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Custom nasal spray at the ready, online allergy treatment startup Allermi is looking to penetrate an underserved consumer market with its first round of funding, Erin writes.

Why it matters: Allermi is focused on a relatively untapped segment of the direct-to-consumer arena: personalized prescription allergy treatment.

It's riding a wave of investor interest jumpstarted by DTC startups including Hims & Hers and Ro.

Deal details: Allermi inhaled $1.25 million in pre-seed funding led by Lucas Venture Group, CEO Shani Bocian tells Erin exclusively.

What's next: The company is gearing up to raise its seed round in the fall, says Bocian, and has plans to expand into personalized treatments for eczema.

Context: While DTC startups for sexual health, dermatology and hair loss have dominated the digital pharmacy landscape, fewer companies have homed in on prescription allergy treatments — with some notable exceptions. For example:

Hybrid care company Thirty Madison, which in February acquired women's telehealth startup Nurx, offers personalized treatments for allergies, hair loss, migraines and digestive issues.

Telehealth company Hims & Hers, which SPAC'ed its way to the public markets last year at a $1.6 billion valuation, sells some allergy treatments through its primary care vertical.

The backstory: A lifelong allergy sufferer, Bocian started the company with her father, Robert Bocian, an allergist and adjunct clinical associate professor of pediatrics in immunology and allergy at Stanford.

"My dad would bring home a custom treatment protocol for me every month that would quell my symptoms," Bocian says, recalling that patients began calling his sprays "Bocian’s potion." 

"So when digital health companies started booming, I said, 'let’s take your solution and make it available across the country,'" she adds.

How it works: Users fill out an online medical questionnaire and detail their symptoms, and an allergist designs their nasal spray.

Thanks to Allermi's partnership with Albertsons, which provides access to a compounding pharmacy, each spray contains between two and four active ingredients. 

Similar to other digital pharmacies, Allermi only accepts cash, and its treatments cost $45 per month.

Robert Bocian says the company is also working on materials to help coach people in the proper technique to use its spray. "We’re very proud this isn’t a cookie-cutter approach," he says.

Yes, but: San Francisco-based Allermi is only available to California residents for now, though Bocian says it is working on getting licensed in five more states.

What they're saying: Lucas Venture Group general partner Sarah Lucas sees an opportunity for Allermi to become what she describes as a gold standard in allergy treatment.

"This isn’t rocket science. It’s very basic," says Lucas. "They have a treatment they know works, so it’s about getting it to the right people and getting them what they need to use it correctly."

👃🏼1 big thing: Don't sneeze at Allermi

Illustration of a bottle of nasal spray spraying the shape of a dollar sign.

Digital health giant Headspace Health has acquired The Shine App, a personalized self-care and wellness startup, the company tells Sarah exclusively. 

Why it's the BFD: Headspace, based in Santa Monica, California, is intent on promoting health equity and inclusivity by bringing mental health care to under-represented communities — and Shine furthers that mission, CEO Russ Glass says.  

New York-based Shine is "transforming the mental health system," Glass says. "For us to be successful in delivering care to all kinds of lived experiences, we need to make sure we are bringing in talent."

Zoom in: Shine, whose team is 80% BIPOC (Black, Indigenous, and people of color), is focused on bringing self-guided wellness to marginalized groups — where the supply-demand imbalance is disproportionally higher.

Underrepresented communities include women, Black, Asian and Latino adults; lesbian, gay and bisexual adults; and transgender individuals. 

Further reflecting this health equity gap, a striking 83% of U.S. psychologists were white as of 2019, with just 17% of the workforce of racial/ethnic minority, according to the American Psychological Association. 

Co-CEOs Marah Lidey and Naomi Hirabayashi, who launched Shine in 2016 following their own experiences, will join Headspace.

How it works: The Shine app offers daily meditations, self-care courses, and personalized support to more than 45,000 paid subscribers. 

Complementing the D2C offering, Shine also has 90-plus enterprise clients via its Shine at Work platform. 

Those customers will now have the opportunity to transition to the Headspace for Work platform. 

Meanwhile, Headspace has a strong cash runway with "enough cash on the balance sheet to get us to profitability," Glass says. 

About 60% of the Headspace platform stems from its consumer business, but the remaining B2B arm is growing at 50% year over year, he adds.

Context: The acquisition of Shine continues Headspace's broader efforts to address mental health care gaps in specific populations

It recently launched a women's collection, whose resources address issues around body and health, sex and relationships, among other things. "It's 50% of the population but there's so little [content] out there," Glass notes. 

It has exclusive content tailored to the LGBTQIA+ community, among other offerings.

State of play: Venture dollars fueled a proliferation of telehealth upstarts in the recent digital health boom. The space is ripe for a rollup, with scaled players well-positioned to cherry-pick assets that advance their playbooks. 

Touching 100 million covered lives in 190-plus countries, with over 3,700 enterprise customers (ranging from Starbucks to Cigna), "that puts us in a really interesting spot," Glass says, noting that it provides a good solution for those startups in need of a distribution channel.

Headspace expects to remain a participant in market consolidation of the crowded market, the CEO says. 

"The quote-unquote cream will rise to the top," he adds. "You'll see the noise go away, but then you'll end up with a system that is going to work much better than the current one."

Catch up quick: Headspace and Ginger merged at a $3 billion valuation in 2021, marrying on-demand therapy with mindfulness and meditation offerings. 

In 2021, Headspace scooped up Sayana, an AI-driven mental health and wellness startup that encourages users to track their moods. 

Headspace has raised north of $400 million to date (Ginger and Headspace combined), with major investors including Blackstone. 

Between the lines: "The digital health train has left the station," and Glass believes such offerings will remain crucial to bending the cost curve and reducing the stigma around mental health care. 

"It's just a matter of time that you see companies like ours grow into the valuations they once had... We’re in this to change an industry so who cares what it's worth at any one time."

What's next: While "a little more cautious" amid macro trends, Glass said Headspace expects to make some 150 new hires between now and the end of the year.

🤝 One fun thing: As an investor in both companies, Eniac Ventures' Nihal Mehta introduced Headspace and Shine. 

2. The BFD: Headspace buys Shine

Illustration of a man in profile with a phone over the top half of his head revealing a view of his brain.

VetCor's just-announced acquisition of People, Pets, & Vets values the general practice vet care chain just north of $1.1 billion, sources tell Sarah. 

Why it matters: Despite some slow-moving processes (see below), the market's labor crisis and rocky financing markets, PP&V's healthy trade demonstrates we're not quite in the dog days of vet care dealmaking.

Driving the news: VetCor, the veterinary services giant backed by Harvest Partners and Cressey & Co, announced its acquisition of PP&V on Tuesday. 

Interestingly, Cressey was also the majority owner of PP&V — and will remain invested in the combination.

The deal concludes a Harris Williams-run auction that also included pure play sponsors, per Axios' April report. Jefferies worked with VetCor.

By the numbers: The deal translates to approximately 19.5x PP&V's real EBITDA of about $55 million, sources say. 

Fully adjusted EBITDA was marketed at about $80 million, sources said previously. 

PP&V encompasses 150-plus animal hospitals throughout the western and southern U.S. 

Yes, and: PP&V's sale multiple is consistent with relevant sector trades. 

Deal multiples for general practice vet groups — ticking higher through the pandemic-fueled pet boon — have recently commanded upper teens to 20x multiples of EBITDA in some cases. 

Specialty vet groups have fetched as much as 25x EBITDA.

Of note: Merrick Axel, a lead partner on both Cressey's VetCor and PP&V deals, joined Varsity Healthcare Partners as partner and head of a new Chicago office, after 16 years at his prior firm, per a news release today.

What we're watching: Whether PP&V's trade gives other buyers and sellers more confidence to pursue a transaction amid today's turbulent financing market.

Namely, Partners Group this summer mandated William Blair for a potential sale of Blue River Petcare, the Chicago-based network of veterinary hospitals, Axios wrote in August.  

Timing was not clear, but one source speculated then that a post-Labor Day launch at the earliest was likely. 

Yes, and: what happened to Encore Vet Group, CareVet and Southern Veterinary Partners? 

North Castle Partners kicked off a sale process for Encore earlier this year via Harris Williams, Axios wrote.

Compass Group Equity Partners engaged Lincoln International to advise on a sale of CareVet early this year, but it's unclear if the business ever formally went to market.

Shore Capital Partners hired Goldman Sachs and Jefferies to explore a sale of SVP, Mergermarket reported earlier this summer.

Meanwhile, VCs are increasingly looking to take a slice of the large and growing market, which private equity has historically dominated. In the last two weeks alone: 

PillPack alum Gavin Cotter raised $20 million in Series A funding for his latest venture, an online pet pharmacy called Koala Health, the CEO told Axios yesterday. 

Petfolk, a vet startup boasting simplified access to health records and care teams, in August clinched $40 million in Series A funding.

3. People, Pets & Vets fetches $1.1B-plus

Illustration of a cat with an x-ray view of its stomach revealing a dollar sign.

Morgan Health invested $20m as part of LetsGetChecked Series D-2 funding round led by Casdin Capital and Transformation Capital (LTP Equity). https://www.letsgetchecked.com

Dyania Health, an NLP-powered clinical research startup, raised $5m in a seed round led by Innospark Ventures with support from Outsiders, Wild Basin and Big Pi. https://dyaniahealth.com

Scan.com, a London-based diagnostic imaging startup, raised £2.2m in a round led by Triple Point Ventures. StartUp Health, Plug and Play Ventures and YZR Capital participated. https://scan.com/

LLR Partners invested in Vantage Point Logistics, a Westerville, Ohio-based provider of supply chain management software for health organizations. www.getvpl.com 

Carlyle formed Atmas Health in partnership with former CareFusion CEO Kieran Gallahue, former Alere CFO Jim Hinrichs, and former PwC partner Jim Prutow.  https://www.atmashealth.com/

The newly launched Park City, Utah-based venture aims to acquire assets within the medical technology and products, life science tools and diagnostics sectors. 

Datavant acquired Convenet, a U.K.-based health tech infrastructure company. Datavant investors include New Mountain Capital, Sixth Street and Goldman Sachs Asset Management. https://www.convenet.io/

Velocity Clinical Research, a Durham, N.C.-based portfolio company of GHO Capital, acquired MedPharmics, a Metairie, Louisiana.-based research site organization targeting patient recruitment from underrepresented groups. https://medpharmics.com/

La Poste, a French portfolio company of Caisse des Dépôts Group, acquired Happytal, a French hospital services platform that had raised over $30m from firms like Axa Venture Partners and Partech. https://axios.link/3KVcKUK

 Church & Dwight (NYSE: CHD) acquired acne treatment maker Hero Cosmetics for $630m in cash and stock. Hero last year raised $14m from Color, N Plus One Ventures and The K Fund. https://axios.link/3D5J19I

4. Deals o' the day

Varsity Healthcare Partners named former Cressey & Co partner Merrick Axel partner and head of the firm's new Chicago office. Varsity additionally named the following operating partners: 

Former Vision Innovations Partners CFO Rosemary Free and former Diversicare Healthcare Services CEO Jay McKnight — financial operations. 

Former Humana technical product leader Robert McElherne — data science. 

CareRev promoted former VP of operations Filiz Genca to COO.

NexHealth named former Circulo Health head of finance Vikram Rao head of finance.

Patient Square Capital named former Marlin Equity Partners' Udaivir Singh associate.  

Sword Health named former Olive AI senior manager of customer marketing Rachel Brocious enrollment marketing manager.

Soda Health named former Wolfram UI designer Chris Perardi senior UX designer.

Clue named former Klarna global communications lead Emma MacKenzie chief of staff. 

5. It's Personnel

🧑🏼‍🔬 Situational awareness: Theranos CEO Elizabeth Holmes has requested a new trial, saying in a court filing that former lab director Adam Rosendorff — a key prosecution witness — now regrets the role he played in her conviction.

📅 Catch up quick: Check out our new events page where you can watch past Pro discussions, including our interview with Julia Cheek, CEO of Everly Health.

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

September 08, 2022

👃🏼1 big thing: Don't sneeze at Allermi