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Generative AI's leapfrog potential in health care rivals that of its promise in other industries, per General Catalyst managing director Holly Maloney.

Why it matters: Health care's continued dependence on tools as basic as the fax has made it all the more ripe for sudden transformation via genAI, Maloney said.

"You actually may leapfrog from fax to genAI in a way that you won't see [in] almost any [other industry]," Maloney told Axios on a panel at the Aspen Ideas Health Festival last week.

The big picture: AI-driven tools have captivated industry observers for their ability to streamline mundane tasks such as note-taking but continue to hold untapped promise, Maloney and investors at Frist Cressey Ventures and Lux Capital said.

What they're saying: Another lucrative future application of AI lies in insurance, said Maloney.

"You might actually see net new insurance products or an entire re-imagination of an insurance category that is leveraging first-of-their-kind data sets that have been unstructured," Maloney said.

"You figure out a way to actually structure those and use them and create real proprietary advantage," she added.

State of play: The sector is already seeing AI applied to arenas such as prior authorization, documentation and billing, and voice transcription.

"As unsexy as it is, I think there's a multibillion-dollar opportunity ... to simply reduce paperwork, to make things more efficient," said Lux Capital general partner Deena Shakir.

"There's an abundant swath of opportunities in terms of how you can help crack what is a workforce crisis," said Maloney, who mentioned Hippocratic AI's creation of "a foundational model that can interact with and communicate discrete, non-clinical activities" of value to health systems and insurers.

Reality check: When it comes to substantiating the claims of AI-powered startups, venture firms and regulatory agencies have a long way to go.

"This category we're talking about is moving so quickly that by the time you think you understand it, you've got to understand it again," said Frist Cressey Ventures partner Navid Farzad.

Responding to a question about how his firm runs due diligence on such companies, Farzad said, "The short answer to that right now is nothing" — which is why they have yet to invest in the category.

"We like to think about the training of these models and using AI in [a] build-and-iterate, build-and-test .... continuous testing motion," said GC's Maloney.

The intrigue: Maloney shared some updates on how GC's portfolio companies are behaving in the wake of the firm's unprecedented agreement to purchase Summa Health in Ohio.

"Companies have proactively started to engage with each other and integrate their solutions and jointly take something to market so that there's a single product, a single implementation process and a single pricing model," Maloney said.

GenAI's 'leapfrog' potential for health care

Health care venture capital investors speak at a panel at the Aspen Health Ideas Festival.

From left: Axios reporter Erin Brodwin moderates a panel with Lux Capital's Deena Shakir, Frist Cressey's Navid Farzad and General Catalyst's Holly Maloney at the Aspen Ideas Health Festival. Image: Courtesy of Aspen Ideas Health

Private equity firm Altaris plans to take digital health company Sharecare (Nasdaq: SHCR) private for $1.43 a share, or about $518 million.

Why it's the BFD: If it closes, the deal will conclude what was essentially a two-year strategic review for Sharecare.

Zoom in: Altaris' bid represents an approximately 85% premium over Sharecare's closing stock price on Thursday.

As of Monday morning, the stock was at $1.39. The company has about 362.4 million shares outstanding, according to FactSet.

Founder Jeff Arnold will roll his existing equity and continue to serve as executive chairman. Sharecare's executive leadership team is expected to remain also.

Catch up quick: Sharecare reported Q1 revenues of approximately $91 million and an adjusted EBITDA of negative $2.7 million.

Results were impacted by a contract dispute with a customer, with remaining fees of $50 million owed to Sharecare over the life of the contract, per the company.

Shareholders approved a reverse stock split during the company's annual meeting on June 13.

Between the lines: "At Friday's close of $1.37, the risk/reward does not seem favorable to us," says David Larsen, analyst at BTIG.

Larsen cites the value of Sharecare's trove of personalized data, alongside good growth in its provider and enterprise segments, plus "the right strategic partners."

Yes, but: If Sharecare's contract dispute escalates, and the deal with Altaris falls apart, "the downside risk could be well below $0.80," he adds.

Flashback: Sharecare went public via reverse merger with SPAC Falcon Capital Acquisition Corp for about $4 billion in 2021.

💭 Our thought bubble: Altaris boasts a good track record for revenue growth, which is what Sharecare needs — but the PE firm is swooping in during an uncertain time for digital health, without a clear eventual strategic buyer for the business.

The bottom line: It's still a tough time to be a publicly traded digital health company — particularly one that SPAC'd its way onto Nasdaq.

Altaris to acquire Sharecare for $518M

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

• Marble Health, an NYC provider of in-network therapy for teens, raised a $5m seed from Khosla Ventures, Town Hall Ventures and IA Ventures with participation from Daybreak Ventures and Lorimer Ventures. axios.link/3xBG9kr

• Healthworx, the Baltimore venture arm of CareFirst, invested in Positive Development, a McLean, Va.-based provider of developmental care for children with autism. positivedevelopment.com

• FirstVet, a Swedish online vet health company, raised a €20m Series C. Telus Global Ventures led, and was joined by insiders OMERS Ventures, Mubadala Capital and Cathay Innovation. axios.link/3XFMOVt

• Cureosity, a German gamified therapy startup, raised an unlabeled €3.8m from TechVision Fund and Nomainvest. axios.link/3VTBnZ3

• Strive Medical, an Irving, Texas-based portfolio company of NMS Capital, acquired ProMed DME, a Stuart, Fla., maker of diabetic continuous glucose monitoring supplies. strivemedical.com

• Cone Health, a Greensboro, N.C., nonprofit hospital health system with ~13,000 employees and ~700 physicians, agreed to merge with Risant Health, an Oakland, Calif.-based nonprofit health care entity owned by Kaiser Permanente. axios.link/4cxHqYQ

• Progyny (Nasdaq: PGNY), an NYC fertility benefits management company, acquired Apryl, a Berlin fertility benefits platform. axios.link/3XCVtYO

• NeueHealth (NYSE: NEUE), the Florida care management company FKA Bright Health, received a secured loan facility for up to $150m from Hercules Capital, a San Mateo, Calif., specialty finance company focused on providing senior secured venture growth loans. axios.link/45UptBL

Deals o' the day

• Jean-Claude Kyrillos, former president of diagnostics at Envista Holdings, joined Tandem Diabetes Care as COO. axios.link/3KQ6mPk

• Fred Paster, former global commercial lead at Takeda Oncology, joined PharmaEssentia as head of commercial. axios.link/3zaf605

• Sachin Jain, CEO of SCAN Group, joined Basys.ai as an adviser. basys.ai

It's Personnel

🏥 Charted: Abortion travel distances, two years after Dobbs — Axios

👨‍💻 Cyberattacks cost an average of $11M per breach — Health Care Finance

⚕️ Health care CIOs are crucial for PE/VC deals — Forbes

⚖️ Affordable care is on the November ballot — The Hill

Your daily dose

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🤵 Aaron is a mix of nervous and excited as his wedding is only 11 days away. 

💍 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 24, 2024

1 big thing: GenAI's 'leapfrog' potential for health care