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BFD Expert Voices - Health Tech Deals

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In-home care enabler MedArrive filled its tank with $8 million in funding steered by Cobalt Ventures.

Why it matters: The funds offer extra padding ahead of a formal Series B in an increasingly tight fundraising market, CEO Dan Trigub tells Erin.

Deal details: Cobalt Ventures, a wholly owned subsidiary of Blue Cross Blue Shield of Kansas City, led the round, tipping MedArrive's total funding to $40.5 million.

Trigub declined to say when the company plans a Series B.

"Given the uncertainty in the markets and not knowing when we may go and raise a Series B, this is a great opportunity to give us more runway and it was even better that it was with a strategic investor," says Trigub.

MedArrive is using the funds to hire case managers, nurse practitioners and social workers and to advance its tech and product roadmap.

How it works: Co-founded by Trigub, who formerly steered health efforts at Uber and Lyft, MedArrive links payers and providers to a network of EMTs, paramedics and nurse practitioners to offer in-home care that can be managed with a virtual platform.

The company's services include diagnostics, health assessments and post-acute care.

MedArrive is currently working with over 12 payers, mostly in Medicare Advantage and managed Medicaid.

The intrigue: A few obstacles litter the road ahead for MedArrive, including its personalized approach to care and an ongoing home health labor churn.

"We don’t have a box we give a health plan where they can just pick it up and start," says Trigub. "Every single one is different. So the challenge is continuing to grow and scale efficiently."

The home care industry has been rankled in recent years by staffing woes, scheduling gaps and waiting lists for services.

What we're watching: Will strategic funding rounds like this become more common as health tech startups navigate a bumpy financial and political road?

State of play: Following a surge of interest in remote care amid the pandemic, several other mobile care companies have managed to hold continued investor attention in recent years.

High-acuity home care provider DispatchHealth last fall raised $330 million in combined equity and debt financing from backers including Optum Ventures and Echo Health Ventures.

Hybrid home care startup Homeward Health last summer pulled in $50 million in Series B funds led by Arch Venture Partners and Human Capital.

On-demand health service Ready in 2020 amassed $54 million in Series C capital.

What they're saying: "Telehealth works great for healthy 20-year-olds, but for a population that’s complex with co-morbidities it doesn’t do all that much," Trigub says. "Being the physician extender into the home, we think that can be a really powerful clinical model."

Cobalt managing partner David Eichler says the company stood out to the firm "because it demonstrates you can build trust with an important population and positively impact their health without requiring an expensive, resource-intensive infrastructure to maintain.”

Catch up quick: MedArrive raised a $25 million Series A led by Section 32 in 2021.

1 big thing: MedArrive fills mobile care tank with $8M

Illustration of a long, winding road with red health crosses painted down the middle as lane dividers

Health IT company Availity agreed to acquire the utilization management division of health automation startup Olive AI.

Why it's the BFD: Olive has one business line left after a series of divestitures and layoffs, Erin writes.

The deal confirms Axios' February reporting on Olive's plans to sell the division, which represents one of two remaining business lines advertised on the company's website.

Deal details: Novo Holdings-backed Availity agreed to purchase Olive's utilization management (UM) service line, which represents the company's payer-facing prior authorization business.

UM comprises tools for speeding the mostly manual process of green-lighting treatment.

As part of the transaction, Availity will assume the commercial contract with Olive’s current UM customers and hire staff dedicated to the division.

Where it stands: The bulk of Olive's remaining business includes Autonomous Revenue Cycle (ARC), its provider-facing tools for prior authorization, notice of admission, claim status coverage identification, and eligibility, Axios previously reported.

Catch up quick: Olive last fall outlined plans to sell a different set of assets to sibling company Rotera in exchange for a revenue share.

That divest included the company's tools for population health management and the Medicaid and Medicare drug discount program known as 340B.

2. The BFD: Availity buys Olive AI business line

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Private equity in health care saw rich returns last year despite macro headwinds, with total disclosed deal value reaching around $90 billion, according to a new report by Bain & Company.

Why it matters: While value was down from $151 billion in 2021, 2022 raked in over $10 billion more than the next-closest year — more evidence that 2021 was an outlier year, Aaron writes. 

Yes, but: Buyout volume fell by more than 35% in the second half of last year, compared with H1 —  and Q4 of 2022 had the lowest quarterly health care private equity deal activity since 2017.

Of note: In 2022, health care information technology buyout volume added up to be the second highest ever on record.

Provider tech continues to be the main driver, though biopharma and payer-focused technology are catching up.

Zoom in: There are abundant opportunities to expand around value-based care, the report notes.

"While investment activity remains focused on primary care and Medicare Advantage, opportunities across other payer and specialty segments are expanding," per the report.

Enabler models represent an attractive investment path, with adoption driven by a need for traditionally fee-for-service groups to participate in risk-based arrangements.

See VBC-enabler Wellvana, which raked in $84 million from Heritage Group and Welsh, Carson, Anderson & Stowe-backed Valtruis.

Bain’s analysis suggests fee-for-value arrangements will capture a 15%–20% market share from traditional fee-for-service providers in primary care by 2030, supporting further investment in the space.

What they're saying: While the death of fee-for-service has been underway for the last five years, "we are still in the same boat today," says VSS Capital principal Eric Kim.

"(Fee-for-service) seems to be slowly dying but like Michael Myers — it  seems to always come back somewhere," Kim says."

"It is hard for providers to do a 180 and quickly shift their models but there is so much opportunity there," he says. "The biggest challenge has been duration (how long someone is cared for). Medicare Advantage is a natural place to get into VBC.”

As tech-enabled VBC continues to evolve, "there are new market leaders emerging," says Dan Harknett, partner at Ridgemont Equity Partners.

Ridgemont partnered with AOM Infusion in 2022 following a multi-year effort in the home infusion subsector.

"Alongside our management team partners, we have been able to scale the platform in multiple key metro areas and deliver high-quality infusion services that are in great demand," says Petri Lindberg, principal at Ridgemont.

3. PE health care deal value robust in 2022 

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Carl Icahn didn't mince words in his presentation opposing DNA sequencing giant Illumina's (NYSE: ILMN) quest to own Grail  — calling the actions an "existential question" for the company, Claire writes.

Driving the news: The FTC on Monday rejected the deal, saying it will "stifle competition and innovation in the U.S. market."

Under the order, Illumina has six months to divest Grail. The FTC also is blocking the company from entering the multi-cancer early-detection testing space without approval.

What he's saying: "ILMN's desire to own GRAIL at all costs has destroyed $50 billion in shareholder value," Icahn's presentation says.

"ILMN will tell you they will expeditiously divest GRAIL," he continues. "But the sad truth is, due to their obsession with GRAIL, they will continue appealing against the EU, and more recently, the FTC decision to block the deal."

Along with appointing three directors of Icahn's choice, the activist investor (strongly) suggests Illumina drop its appeal to regulators blocking the deal and divest Grail.

In the crosshairs is current Illumina CEO Francis deSouza, who Icahn says has caused deterioration of the company's core business due to "a talent exodus, decrease in new product cycles, slowing revenue growth, and declining margins."

Illumina chair John Thompson was also criticized, particularly his "conflicted relationships" with a prior owner of Grail as well as a "poor history of M&A."

Icahn calls for the reappointment of former Illumina CEO Jay Flatley, "or a similar individual" as CEO or chairman.

By the numbers: Illumina has taken a $4 billion impairment charge, with significant tax liabilities looming upon exiting Grail, and the company has accrued about $450 million in fines, Icahn's presentation says.

Against the backdrop of the contentious deal, Illumina's share price has underperformed among health care leaders by about 260% and lab technology peers by 195%, per the presentation.

Under deSouza, "R&D continues to climb, while product cycles lengthen and revenue growth slows," Icahn says — prompting the question of where investment in R&D is going.

Illumina's core operating margins have shrunk from about 31% to 22% during deSouza's tenure, it says.

Of note: Icahn's presentation cites a remark from Citi from 2020, which suggests the Grail deal positions Illumina to compete against its own liquid biopsy customers.

Catch up quick: Illumina founded Grail in 2016 and later spun off the company at a valuation of around $1 billion to $2 billion, keeping a minority share.

The company set its sights on bringing the company and its MCED tests back in the fold in 2020, announcing a deal to reacquire Grail for $8 billion. It closed the deal in 2021.

It has since faced heavy pushback from regulators, and a formal proxy fight from Icahn, though the two parties were close to settling before the fight broke out.

The other side: "Carl Icahn, whose firm owns less than 1.5% of Illumina’s outstanding common shares, has made it clear that his three director nominees — Jesse Lynn, Andrew Teno, and Vincent Intrieri, all current and former Icahn employees —  would represent Mr. Icahn’s interests on the board of Illumina and answer to Carl Icahn, not the shareholders of Illumina," an Illumina spokesperson tells Axios.

"Unlike Icahn’s director nominees, Illumina’s board of directors acts in the best interests of all of its shareholders and exercises considered and deliberate independent judgement.”

This article was updated after publication with comments from Illumina.

4. Icahn gets tough on Illumina and leadership

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Nolea Health, a London-based health care jobs marketplace raised £1m ($1.24m) in seed funding led by Frontline Ventures with participation from Calm/Storm Ventures and individual backers including Cera CEO Mahiben Maruthappu and former CPL Resources CEO Anne Heraty. https://www.getnolea.com/

Medical Specialists of the Palm Beaches, an Ascend Partners-backed primary care and multi-specialty physician group practice serving Florida's Palm Beach and Broward counties, acquired Palm Beach Digestive Associates, a Delray, Fla.-based network of gastroenterology and colonoscopy clinics. https://ascendpartners.com/

Vander-Bend Manufacturing, an Aterian Investment Partners-backed developer of design, manufacturing and assembly tools for the medtech industry based in San Jose, Calif., acquired Omni Components Corp, a Hudson, N.H.-based producer of precision mechanical medical products. https://www.aterianpartners.com/

5. Deals o' the day

Hercules Capital named Former SVB market manager for central and southwest U.S. life sciences and health care Tom Hertzberg managing director of its life sciences and health care team.

GE Healthcare named former Amazon senior applied science manager Parminder Bhatia chief AI officer.

MedArrive named former Premera Blue Cross provider Traci Tigar-Zieper regional clinical director of episodic programs.

Wellframe named former Optum Virtual Care chief product officer Sunil Venkataram SVP of product.

Alcami Corporation named former AeroSafe Global SVP of marketing Jessica Cao VP of marketing.

The following former Olive AI employees took on new roles: 

Former implementation success owner Elliot Hamer is now senior implementation manager at PreciseMDX.

Former SVP and chief platform architect Howard Dierking is now VP of engineering at Flatfile.

Former facilities manager Dustin Schwab is now in the same role at Aldi USA.

Former senior operations manager Kayla Appleton is now senior solution designer at Athenahealth.

6. It's Personnel

It's Tuesday, Health Tech readers, and we have a lot to cover. Let's get to it.

📣 Situational awareness: BFD San Francisco is on May 10, to feature Y Combinator CEO Garry Tan and Alto Pharmacy CEO Alicia Boler Davis, among other esteemed speakers. Request your invite.

🦷 Erin finally booked a dentist appointment for the first time in several years and intends to keep it.

💙 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece. Please ask your colleagues, friends and family to sign up.

April 11, 2023

1 big thing: MedArrive fills mobile care tank with $8M