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People Science wants to revamp the clinical research ecosystem for nontraditional medicines.

Why it matters: People raised a second seed round of $5.3 million led by Acre Venture Partners, CEOs Noah Craft and Belinda Tan tell Erin exclusively. 

Other participants included Bluestein Ventures, Thia Ventures and Form Life Ventures, bringing the company's total funding to $8.5 million.

People will use the funds to hone its technology platform, hire more staff focused on customer growth, and expand into nutrition.

As part of the funding, Acre managing partner Lucas Mann joins People's board of directors.

Craft predicts the company will raise its Series A this fall.

Context: Although traditional pharmaceuticals have a clear, albeit slow, path to approval, alternative medicines are much more cumbersome to study — and People joins a nascent group of companies innovating in the space. 

Bolt founder Ryan Breslow in August pulled in $7.5 million in seed funding for his latest venture, Love, which aims to gather real world evidence on homeopathic solutions, generic chemicals and non-substance-based treatments.

How it works: Based in Los Angeles, People designs protocols, recruits participants, and oversees and conducts studies to match regulatory goals of clients including consumers, digital health companies and researchers.

Tan and Craft tell Erin the company's core differentiation strategy is its focus on enabling individuals to answer the question: Does this alternative medicine work for me?

The company's platform links patients, doctors and scientists to help test alternative therapies including psychedelic medicines, nutrition-based approaches, cannabis and the microbiome.

People's proprietary data collection tool, CHLOE (Consumer Health Learning and Organizing Ecosystem), is an app for research participants.

The backstory: Tan and Craft previously cofounded and led Science 37, a decentralized clinical trial technology company that in 2021 went public through a $1 billion SPAC deal.

State of play: The company began running sponsored clinical studies late last year and hopes to make the app available to the public without a need to be enrolled in an existing study later this year.

"We want to empower people to be the scientist, to design their own studies and learn what works and what doesn't," Tan says.

Although randomized controlled trials (RCTs) remain the gold standard for drug development, recent FDA guidance encourages researchers to incorporate real-world evidence.

The intrigue: There's a big difference between anecdotal data based on individual experiences and rigorous clinical research, and People will need to get from one to the other. 

"This makes data collection and observational note-taking accurate and transmissible to other scientists," Craft tells Erin.

What's next: "We’d like for this to be a massively scaled software tool that goes global," Tan says.

1 big thing: From Science 37 to People Science

Illustration of a large cap mushroom inside of a pill bottle. 

Walgreens is mulling a sale of its pharmacy automation business iA, which could fetch up to $2 billion, Bloomberg reports.

Why it's the BFD: The future of pharmacy services is murky, with Walgreens, CVS and Amazon all pursuing disparate strategies, Claire writes.

Details: Walgreens is working with advisers and expects to launch a process next month, per Bloomberg.

Indianapolis-based iA offers automation software solutions helping pharmacies fill prescriptions.

Catch up fast: Walgreens took a majority stake in iA from a consortium of PE firms for $451 million in 2021.

State of play: Walgreens, CVS and Amazon have made clear their intent to own primary care. Their strategies around pharmacy are less obvious.

CVS just acquired MedAvail's SpotRx pharmacies in certain cities in Arizona, California and Florida, seeming to double down on its commitment.

Meanwhile, Amazon has made piecemeal moves, initially disrupting the industry with its $750 million acquisition of PillPack in 2018 and this week launching RxPass, a monthly prescription drug pass.

What they're saying: Antonio Ciaccia, a pharmacy sector analyst and the CEO of research firm 46brooklyn, called a possible iA divest "a surprising move."

Automation has become increasingly important in pharmacy, and there's value to owning the asset in-house, Ciaccia says.

"Especially given some of the internal issues Walgreens and all pharmacy chains have had related to staffing, it would seem that this would be a need rather than something to sell off," he continues.

Walgreens eyes pharmacy divest

2. The BFD: Walgreens eyes pharmacy divest

Illustration of a pharmacy script presented as a bill with change on it

Digital health should expect more strategic investors participating in and leading fundraises, industry experts said during an SVB webinar Wednesday.

Why it matters: The current bear market is unlikely to shift any time soon, and health tech entrepreneurs and their investors will be seeking nimble capital, Claire writes. 

The webinar, moderated by Erin, discussed findings of SVB's Healthcare Investments and Exits report.

What they're saying: "Tying equity investments from strategics to commercial commitments — it's a good game to play if you construct it in the right way," said Andreessen Horowitz general partner Julie Yoo.

"It directs a lot of the commercial risk that is typically associated with these growth-stage healthcare companies," she added.

During the funding frenzy of 2021, "it was actually quite difficult for companies to get to actually get to squeeze in a corporate VC" to their cap table, said TPG Life Sciences partner Carolyn Ng. 

That tide has turned as strategic investors are not bound to the same fund cycles as venture capital, and remain "pretty committed to to innovation and scientists," Ng added.

Zoom in: Today's market requires tangible proof of ROI from companies seeking funding, whether that's a path to profitability or specific clinical milestones, panelists said.

"There's going to be a lot more thinking around what this funding is going to take them to, and whether or not that is truly a valid creating milestone," Ng said.

Companies will need to prioritize their core business and pipelines and end speculative projects, Ng and Yoo both said.

Between the lines: Alongside a rush of strategic capital, 2023 will likely usher in unique deal structures among VC investors.

Typical funding rounds in digital health have one lead investor, but Yoo predicted "more frenemies playing nice with each other on rounds where they're sharing equity."

"People will have to make the tough decision about taking structured terms over just doing a down-round on the valuation side and keeping it as clean as possible," she added.

In its report, SVB predicts an increase in larger, outsider-led rounds in the second half of next year, but notes that many will be down rounds.

"Having new investing partners coming in with dry powder and help support your company going forward is probably a lot more important than trying to save valuation," said SVB managing director Jon Norris. 

The bottom line: "It's not that the [digital health] industry crashed," Yoo said. "It's just that the last few years were such outliers that we should just recalibrate our baseline to not overfit for those two years. Or, rather, look at the straight path that that exists relative to 2019." 

3. Corporate dollars and digital health

Illustration of a mouse cursor formed by small pennies

Pearl Health, a NYC-based startup helping independent physician practices participate in VBC models, has raised $75m in Series B funds led by Andreessen Horowitz’s Growth Fund and Viking Global Investors with participation from AlleyCorp and SV Angel’s Growth Fund, bringing total funding to over $100m. https://axios.link/3H74X4N 

Levine Leichtman Capital Partners-backed medication management business Capsa Healthcare has acquired mobile hospital work station provider Tryten Technologies. https://axios.link/3H5024e 

4. Deals o' the day

Zócalo Health has named UCLA assistant clinical professor of emergency medicine Sarah Lopez chief medical officer.

Firefly Health has named former Massachusetts lieutenant governor Karyn Polito to its advisory council.

Forge Health has named former UnitedHealth behavioral health COO Chad Burkholder its COO.

Memora Health has named former Cleveland Clinic CEO Toby Cosgrove and current UC Davis Health CEO David Lubarsky strategic advisors.

5. It's Personnel

🩸 Situational awareness: Palo Alto-based health tech nonprofit Tidepool this week received FDA clearance for the first prescription app to link continuous glucose monitors and insulin pumps and to automate insulin dosing. 

📺 Claire caught the Valeant Pharmaceuticals episode of Netflix's "Dirty Money" last night, a visceral reminder of the era of the Pharma Bro. 

✨ Thanks for reading, and extra thanks to newsletter editor George Moriarty and copy editor Brad Bonhall. Please ask your friends and colleagues to sign up.

January 26, 2023

1 big thing: From Science 37 to People Science