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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

Upperline Health, a value-based specialty care provider, secured $58.35 million to grow its accountable care organization, CEO David Thorpe tells Aaron exclusively.

Why it matters: Investors see specialty care as the next logical frontier for health care's shift to a value-based care (VBC) model.

Details: This round was led by Crestline Investors and had participation from previous investors Silversmith Capital Partners and Adam Boehler, CEO of Rubicon Founders.

The breakdown is half debt and half equity. Crestline provided debt with Silversmith participating in the equity.

Funding will go toward hiring more care team members, as well as improving the way Upperline collects and analyzes patient data, Thorpe says.

Upperline, which has primarily grown organically, will also weigh acquisitions of other providers, he says.

What they're saying: "Despite 70% of health care providers being specialists, there has been little focus on value-based care arrangements with these physicians,” says Crestline managing director Marc Strauss.

Unlike Upperline's prior fundraises, "the pool of people who were first-time interested investors in VBC was smaller," Thorpe says.

"It was mostly folks who have been in VBC and knew the space and know the opportunity, despite fluctuations, and can tune out the white noise," he adds.

How it works: Nashville, Tennessee-based Upperline provides treatment for lower extremity injuries and conditions.

Founded in 2017, the company currently serves 350,000 patients.

There are 122 Upperline Health clinics across seven states (Alabama, California, Florida, Georgia, Indiana, Kentucky and Tennessee).

Care teams include advanced practice providers, physicians, care navigators, pharmacists, dietitians and social workers.

What's next: "We are EDBITA positive right now, so the runway depends on how quickly we want to grow and deploy the capital," Thorpe tells Axios.

"This could be the last round of funding, outside of a possible recap down the road," he adds.

Catch up quick: Silversmith invested $29.75 million in Upperline back in 2018, when the company had only eight doctors.

The company has raised $79 million to date.

1 big thing: Upperline Health raises $58M for specialty VBC

Illustration of scrubs on a hanger with a dollar bill overlay

Med tech company Vertos Medical raised a $26 million Series C, which the company is hoping will be its final private fundraise before a public market debut, CEO Eric Wichems tells Aaron exclusively.

Why it's the BFD: Chilly IPO markets are showing signs of thawing and the med tech sector is particularly primed for an active 2024.

Details: The round was led by new investor Norwest Venture Partners.

Existing investors, including Pitango Venture Capital, also participated.

What's next: "We are on a path to break even, and ideally, this will be the last financing before going IPO next year or so," Wichems said in an exclusive interview with Axios.

"We are high growth, demonstrated a profitable business in an under-penetrated market, and we are not burning cash like crazy," he continues.

Alongside helping expand its sale and commercialization footprint, fresh funds may finance potential M&A, Wichems notes.

"If we find a good product, anywhere from early to commercial ready, we will be acquisitive," Wichems says.

Wichems declined to comment on company valuation but added that this is an "up round."

How it works: The company makes minimally invasive medical devices to guide procedures treating lumbar spinal stenosis (LSS).

It's best known for "mild," which is an image-guided outpatient procedure that removes a large root cause of LLS via a small incision.

The procedure is nationally covered by Medicare and more than 1,000 physicians in the U.S. are performing it.

What they're saying: "A lot of the work is building a standard of care and educating physicians and the public about this therapy before we go public," says Wichems.

"It is a serious problem, and often people think it is a mechanical problem — but in reality, you just need to release pressure on the spine and don't have to restructure the whole back," Norwest Venture Partners general partner Zack Scott tells Axios.

Flashback: This is Scott's second rodeo with Vertos, having invested in the company back in 2014 when he was a managing partner at Revelation Partners.

"Back then, I thought Vertos could get profitable without outside capital most likely, as they were just scratching the surface on market share in the space," Scott said.

Now, Vertos has "one of the largest sales forces and footprint in sales in the interventional pain space," he says.

2. The BFD: Vertos Medical captures $26M Series C

Illustration of a spine with the vertebrae made out of dollars.

Karoo Health, an Albuquerque, New Mexico-based value-based heart care company, raised $3.4 million in seed funding, CEO Ian Koons tells Erin exclusively.

Why it matters: Heart disease is the nation's leading cause of death, and cardiology care is the largest driver of U.S. health care spending.

Details: First Trust Capital Partners led the round.

New backers GoGlobal and Inflect Health joined along with previous investors Panoramic Ventures, FirstMile Ventures and several individual backers.

Funds will be funneled into Karoo's launch on June 19 as well as supporting partnerships with health plans and systems and honing its technology, Koons says.

Koons envisions the company raising a Series A of between $15 million and $25 million early next year.

How it works: Karoo supports patients onsite and virtually and contracts with cardiology practices, health systems and health plans to share per-patient, per-month savings.

The company's core aim is preventing emergency room admissions with low-touch interventions such as nutrition support and daily weigh-ins.

Karoo's tech also provides insight into clinician performance, and the company shares in cardiologists’ bonuses. "We're only successful if they’re successful," says Koons.

Of note: The company plans to bill providers on a fee-for-service basis for the first six to nine months, track progress and transition to value-based contracts starting Jan. 1, 2024.

"It’s a pragmatic way to get started and help these patients now," Koons says.

Karoo stands out from its peers by offering not just a portion of heart care but rather wraparound services, according to Koons.

What's happening: The company is currently partnered with 100 providers including 75 cardiologists in Arizona and New Mexico.

Koons aims for the company to be in five states by year's end.

State of play: An aging population combined with patient and provider interest in shifting cardiac procedures to lower-cost care settings is underwriting growth in demand for remote and home-based cardiac companies.

Remote patient monitoring company Hello Heart amassed $70 million in Series D funds in May 2022.

Virtual heart health management startup Moving Analytics last summer pulled in $20 million in Series A funding.

Wearable heart failure detection technology developer Cardiosense last winter raised $15 million in Series A capital.

What he's saying: Koons was inspired to start Karoo after his best friend passed away at age 29 after a heart attack — and although almost a decade has passed, Koons says the work continues to remain "super personal."

"This couldn't save my friend’s life, but I’d love to be able to say we helped save your mother or father or best friend from this preventable issue," Koons says.

3. Karoo Health seeds $3M for value-based heart care

Illustration of a hand putting a coin into a heart through a slot. 

• GetHarley, a London-based telehealth platform for skin care professionals, raised $52M led by Index Ventures and joined by Headline, Visionaries Club and Village Global. https://axios.link/3WS4n24

• RxLightning, a New Albany, Ind.-based specialty medication enrollment startup, raised $17.5M in Series A funds led by LRVHealth with participation from McKesson Ventures and insiders Novartis, Onco360, Hearst Ventures and HealthX Ventures. https://axios.link/45LWpf8

• Mend, a New York-based provider of physical recovery products and digital tools, raised $15M in Series A funding led by S2G Ventures. www.mend.me

• Bain Capital sweetened its takeover offer for Australian agreed-care home provider Estia Health (ASX: EHE) to A$826.8M, or A$3.20 per share (up from A$3 per share). https://axios.link/45OiGJb

• PSG-backed DoseSpot, a Dedham, Massachusetts-based SAAS health care platform acquired pVerify, a Tustin, California-based HIPAA-compliant API company. https://axios.link/3WTBPVY 

• Persistence Capital Partners-backed Neighbourly Pharmacy, a Toronto-based network for community pharmacies, acquired seven Canadian pharmacies. https://axios.link/3qlhj4n

• SpendMend, a Grand Rapids, Mich.-based developer of cost-cycle tools for health care, acquired Rebate Insight, a health care rebate streamlining software provider. https://www.spendmend.com/

4. Deals o' the day

• Alan Novak left a position as VP at Olive AI to join Veeva as VP of global customer support.

• Teresa Asma was promoted from VP of finance at Solv to chief operating officer.

• Todd Macaluso left a role as VP of sales at UnitedHealth Group to become Alignment Health's health plan chief growth officer. David Milligan left a role as VP of sales at Bright Health to become Alignment's SVP of sales for California. Joe Kanatzar left a role as Medicare growth officer for Florida Blue Medicare to become Alignment's SVP of sales for all states outside California.

• Chaitali Sinha was promoted from head of research to SVP of health care at Wysa.

• Ryan Stewart left Solomon Partners to join MTS Health Partners as partner.

• Marc Rabner was promoted from clinical adviser at CRISP Shared Services to chief medical officer.

• Teresa Lee, managing director of OMERS Growth Equity, will join Carrum Health's board of directors. 

• Zack Scott, general partner at Norwest Venture Partners, will join Vertos’ board of directors.

5. It's Personnel

It's Wednesday, Health Tech readers. You made it halfway through the week.

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Health Tech: Upperline Health secures $58M

June 07, 2023

1 big thing: Upperline Health raises $58M for specialty VBC