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BFD Expert Voices - Health Tech Deals

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Empower Pharmacy, a Houston-based compounding pharmacy targeting integrated health and wellness, is seeking an investment, sources tell Sarah. 

Why it matters: Private equity has a reputation for being acquisitive in compounding pharmacy — and Empower's growth profile and attractive end-markets suggest it will likely draw strong interest.   

Driving the news: Founder-run Empower has mandated Cantor Fitzgerald for financial advice, with outreach to financial sponsors kicking off early this week, sources say. 

The process could produce either a minority investment or majority recapitalization, sources add. 

By the numbers: The company, growing at a more than 30% clip over the last three years, is marketing close to $160 million of run-rate revenue off of EBITDA in the low $30 million range, sources say. 

Revenue and EBITDA are projected to climb to about $200 million and $50 million in 2023, respectively, they say. 

Details: Empower is seeking capital to fund the development of a new 503B facility that will substantially increase its growth trajectory and capacity over the next decade, one source says.  

It already has an advanced FDA-registered 503A compounding facility.

How it works: Empower, founded in 2009 by CEO Shaun Noorian, provides compounding pharmacy solutions for various health and wellness end-markets.

Empower offers customizable medications across women's health, men's health, fertility, hormone replacement, weight management, dermatology, and IV therapy (nutritional, vitamin B-12, etc.). 

The company delivers to patients and providers in all 50 states with a 24-hour average turnaround time, per its website.

Empower compounds more than 2,000 custom-made medications, per a mid-2021 news release. 

State of play: Empower is unique in its end-market focus areas, but private equity participation in the compounding pharmacy arena isn't new. 

Vistria Group and Excellere Partners in January 2021 invested in SCA Pharmaceuticals, an FDA-registered compounding pharmacy. The deal provided an exit for Enhanced Healthcare Partners. 

Welsh, Carson, Anderson & Stowe in November 2021 acquired a majority stake in Leiters, an FDA-regulated 503B outsourced pharmaceutical compounding company, from investors including Kaiser Permanente Ventures and Frazier Healthcare Partners. 

Bain in 2015 acquired QuVa Pharma, a 503B manufacturer of compounded, ready-to-administer injectables, from Helix. Goldman Sachs Private Credit and  Owl Rock Capital Partners injected $275 million in debt financing into the business in May 2021. 

💭 Our thought bubble: Considering Bain's seven-year plus hold, QuVa also looks ripe for potential picking.

Empower did not immediately return a request for comment, while Cantor declined to comment.

1 big thing: Empower Pharmacy seeks investment

Illustration of falling pills surrounded by abstract shapes and sections of dollars.

Benefits-matching startup Soda Health raised $25 million in Series A funding, CEO Robby Knight tells Erin exclusively.

Why it's the BFD: Medicare Advantage is an increasingly competitive market, with plans amplifying supplemental benefits to edge out would-be rivals.

Add that to recent pushes by the Centers for Medicare and Medicaid Services (CMS) to invest more in health equity and "we continue to see more and more investment in the space," A2 Strategy Corp. health care analyst Ari Gottlieb tells Erin.

Deal details: Lightspeed Venture Partners, Define Ventures and Qiming Ventures participated in the round.

How it works: Knight, the former head of consumer health innovation at Walmart, says Soda straddles retail, finance and health care in an effort to simplify using supplemental benefits.

Such benefits are often difficult to locate — not to mention use — and typically arrive in a combination of mail-order, online and in-person formats.

"This stuff is 30 years old," Knight tells Erin. "Humans deserve a solution that’s as dynamic as their needs are."

Yes, and: Headquartered in Bentonville, Arkansas, with offices in Chicago, Soda matches people with what Knight calls "personalized" benefits, then provides them with a single prepaid debit card to use at participating retailers.

The company is currently focused on the Medicare Advantage and Medicaid markets, where it faces fewer rival startups, but also has an expanding presence in the employer sector. 

"As we see people and track how they’re doing and what their needs and challenges and barriers to health are, we can identify the right thing to do next," says Knight.

He declined to provide specifics on the metrics the company tracks or its methods to match people to benefits.

What's next: Knight says the company is on track to serve half a million people in the next 12 months. 

Soda aims to build up its presence in the employer sector and offer its services to nonprofits next.

Context: Insurance- and benefits-navigation platforms are attracting fresh interest from venture capitalists as their buzzier cousins — like primary care — rapidly modernize. For example:

Fair Square Medicare in August garnered $15 million in Series A funding to help older adults navigate Medicare.

Transcarent in January raised $200 million in Series C funds to guide consumers through employer-sponsored benefits.

Vera Whole Health in January bought benefits navigation company Castlight Health in a $370 million all-cash deal.

What they're saying: Given the aggressive competition taking place in Medicare Advantage, Soda could hit the ground running, Greg Chittim, a health care analyst with the firm Health Advances, tells Erin.

"Companies like Soda Health will find both partnership and competition from traditional health care navigators like Virgin Pulse and Accolade, broad-based chronic care companies like Welldoc and Transcarent, and innovative virtual care providers like CirrusMD, 98point6 and Firefly Health," Chittim says.

Yes, but: While somewhat unique, Soda's positioning as a member advocate could present monetization difficulties outside of plan sales, Gottlieb says.

"Their challenge will be finding a path that creates real value for more than just members," he adds.

🥤 One fun thing: Soda got its name from the phonetic pronunciation of SDOH, the social determinants of health.

The takeaway: If successful, Soda could help streamline yet another fragmented subsector of the health care market.

"All the pieces are there but they’re not connected, and that’s what Soda does," says Lightspeed Venture Partners senior adviser Ling Wong.

Editor's note: The headline of this story was corrected to state Soda raised $25 million, not $20 million.

2. The BFD: Soda Health gets $25M to simplify benefits

Illustration of a credit card shaped like a health plus.

Redesign Health, a New York-based health tech startup incubator, raised $65m in Series C financing led by General Catalyst with support from CVS Health Ventures, UPMC Enterprises, Eden Global Partners, Euclidean Capital, Samsung Next, TriplePoint Capital and insider Declaration Partners. https://www.redesignhealth.com 

InsideTracker, a Cambridge, Mass.-based personal fitness tracking startup, raised $15m in Series B funding led by PeakBridge with support from Cornucopian Capital, OurCrowd, BASF Venture Capital and GmbH. https://www.insidetracker.com 

CertifyOS, a New York-based provider credentialing software company, raised $14.5m in Series A funding led by General Catalyst with support from Upfront Ventures, Max Ventures and Arkitekt Ventures, bringing total funding to over $19m. https://www.certifyos.com

Hopscotch, a New York-based pediatric behavioral health tech startup, raised $8m in seed funding co-led by Greycroft and Inspired Capital with support from New York Ventures, Remarkable Ventures, Watershed VC, Cold Start, and the founders of Elemy, Genoa Telepsychiatry and Firsthand. https://www.joinhopscotch.com 

Phantom Neuro, a robotic orthopedic neurotech startup, raised $6m in additional funding led by new investor Time BioVentures and joined by new backer Risk & Return, bringing the company's total funding to $9.5m. https://www.phantomneuro.com/

Cipher Skin, a Denver-based medical wearables maker, raised an undisclosed funding round from Tribe Capital, Draper Capital and insider Andreessen Horowitz. https://cipherskin.com/

Upward Health, a Hauppauge, New York-based risk-bearing, in-home medical group, closed a Series B capital raise led by Heritage Group and joined by insiders Blue Venture Fund, Noro-Moseley Partners, and Windham Venture Partners. https://upwardhealth.com/

Latticework Capital Management acquired Catalina Research Institute, a Montclair, Calif.-based clinical trials center. www.catalinari.com

OMERS, EQT and Morrison & Co. are among those circling PRP, an Australian diagnostic imaging firm owned by Crescent Capital, per The Australian. www.prpimaging.com.au

The Riverside Company invested in Jupiter Life Science Consulting, a Key Largo, Fla.-based provider of commercial and market access strategies for life sciences. www.jupiterls.com

3. Deals o' the day

Cue Health named former Apple Health clinical leader and cardiologist David Tsay chief medical officer.

Phantom Neuro named former Verily hardware engineer Aurel Bouvier VP of implantable systems, former Brink Bionics CEO Erik Lloyd senior neuroengineer, and Time BioVentures co-founder D.A. Wallach board member. 

Galileo named former Carbon Health director of talent Tom Jones director of talent acquisition.

Redesign Health named General Catalyst CEO Hemant Taneja to its board.

4. It's Personnel

Situational awareness: The FDA could clear the first OTC contraceptive, a landmark decision that would broaden the availability of the medication. 

Still, gaps in insurance coverage rules could make it unaffordable for some people, our colleagues Oriana Gonzales and Caitlin Owens write.

🚴🏼 Erin is gearing up for her latest Climate Ride, this time in upstate New York. Support the cause.

🙏🏻 Thanks for reading, and thanks to Health Tech Deals editor Claire Rychlewski and copy editor Mickey Meece. Please ask your friends, fellow riders and colleagues to sign up.

September 13, 2022

1 big thing: Empower Pharmacy seeks investment