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BFD Expert Voices - Health Tech Deals

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Revelstoke Capital Partners won the auction for Monte Nido & Affiliates, agreeing to acquire the eating disorder treatment provider from Levine Leichtman Capital Partners, multiple sources tell Sarah. 

Some of those people place a valuation around the ballpark of $725 million.

Why it matters: The COVID-19 environment fueled a spike in hospitalizations for anorexia and other eating disorders among adolescents. 

Driving the news: The Denver-based private equity shop signed the deal over the weekend, concluding a Harris Williams-run auction process that kicked off late last year, sources say.

Sources previously cited estimated pro forma EBITDA of about $50 million for 2022, (or $65 million with maturities), but one source adds that actual EBITDA is more like $40 million. 

Context: Monte Nido provides various residential treatment, partial hospitalization, and intensive outpatient programs for the treatment of eating disorders, a common comorbidity of depression and other behavioral health issues.  

Monte Nido historically slanted toward lower- and moderate-acuity patients, a more competitive care setting in contrast to high-acuity patients, but more recently diversified, sources say. 

The company invested in higher acuity patient populations through its acquisitions of Walden Behavioral Care in September 2021 and Arizona-based Rosewood Center for Eating Disorders in October 2020, the latter through which it also entered the Southwest market.

Monte Nido as of July encompasses five different brands with 47 programs in 14 states.

Yes, and: The Monte Nido deal comes after Revelstoke in January put its money behind another area of behavioral health, investing in substance abuse treatment provider Crossroads Treatment Centers alongside CDPQ.

State of play: Monte Nido follows the joint acquisition of industry leader Eating Recovery Center by Apax and Oak HC/FT last fall. (ERC for its part has diversified into mood & anxiety disorder treatment.)

Sources at the time told Sarah the deal was valued at approximately $1.4 billion, with the company projecting $91 million of pro forma mature EBITDA for 2021. 

Apax's Andy Cavanna and Oak HC/FT's Andrew Adams then spoke to the shortage of good providers in the market, emphasizing the value of having an omnichannel approach that encompasses both in-person and virtual care — particularly when it comes to addressing the country's access problem. 

The bottom line: Sale processes seem to be taking a little bit longer in today's turbulent market, but we continue to see private equity and venture capital flock to various pockets of behavioral health — be it Vistria Group's quiet youth mental health bet or AI-driven digital startup Wysa landing $20 million in Series B funding.

Claire Rychlewski contributed to this report. 

1 big thing: Revelstoke inks eating disorder treatment deal 

Illustration of a brain-shaped maze with the correct path highlighted.

A month after the Supreme Court overturned Roe v. Wade, virtual reproductive and mental health startup Caraway raised $10.5 million in seed funding, CEO Lori Evans Bernstein tells Erin exclusively. 

Why it's the BFD: The company launches at a time when women are facing devastating consequences from the reversal of Roe, including poorer mental health, reduced access to reproductive support and lower economic mobility.

"A lot of Gen Z women previously assumed they’d have the right to make their own health care decisions just like they’d have the right to clean drinking water," says Bernstein. "Overturning Roe has overturned that basic assumption."

Deal details: 7wire Ventures and Omers Ventures led the round and HopeLab Ventures participated.

Additional investors include Oxeon Investments' Trevor Price, PillPack's Elliot Cohen, Lux Capital's Deena Shakir, ACME's Aike Ho, GoodRx's Doug Hirsch, Maven Clinic's Kate Ryder, author and investor Leslie Schrock, WCAS' Brian Regan and Redesign Health's Missy Krasner.

Of note: This is Bernstein's third health care venture following her service as senior adviser to the nation's first Office of the National Coordinator under the George W. Bush administration.

She previously co-founded and led HealthReveal, a clinical AI startup that Accolade acquired in 2021.

Before that, Bernstein led GSI Health, acquired by Medecision in 2015.

How it works: Focused on women in college, Caraway uses a team-based approach to offer virtual mental, reproductive and physical care through an app. It'll accept insurance and charge a $19.99 per month membership fee. 

That team includes gynecologists, psychiatrists, adolescent specialists, therapists, nurses and coaches.

The above providers can prescribe birth control and education and guidance on emergency contraception. If patients need a procedural or medication abortion, Caraway will refer them to legal locations.

Caraway also offers tests for urinary tract infections (UTIs) and sexually transmitted infections (STIs).

One fun thing: Bernstein says her team spent a lot of time pre-launch interviewing Gen Z women and currently has a text group of 60+ of them that it consults regularly on issues related to the app.

"There are a lot of companies asking, ‘How might we adapt this existing tool for this particular audience?,’" says HopeLab CEO Margaret Laws. 

Laws says Caraway's perspective is: "'This is a really important time in the life and evolution of a human — what might we create to help those people be healthy and happy?’"

The company has also hired 11 Gen Z women across its product and engagement teams. "This is built by and with students," says Bernstein, "for women of all races, gender identities and sexual orientations."

What they're saying: Caraway leaders and investors say college is the perfect time to begin setting young women on a path to healthier outcomes later in life.

"There’s so much opportunity to get ahead of a lot of potential issues down the road and have a different health journey than the one I’ve had, which is much more reactive," says Bernstein.

What's next: Caraway eventually plans to offer medication abortions, Bernstein tells Axios.

"Depending on how the launch goes and how quickly we can scale on the clinician side, we want to flip the switch and take that piece on," she says.

State of play: Women's-focused health tech startups are gaining significant traction with investors. Recent deals include:

Pique in May nailed a $4 million seed round.

Noula Health in March raised $1.4 million in pre-seed funding.

Future Family in April raised $25 million in Series B funding.

2. The BFD: Caraway seeds $11M for women's care

Illustration of a woman in a hospital gown made from a one hundred dollar bill sitting on an examination bed.

Butlr, a Redwood City, Calif.-based motion sensing startup, raised $20m in a Series A funding round led by Tiger Global, Ray Stata and Primetime Partners. Insiders E14, Union Labs, Hyperplane Venture Capital and Tectonic Ventures also joined the round. https://www.butlr.io

Health Note, a San Francisco-based developer of patient intake software, raised $17m in a Series A round led by SignalFire with support from UnityPoint Health, Northwell Health and Cedars Sinai Health Ventures. https://www.healthnote.com 

Proteus Motion, a New York-based fitness technology startup, raised $8.5m in a Series A funding round co-led by Acies Investment and HBSE Ventures with support from Harrison & Co., Monozukuri Ventures, 412 Ventures, Blake Griffin Enterprises, NBA champion Matthew Dellavedova and World Series champion Jon Lester. https://proteusmotion.com 

Cornerstone AI, a San Francisco-based health care data startup, raised $5m in seed funding in a round led by Healthy Ventures with support from Initiate Ventures. https://cornerstoneai.com

Resolve, a New Hampshire-based medical billing startup, raised $3.3m in seed funding in a round led by AlleyCorp Healthcare Fund with support from Orem, Utah-based health care startup Nomi Health. https://www.resolvemedicalbills.com

3. Deals o' the day

Future Family named former SoFi chief accounting officer James Giuliani CFO and former CipherHealth SVP of growth Amanda Devlin VP of enterprise.

MedArrive named former Medline Industries RVP Darcy Selby RVP of business development.

Patient Square Capital named former PRA Health Sciences CEO Colin Shannon senior adviser. 

Piper Sandler named former Cain Brothers banker Christian Pesci managing director within its health care investment group.

Excellere Partners' ParcelShield named former OptumRx executive Kirk Nilson CEO.

Rock Health Capital named Rock Health advisory board chair Bill Evans general partner and Tom Cassels advisory CEO.

Cornerstone named Healthy Ventures general partner Anya Schiess and Initiate’s Rowan Chapman and lana Dimkova to its board of directors. 

Oura named former Tinder SVP of people Lina Alcala its first chief people officer.

HealthQuest Capital named former Everly Health senior director of investor relations and corporate development Avery Burns Williams head of investor relations and marketing.

4. It's Personnel

Happy Tuesday, Health Tech readers. It's another news-packed day, so let's get to it.

🧘‍♀️ Sarah has traded in her hiking shoes for AC-focused mat workouts until further notice. 

😍 Thanks for reading Axios Pro Health Tech! Please ask your friends and family to sign up.

July 26, 2022

1 big thing: Revelstoke inks eating disorder treatment deal