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Genetic testing startup Sequencing wants to drive more insights into rare and chronic diseases — not by partnering with Big Pharma, as rivals like 23andMe have done, but by more comprehensively scanning the genome.

Why it matters: The Los Angeles-based startup raised $5 million in seed funding led by Lerer Hippeau, bringing total funding to $7 million, CEO Brandon Colby tells Erin exclusively. The capital will fuel acceleration of its whole genome sequencing (WGS) tech offering.

WGS is a more comprehensive form of genetic testing than what several consumer-facing competitors offer.

Red Sea Ventures, Global Founders Capital, XRC Labs, Correlation Ventures, Mucker Capital and Gaingels joined the round, which will also go toward growing Sequencing's team. 

Between the lines: Although consumer genetics services are not as popular as they once were, their troves of DNA data continue to grow. 

Those databases are minable for insights that power drug development and virtual care while providing potential support for treating rare and chronic diseases.

Zoom in: Many DNA testing companies have partnered with pharmaceutical companies, telehealth businesses and health record platforms (see: 23andMe and GlaxoSmithKline and Lemonaid).

Seqster, a data-syncing platform that enables patients to combine health information from electronic health records, wearables and DNA sequencing services, last year raised $12 million in Series A funds.

Yes, but: Sequencing has a very different business model from 23andMe or Seqster — and it's one that Colby says puts a premium on privacy.

Rather than selling aggregated DNA data to Big Pharma or other health techs, Sequencing provides its tests and lab processing capabilities to bioinformatics startups including Athletigen Technologies and Toolbox Genomics, which then do their own genetic analysis on the data.

"It’s important to us to not have to sell a person’s data to make money," Colby says. "We don't sell into the pharmaceutical industry and we don't sell to insurance providers."

How it works: Sequencing charges consumers $399 for its WGS-based tests, which are more comprehensive than the SNP-based tests offered by 23andMe and Ancestry, for example. 

You can think of SNP-based testing as highlighting several lines of text in a book, while WGS reveals the whole book.

Sequencing also individually encrypts each person's genetic dataset and stores it in a unique location rather than aggregating one large database, per Colby.

What's next: The company plans its next fundraise in 2023, Colby says.

State of play: After a 2017 rage year for consumer genetics services, privacy concerns and lagging interest nearly killed demand in 2019.

23andMe (Nasdaq: Me), for example, has been a money-hemorrhaging investment since it SPAC'ed its way to the public markets in 2021.

Helix, which once offered a range of consumer-focused services very similar to those now sold by Sequencing, in 2019 pivoted to focus on population health research. 

What they're saying: According to Colby, Sequencing doesn't need to drive the sale of a larger genetics companies' products or sell to Big Pharma in order to grow. 

1 big thing: Sequencing your (whole) genome

Illustration of a flashlight with DNA strands in the light

Walgreens-owned primary care company VillageMD is buying Summit Health-CityMD from Warburg Pincus at an $8.9 billion valuation, Sarah and Claire write. 

Why it's the BFD: As retail incumbents race to participate in the evolution of care delivery, VillageMD is taking a big leap forward as the deal supports the notion that after primary care, specialty care is the next frontier of value-based care. 

Who advised: Warburg and Summit received financial advice from Goldman Sachs, Barclays, Jefferies, Credit Suisse and Guggenheim Partners; VillageMD turned to JPMorgan, sources say.

What they're saying: "It's very hard to manage quality and cost of care without integrated specialty care services," Warburg Pincus managing director and head of healthcare TJ Carella tells Axios. 

"What they saw in Summit was not only a geographically dense primary and urgent care footprint in the largest U.S. healthcare market, but also highly differentiated specialist talent necessary to help close the loop in managing total cost of care," Carella says.

“If you want to continue to be successful in delivering care in a value-based care model, you have to be successful managing the specialty spend and the other ancillary spend, like lab and imaging," VillageMD CEO Tim Barry tells Axios. 

Between the lines: VillageMD scores a large entry point into the New York metro area's enormous health care market via Summit. 

Plus, VillageMD can now take the integrated multi-specialty care delivery model Summit has proved out in one market, and replicate this strategy nationally.

"We think this model will scale to hundreds of other markets, and we want to make sure wherever we are, we're doing it right and doing it well," Barry says.

💭 Our thought bubble: With fresh funds injected behind VillageMD — with Cigna joining the investor base to bring additional financial firepower — we expect more M&A to follow.  

One logical takeout candidate is Duly Health and Care (fka DuPage Medical Group), which has been held by Ares Management since 2017.

Asked whether VillageMD has taken a look at Duly, Barry demurred: "I think it's fair to say all these organizations are generally talking to each other."

The other side: This is a huge win for Warburg and the physicians heavily invested into Summit Health-CityMD the last five-plus years. 

Summit Health-CityMD has grown to roughly $3 billion of revenue today, a source tells Axios, up from a couple hundred million of top line when Warburg acquired a majority stake in CityMD. 

Catch up quick: Warburg took a majority stake in CityMD in April 2017 at roughly a $600 million valuation, subsequently buying Spano Barber Jesse & Co’s Stat Health Management in a deal valued just south of $100 million, Sarah wrote then. 

In 2019, Warburg married N.Y. metro area’s dominant urgent care chain with New Jersey's Summit Health in the first such deal of its kind. 

Behind the scenes: UnitedHealth Group's Optum was said to have approached Summit earlier this year, but for a variety of reasons that didn't come together, sources say.

VillageMD subsequently approached Summit in late summer, they say. 

Barry tells Axios the deal was made on direct approach with no auction process.

Details: WBA will invest $3.5 billion through an even mix of debt and equity, and it will remain the largest shareholder in VillageMD with a controlling stake of about 53%. 

Cigna is joining as an investor, Summit Health doctors retain meaningful minority ownership, and Warburg maintains a small stake.

The combination will have more than 680 provider locations in 26 markets. 

2. The BFD: WBA's VillageMD bags Summit Health-CityMD

Illustration of George Washington peeking out from behind a red cross.

Archy, a San Francisco-based payments and dental practice management platform, raised $10 million in new funding led by Bessemer Venture Partners and CRV.

Why it matters:  By bringing all aspects of running a practice into a single platform, Archy is trying to do for dentists what sector-specific vertical SaaS company Toast did for the restaurant industry. 

Read more from Axios Pro Fintech Deals' Ryan Lawler. 

3. Archy gets $10M for dental payments

Illustration of a mouth mirror with Benjamin Franklin's face reflected in it.

Longtime Certara shareholder Arsenal Capital has committed to making a new $449 million investment, buying out EQT's stake in the maker of biosimulation software for drug development.

Why it matters: Arsenal is paying a big premium over Certara's recent trading price, sending shares skyrocketing nearly 20% early today. 

Arsenal says it will acquire roughly 30 million shares at $15 per share, reflecting a 40%-plus premium over Friday's closing share price of $10.65.

Before the share pop, Certara's stock had lost around 62% of its value year-to-date.  

Catch up quick: Arsenal first invested in Certara in December 2013, remaining an investor through its majority sale to EQT in 2017 at $850 million value. 

Certara, headquartered in Princeton, New Jersey, went public in December 2020 at a $3.5 billion valuation.

Through both the sale to EQT and subsequent IPO, Arsenal has retained an undisclosed minority stake. 

💭 Sarah's thought bubble: No investor knows Certara as well as Arsenal, so who better to reinvigorate the business?

Details: The investment will boost Arsenal's stake to 22% of diluted shares outstanding from the current 4%. 

Arsenal, subject to maintaining a certain ownership position, has the right to nominate up to two board members including current board member Stephen McLean, a senior partner at Arsenal. 

After the deal closes, Arsenal operating partner David Spaight is expected to join the board, while EQT's Eric Liu and Ethan Waxman will step down.

4. Arsenal buys back EQT's Certara stake

Illustration of binary code surrounded by abstract shapes, red crosses, and dollar elements.

Exer AI, a Denver, Colo.-based developer of a remote patient monitoring platform, raised $6.5m from Backstage Capital and Life Extension Ventures. https://www.exer.ai

Options MD, a Los Angeles-based behavioral health startup focused on treatment-resistant depression, raised $2.4m in a round led by Bread & Butter Ventures with participation from M13, Bright Ventures and Collab Capital and backing from insiders MedMountain Ventures and Techstars, plus $100K from the Google for Startups Latino Founders Fund. https://optionsmd.com

Pathlab, a Southeast Asia-focused medical testing company, may seek a buyer for its Malaysia business, which could fetch around $200m, per Bloomberg. https://axios.link/3UxAimd

Voya Financial (NYSE: VOYA), a New York-based health and investment company, agreed to acquire Charleston, S.C.-based Benefitfocus (NASDAQ: BNFT), a cloud-based benefits administration technology company, for roughly $570m. https://www.voya.com

5. Deals o' the day

AlleyCorp named Bill Georges, former chief strategy officer of Horizon Blue Cross, and Michelle Garland, previously Daversa managing partner, partners to the AlleyCorp Healthcare Fund.  

Tomorrow Health named former Hippo Insurance VP Anna Lenhardt chief people officer and former Elemy head of operations Ryan Colby head of go-to-market.

Rippl Care named former Nordstrom VP Jesse Schlueter its first chief people officer.

Pfizer named former Eversana SVP Edward Cox head and GM of digital health and medicines.

Sift Healthcare named former Olive VP of provider operations Dominic Foscato VP of growth and client operations.

Wave named former Halcyon Health head of engineering Ryan Weald chief technology officer.

Included Health named Acuity Brands and Kohl's board member Michael Bender board member.

Premier Inc. named former Amazon Care head of employer sales Stephen Bucken VP of continuum of care channels.

6. It's Personnel

Happy Monday, Health Tech readers! Let's jump in. 

☀️ Erin left a snowstorm in Truckee, Calif., for sunny Los Angeles, where she's spending the week before heading to Vegas for HLTH.

✅ Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Brad Bonhall. Please ask your friends and colleagues to sign up.

November 07, 2022

1 big thing: Sequencing your (whole) genome