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Elliott Management has amassed a large stake in Cardinal Health and aims to score a "handful of seats" in the board room, the Wall Street Journal reports.  

Why it matters: The activist investor's endgame isn't yet clear, but signs point to its interest possibly being a precursor to M&A, Sarah writes. 

Between the lines: Cardinal has disparate medical supplies and pharma distribution businesses, and while the pharmaceutical segment profit is ticking higher, the medical arm is heading in the other direction. So will a breakup finally happen?

Yes, and: With inflation and supply chain constraints weighing on the medical segment's performance, Cardinal last week unveiled a "Medical Improvement Plan" — setting a new goal to achieve segment profit of $650 million by fiscal year 2025. 

The medical segment incurred a $2.1 billion impairment charge in fiscal 2022, with revenue and profit dropping 5% and 63% year over year, respectively. 

All this while pharmaceutical segment revenue and profit grew 14% and 5%, respectively, over the corresponding period. 

Catch up quick: Dublin, Ohio-based Cardinal announced late last week that CFO Jason Hollar would take the helm as CEO after the unexpected departure of Mike Kaufmann. 

Kaufmann joined Cardinal more than three decades ago and steered the company as CEO for most of the last five years.

Flashback: Cardinal about a year ago completed the $1 billion divestiture of Cordis — its cardiovascular medical device unit. The buyer was Hellman & Friedman in partnership with Ajax Health and Zeus Health.

Cardinal on Thursday cited the sale as another factor that pushed the medical segment's top line lower. 

State of play: Increased competition could be another factor at play.

Fueled by its growing production of private label products, sources have said health care distribution giant Medline has quietly been taking share from other large vendors. 

Last year Medline commanded $34 billion in its LBO by H&F, Carlyle and Blackstone, and that presumably positioned it for accelerated growth. 

Sources suggested then that the deal could have implications, or eventually help to trigger some strategic moves by big public players like Cardinal, Owens & Minor or McKesson. 

By the numbers: Shares of Cardinal Health have added more than 11% since news of its C-suite changes emerged, with gains added this week amid reports of Elliott's stake. 

1 big thing: Elliott targets Cardinal Health board seats

Illustration of a cardinal sitting on a branch with a word balloon with a question mark in it coming out of its mouth.

Vaccine waiting list startup Dr. B raised $8 million as it pivots to virtual COVID treatment distribution, CEO Cyrus Massoumi tells Erin exclusively.

Why it's the BFD: As COVID surges continue and public health agencies relax safety guidelines, demand for antiviral medications such as Paxlovid is on the rise — but data suggests the drugs aren't getting to those who need them most.

Deal details: Lerer Hippeau and Founders Fund led the fundraise.

Between the lines: Massoumi, who also founded doctor-patient matching startup Zocdoc, plans to offer the antivirals for free to those who can't afford them.

"My greatest regret at Zocdoc is we never did enough to help the people who couldn’t afford coverage," says Massoumi. "I always told myself with my next health care company I’d solve both parts of that equation — accessibility and equity."

Context: After his stint at Zocdoc, Massoumi started Dr. B as an online matchmaking service in New York for unused vaccines, with 2.5 million people signing up.

The company distributed 1.1 million vaccine doses in 90 days — and Massoumi began looking for the company's next act.

"As vaccines became more widely available we started asking, 'How will we help improve health care access more broadly?'" says Massoumi. "That’s when we decided to go into medications."

How it works: For users who can pay, Dr. B will charge $15 per consult. 

Those who can't pay fill out an online form that quickly calculates whether they qualify for financial hardship based on federal poverty guidelines. If approved, the service is free.

Yes, and: To ensure Dr. B can offer those no-cost services, Massoumi aims to keep the company's budget trim — for example by avoiding expensive advertisements.

"What makes us different from other telemedicine companies is we’re not buying Super Bowl or subway ads," says Massoumi. "We take our promotional budget and give away free care under the hope and belief that that will spread enough knowledge about us to turn the economic model on its head."

Of note: Between April and May, Paxlovid demand jumped 315%, per Reuters.

Yet socioeconomically vulnerable parts of the U.S. had less access to Paxlovid and other antivirals, per the Centers for Disease Control and Prevention.

What's next: Massoumi plans for Dr. B to soon offer a range of medications via telehealth — from those for heart health and dermatology to reproductive health‚ all with a no-cost option for those who qualify.  

In the meantime, the company has yet to consider future fundraising and is instead "heads down executing and getting ready for what we expect to be a very busy fall," says Massoumi.

👨🏽‍⚕️ One fun thing: Dr. B is an homage to Massoumi's grandfather, who became a doctor during the last global pandemic — the 1918 influenza pandemic.

Be smart: As Dr. B expands, it will face sharp competition from large and small telemedicine companies, most of which have years (if not decades) of a head start and far more capital. They include...

Thirty Madison in February acquired women's-focused digital pharmacy Nurx and was last valued at $1.4 billion.

Ro in January raised $150 million at a staggering $6.6 billion valuation.

Teladoc (Nasdaq: TDOC) in 2020 acquired chronic virtual care company Livongo for $18.5 billion.

Additionally, Dr. B will need to create a clear and defensible customer acquisition strategy as it seeks to compete against its direct-to-consumer rivals.

"Five to 10 years ago, building a DTC business was itself considered disruption," says Lerer Hippeau managing partner Ben Lerer. "Now, that’s par for the course. So how do you crack that user-acquisition nut? That'll be the big challenge."

2. The BFD: In second act, Dr. B gets $8M for Paxlovid by screen

Illustration of a hand pulling a 3D bottle of pills from a laptop screen.

Monod Bio, a biosensor startup, raised $25m in seed funding in a round led by Matrix Capital with support from the Global Health Investment Corporation, Cercano Management, The Washington Research Foundation, Boom Capital Ventures, Sahsen Ventures and Pack Ventures. https://www.monod.bio 

Violet, a New York-based startup that helps clinicians become educated on diversity, equity and inclusion, raised $5.3m in seed funding co-led by SemperVirens Northwell Holdings, The Venture Collective, Hopelab and Brightline CEO Naomi Allen. https://axios.link/3Ao6fpP 

Carlyle took a minority stake in CureApp, a prescription digital therapeutics provider in Japan. https://cureapp.co.jp/en/

Eir Partners completed the growth recapitalization of ClaimLogiq, a Charleston, S.C.-based SaaS and tech-enabled health care payment integrity platform. https://www.claimlogiq.com/

BV Investment Partners-backed EMS Management & Consultants, a Winston-Salem, N.C.-based RCM provider for emergency medical services, acquired VAIRKKO, a provider of workforce operations management software. 

Thompson Street Capital-owned Revenue Management Solutions, based in Oklahoma City, acquired health care automation startup OrboGraph from KLA Corp.

3. Deals o' the day

Sema4 CEO Eric Schadt announced he was resigning from the company after previously stepping away from the CEO role to serve as president. Katherine Stueland remains CEO.

Royal Philips announced that company leader Roy Jakobs will succeed Frans van Houten as president and CEO, effective Oct. 15, 2022. 

Kyros named former Unite Us director of insights product management Marc Seaberg VP of product.

CareRev named former Lyft delivery chief of staff Sarah Fazal chief of staff to the CEO.

ChenMed named former PwC manager of health transformation Johann Schmidt consultant.

4. It's Personnel

Situational awareness: AI-driven digital health company Babylon Health could be weighing a take-private, per Bloomberg — though the U.K.-based company responded to the reporting by denying any acquisition plans. Involved and want to give us the real skinny? Write to us.

🏔 Sarah is car shopping in preparation for her October return to Jackson Hole. Yes, it's happening, everyone. Catch her in NYC for the next six weeks before she takes off!

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August 16, 2022

1 big thing: Elliott targets Cardinal Health board seats