver that lets companies bypass the Ryan Haight Act, which was passed to regulate online internet prescriptions after a young man died after overdosing on Vicodin he'd obtained on the internet.

Walnut, Calif.-based Cerebral, now valued at nearly $5 billion, has attracted celebrity sponsorship in the form of Simone Biles.

San Francisco-based Brightside raised $24 million in Series A fund last May.

Santa Clara, Calif.-based Ahead, which focuses on ADHD medications, raised $9 million in July 2020 in a Series A round led by digital pharmacy Truepill. 

Yes, but: What all that dough fails to tell us is whether startups that let users get medications online are actually improving patient well-being, or whether they're functioning essentially as pill-mills.

Most of the companies in the space offer medications that can be prescribed by general practitioners at a low or negligible cost with insurance.

In comparison, Cerebral charges $85 a month, while Minded charges $65 monthly.

After Ryan Haight was waived, the industry began to deteriorate, with company leaders pressuring clinicians to prescribe increasing amounts of medications, one source tells Erin.

While Minded doesn't prescribe medications for ADHD, it does offer sleeping aids, Xanax and Ativan.

Details: Minded's seed round received a lot of support from non-traditional health care investors, including Streamlined Ventures and the founders of Bolt and Gilt.com. 

What's next: We hope to see more clinical trials demonstrating the utility of online medication management for conditions including ADHD, anxiety and depression. In the meantime...

Minded also says it is interested in prescribing psychedelics for treatment-resistant depression, though we imagine that's something of a long-term goal. 

2. The BFD: $25 million Minded seed round

Consolidation is coming for another subsector of digital health: virtual disease management, Mintu Turakhia, a cardiac electrophysiologist and the director of Stanford's Center for Digital Health, tells Erin.

Why it matters: Investors have been flocking to startups that help patients manage certain diseases remotely with a combination of connected devices and virtual coaching, but most of them only operate within one disease or category.

That's set to change, as hospitals grow weary of managing multiple contracts with a handful of providers for various conditions, Turakhia says. Kind of like what happened with employers and wellness startups.

"Virtual care is good in its current 1.0 form, but when it comes to disease management, it's still synchronous," Turakhia says. "There’s no ongoing asynchronous disease management."

Details: Catalysts for the change could come in two main forms, according to Turakhia:

Companies that offer direct disease management for a handful of the most common diseases, such as heart failure.

Companies focused on high-cost diseases that may be less common but more costly to health systems.

Context: Several startups offering one or more components of the above have raised large sums from venture backers in recent months, such as:

Silicon Valley, Calif.-based Athelas, a remote patient monitoring company that got its start in immunocompromised people, raised $132 million from General Catalyst and Tribe Capital last month.

Boston-based Medically Home, a maker of a hospital-at-home virtual care system, collected $110 million from Cardinal Health, Kaiser Permanente and Mayo Clinic — also last month.

New York-based Cadence, another RPM company, drew $100 million from Coatue Management, General Catalyst, Thrive Capital and others last December.

What's next: Expect to see existing disease management startups expand into adjacent conditions, or new companies emerge with capabilities to manage diseases across conditions.

"Little things coalesce into big things and those big things turn into platforms," Turakhia tells Erin. 

3. The next phase of virtual disease management

Automata, a U.K.-based lab robotics startup, raised $50m in Series B funding led by Octopus Ventures, with Hummingbird, Latitude Ventures, ABB Technology Ventures, Isomer Capital, In-Q-Tel and others also participating. http://axios.link/dZhE

Minded, a digital pharmacy focused on mental health, raised $25m in seed funding from investors including Streamlined Ventures, Link Ventures, The Tiger Fund, and the founders of Care.com, Bolt, RXBAR and others, along with venture debt from WTI. https://www.tryminded.com 

Epitel, a maker of a wearable electroencephalogram (EEG) to detect seizures, raised $12.5 million in Series A funding led by Catalyst Health Ventures and Genoa Ventures with support from Dexcom, OSF Ventures and others. https://www.epitel.com/

HerMD, a Cincinnati-based women's hybrid care provider focused on sexual health and menopause, raised $10m in a Series A funding round led by JAZZ Venture Partners. http://axios.link/I209 

Nabta Health, a Dubai-based women’s health care startup, raised $1.5m in new funding led by Basim Anwer, with Priya Oberoi, Sarper Tanli and Nadia Mannell also participating. www.nabtahealth.com

4. Deals o' the day

Jasper Health named Brad Fluegel and Lisa Suennen to its advisory council. Fluegel is the former SVP and chief health care commercial market development officer for Walgreens; Suennen is managing partner of Venture Valkyrie and an adviser to several venture funds.

Walmart named Amber Blackwood senior product manager of health and wellness from Lirio, where she was a behavioral researcher and product owner.

Kyruus promoted Jillian DeMaria to security program manager from technical program manager.

Incredible Health named Yair Livne vice president of product from Quora, where he held the same position.

5. It's Personnel

💸 Situational awareness: If last week was a quiet one for digital health, this (short) week is already shaping up to make up for it. Watch this space!

🌮🌴 After enjoying tacos, sun and cenotes over the weekend, Sarah is attending a wedding in Tulum's jungle today. 

✅ Thanks for reading Axios Pro Health Tech! Please ask your friends, wedding party and colleagues to sign up.

February 22, 2022

1 big thing: Dentists get their tech fillings