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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

The virtual physical therapy sector has been active lately amid promising new outcomes data and fresh funding, Erin writes.

Why it matters: Large fundraises and promising research have buoyed the sector, but the lack of integration with the health care system stands as a challenge.

Zoom in: On the heels of recent fundraises, multiple private digital musculoskeletal (MSK) players have hinted at public debuts, and a Peterson Health Technology Institute (PHTI) report suggests these approaches might help patients recover faster and save the health system big bucks.

Yes, but: The report also found that such tools aren't well integrated with the health care system, limiting access and savings potential.

And, if one public debut can serve as a bellwether, digital MSK company DarioHealth hasn't fared so well since its 2017 IPO.

Context: AI-powered virtual physical therapy (PT) startup Sword Health last week raised $30 million in new funding and $100 million in secondary financing to offer liquidity to employees and early investors at a valuation of $3 billion, a 50% increase from its 2021 $2 billion valuation.

Sword CEO Virgilio Bento has been in conversations with bankers and investors and is eyeing an IPO in the second half of 2025 or early 2026.

Bento said the company's product for pelvic floor PT, called Bloom, is its fastest-growing segment.

"Just with Bloom, we are going to do as much revenue in 2024 [as] we did with Sword altogether in 2022," he told Axios.

The big picture: Sword's raise is at least the seventh such deal in the virtual MSK space since 2021, and Sword is the second virtual PT company to hint at a near-term IPO.

Livara Health (FKA SpineZone), a specialty provider of value-based in-person and virtual MSK care, collected $15 million in May.

Hybrid musculoskeletal care provider Commons Clinic in 2023 clinched a $19.5 million Series A.

Virtual physical therapy provider Hinge Health in 2021 raised a $300 million Series D at $6.2 billion valuation and advertised ambitions to go public in 2022.

Digital MSK startups Kaia Health and RecoveryOne in 2021 scored Series C raises of $75 million and $33 million, respectively.

In-person PT provider Bardavon Health Innovations in 2022 paid 8 figures in a roughly even split of cash and stock to acquire virtual MSK startup PeerWell.

By the numbers: At $223 million raised so far this year, funding for the virtual MSK sector already stands at nearly double that of last year's $125 million total, per Rock Health.

Between the lines: The report found that virtual MSK solutions "stand to improve access for populations who otherwise have barriers to in-person PT, including older adults, people who live in rural areas, and those with mobility limitations."

Specifically, the analysis found that PT-guided treatment, or the type of therapy offered by companies including Sword, Hinge, Omada and RecoveryOne, had outcomes equivalent to in-person PT at a lower cost.

Such tools could save commercial insurance beneficiaries $737–$1,306 per person in the first year.

By contrast, app-based exercise therapy solutions, or what's offered by companies such as Kaia and Dario, were found to "improve pain and function compared with no PT, but there is no evidence that they improve functional status comparable with in-person PT, and are therefore unlikely to be an effective substitute."

What they're saying: Overall, digital MSK care "is an excellent use case for virtual care and it can be effective," PHTI executive director Caroline Pearson tells Axios. "It's a win-win."

Still, virtual tools' lack of integration with the health system at large limits their accessibility and impact.

"As you think about hybrid care and medical avoidance you start to think, this has to be a part of the medical insurance benefit landscape," adds Pearson.

1 big thing: What's next for the virtual PT market

Illustration of a person using an exercise band made from $100 bills.

Gina Bartasi is back as chief executive at Kindbody, the fertility company she founded in 2018, the company tells Axios' Claire Rychlewski exclusively.

Why it's the BFD: Bartasi's second act as CEO comes as the digital health unicorn prepares for an IPO.

The latest: Bartasi replaces Annbeth Eschbach, who was appointed president in 2019 and took on the CEO position as well in 2022.

Kindbody is now EBITDA-positive and is expecting to generate $225 million to $250 million in revenue this year.

What's next: "We'd love to raise a crossover round," which could finance acquisitions ahead of a potential IPO in Q2 or Q3 next year, Bartasi says.

"There's one more milestone we're targeting, which is [becoming] free cash-flow-positive," she adds, noting Kindbody expects to achieve that this year.

"I do think the election plays into the IPO window," she says, adding the company doesn't plan to pursue a listing in the months directly leading up to or after the federal election in November.

How it works: Based in New York, Kindbody functions as payer and provider and offers customers bundled rates for its services, which include fertility and nutrition consultations, in-vitro fertilization (IVF), egg freezing and virtual therapy.

Reality check: Just over six months ago, Kindbody's prospects were looking less rosy.

Bloomberg reported last November that Kindbody was looking for $50 million to help the company weather larger-than-expected operating losses and a "material" cash burn. (Kindbody declined to comment on this to Axios.)

This was after Bartasi told Axios last March that the company had no plans to raise more funding and would be EBITDA- and cash-flow-positive in 2023.

A Bloomberg investigation from October 2023 found understaffed clinics and inconsistent safety protocols contributed to errors at Kindbody, though the company refuted the staffing allegation in its comment to Bloomberg.

Catch up quick: Kindbody has raised just over $290 million from investors like Perceptive Advisors and GV.

Bartasi stepped into the chair role from CEO in 2022. She says Eschbach's entire tenure was always planned to be five years.

The board asked Bartasi to return to the top job in the fall, she adds, but her son was newly diagnosed with Crohn's disease at the time, and she wasn't in a position to step in.

The big picture: The Alabama Supreme Court's ruling on IVF in February created a flurry of legal questions and liability risks, casting a shadow of uncertainty across the sector.

"What we've seen is protecting IVF and fertility coverage is a bipartisan issue," Bartasi says, adding that both presidential nominees have signaled support and defense for IVF and fertility freedom.

The bottom line: Kindbody may finally be ready for the IPO it's been plotting the last two years.

2. The BFD: Gina Bartasi back as CEO of Kindbody 

Illustration of a baby onesie printed with the image of a $100 bill.

Want more health tech deals? Check out the Axios Pro Deals Tracker.

• Regard, a Los Angeles developer of AI tools to help providers synthesize patient data, raised a $30m Series B led by Oak HC/FT at a $350m valuation, per Business Insider. axios.link/3VBL0eE

• Canary Speech, a Utah developer of voice biomarkers, raised a $13m Series A led by Cortes Capital with participation from Sorenson Communications, SMK and Hackensack Meridian Health. canaryspeech.com

• Mindset Medical, a Phoenix patient monitoring startup, raised a Series A led by Grayhawk Capital and Questa Capital with participation from AZ Venture Development Corporation, Amgen Ventures and Nova Prime. axios.link/4cggw7z

• SG Homecare, a Tustin, Calif.-based, portfolio company of Sverica Capital, acquired Western Drug Medical Supply, a Glendale, Calif.-based provider of durable medical equipment and single-use home care medical supplies. sgdme.com

• Med-Metrix, a Parsippany, N.J.-based RCM software company backed by A&M Capital Partners, acquired RCM provider Hospital Billing and Collection Service. axios.link/3VmEUgW

• NeuroFlow, a Philadelphia provider of behavioral health tech infrastructure, acquired Owl, a Portland provider of data and analysis to behavioral health organizations. neuroflow.com

• Quest Diagnostics (NYSE: DGX), a Boston diagnostic services company, completed its acquisition of PathAI Diagnostics from PathAI. axios.link/3Xqecqe

• InTandem Capital Partners, an NYC middle-market PE firm focused exclusively on health care services, closed its third fund with $715m. axios.link/3VA18gT

3. Deals o' the day

• Ed Glynn, former CMIO at HCA Physician Services, joined RhythmX AI as chief clinical officer. rhythmx.ai

• Kendra Lanza-Kaduce, former director of delivery and customer success at Olive AI, joined Healthy.io as director of program management. healthy.io

• Dan Henderson, former chief medical officer at InstED, joined Gather Health as regional medical director. gatherhealth.com

• At GE HealthCare, Roland Rott, former president and CEO of ultrasound, will become president and CEO of imaging, and Phil Rackliffe will become president and CEO of ultrasound and image-guided therapies, effective July 1. gehealthcare.com

4. It's Personnel

📋 Medical device trials don't enroll enough women — STAT

🏬 What retailers might do next in health care — Axios

🧟 PE investors fear cash is stuck in zombie funds — Bloomberg

🏛️ Senate may have votes to scrap nursing home staffing mandate  — Axios

5. Your daily dose

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🥂 Situational awareness: One week from today, join our Health Care Policy colleagues for an exclusive conversation with Sens. Tom Carper (D-Del.) and Bill Cassidy (R-La.). Secure your spot now!

🌲🪵 Erin is back from a weekend of easy creek camping that featured bonfire s'mores and cold water dips.

⛺ Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Egan Millard. Please ask your colleagues, friends and family to sign up.

June 11, 2024

1 big thing: What's next for the virtual PT market