TTA’s Summer Like No Other: Amwell’s Googly IPO, CVS’ cash offer, Humana sues ‘telehealth’ scam, Theranos trial delayed, a movie project to engage on dementia needs funding

Getting close to the unofficial end of summer in a year like no other (unless you count 1919?). We catch up with news and ISfTeH, Amwell finally IPOs with a Google kicker, Theranos’ denouement moves to 2021, and payer Humana sues a scam masquerading as a telehealth company. And we profile a movie project which will engage people on dementia.

Last Days for our exclusive offer for Readers to attend the fully virtual Connected Health Summit 1-3 September at half price!

For our UK Readers, enjoy your bank holiday on the 31st. US readers follow with Labor Day one week later. Alerts and articles will be on holiday from early next week to 14 September. 

Connected Health Summit 1-3 September (virtual): last days to register–50% off for TTA Readers! (see above)
Is the NHS ready to adopt telemedicine through and through–and is telemedicine ready? (COVID revealed the need, now for getting to the goal)
News roundup: CVS cashing out notes, catching up with ISfTeH, India’s Stasis Labs RPM enters US, Propeller inhaler with Novartis Japan, Cerner gets going with VA
QuivvyTech: a ‘telehealth’ company, sued by Humana in telemarketing scheme (US)
(An apparent scam with telehealth ‘lipstick’)
The Theranos Story, ch. 64: Holmes’ trial moved to March 2021 (Lady Justice is crying with boredom under that blindfold)
Amwell plans $100 million IPO, plus $100 million from Google as a kickoff (As predicted, but surprisingly modest in scope)
‘Before the Ashes Fall’: the story behind the book and the movie in development about dementia (Funding needed)

More signs of normality as we turn to topics other than COVID. We return to issues like data privacy and a Genomic Bill of Rights. ‘What’s hot in digital health’ lists reappear. And there’s another bumper crop of funding and acquisitions. Plus a fresh look at VR in medical education stimulated by the pandemic reaction.

Will the rise of technology mean the fall of privacy–and what can be done? UK seeks a new National Data Guardian. (Guarding the chicken coop with an open gate?)
CB Insights rounds up a 2020 Digital Health Top 150 (Not that different from 2019)
News Roundup of acquisitions, funding: Health Catalyst-Vitalware, Change Healthcare-Nucleus.io, Medtronic-Companion Medical, Cecelia Health; Proteus Health sale contested, but sold (updated 20 Aug) (More signs that we’re returning to a frothy ‘normal’)

Medical education going digital, virtual, and virtual reality (US/UK) (How med ed is adapting)

Is something vaguely resembling normality returning? We note and opine on multiple sales, acquisitions, and IPOs. The Propel@YH accelerator in Yorkshire returns for year 2. Walmart Health’s leader departs mysteriously. And another gimlety take on the Teladoc-Livongo deal from the ‘flight deck’.

News roundup: Ancestry sells 75% to Blackstone, Cornwall NHS partners with Tunstall, most dangerous health IT trends, Slovenski departs from Walmart Health (Activity a leading indicator of a return to normality)
Propel@YH digital health accelerator open now for applications to 24 September (UK) (Return to normality #2–important for your early stage company)
Doro AB acquires Eldercare (UK) Limited, creating #2 in telecare  (Piece by piece strategy)
Drug discounter GoodRx plans US IPO; Ginger mental health coaching raises $50 million (It’s getting foamier out there in the Digital Health Bubble Bath) 
Reflections in a Gimlet Eye: further skeptical thoughts on the Teladoc acquisition of Livongo (updated) (A message to Teladoc: just like on the flight deck, Human Factors will make–or doom–your success)

2nd Quarter results are capped with Teladoc’s Livongo acquisition (ka-ching!), SOC Telemed’s alternative IPO, plus more modest acquisitions. What happens after the mad rush of a NHS challenge? 

Plus a special offer for Readers to attend the Connected Health Summit at half price!

More consolidation: BioTelemetry acquires population health platform from Envolve/Centene, inks agreement with Boston Scientific (Acquisitions that make business sense)
TechForce 19 follow up: Alcuris’ results on testing Memo Hub (UK) (What happens after all that work–tell us your story)
Connected Health Summit 1-3 September goes virtual–now 50% off for TTA Readers! (Affordable, accessible conference)
An admittedly skeptical take on the $18.5 billion Teladoc acquisition of Livongo (updated for additional analysis) (What makes sense and what does not)
SOC Telemed will go public in unusual ‘blank check’ acquisition (An interesting alternative to IPO)

While it’s summer, investment in digital health continues with Withings’ $60 million Series B. Wearables find a boost from COVID in this Year of the Sensor. And we take a long catch up with UK news from the Isle of Man to Manchester.

En Vogue: smart clothing and wearables to track COVID spread and progression (More wearables in The Year of the Sensor)
Withings closes $60 million Series B round to fund expansion, B2B development (Funding B2B and expansion)
UK news roundup: Health Innovation Manchester winners, donate Phones for Patients in isolation, British Patient Capital funds SV Health with $65m, Memory Lane on the Isle of Man, SEHTA and Innovate UK briefings

Unlockdown is proceeding and despite breathless media hype, we are learning valuable lessons and creating new models using sensor-based monitoring, contact tracing, even about the air we breathe in the office. Innovation competition continues virtually with Aging 2.0. Telehealth remains heading up. And our weekend’s provocative Must Read is an impassioned warning on our headlong rush to turn healthcare over to Big Tech and Pharma.

Weekend ‘Must Read’: Are Big Tech/Big Pharma’s health tech promises nothing but a dangerous fraud? (Urgent Snake Oil Warning)
The Year of the Sensor, round 2: COVID contact tracing + sensor wearables in LTC facilities; Ireland’s long and pivoting road to a contact tracing app (Contact tracing that actually works)
Nanowear’s ‘smart clothing’ in NY/NJ hospital trials to monitor patients for early-stage COVID. Is it the Year of the Sensor? (Intriguing clinical trial)
Vote now for finalists in the Aging 2.0 Global Innovation Search (to 31 July) (We have the list and links)
Can technology speed the return to office post-COVID? Is contaminated office air conditioning a COVID culprit? (All the apps, testing, and monitoring in the world doesn’t fix the air you breathe)
While telehealth virtual office visits flatten, overall up 300-fold; FCC finalizes COVID-19 telehealth funding program (US) (Still on the rise)

Is it the July doldrums, or COVID pandemic rerun fatigue? CVS Health’s study points at progress for telehealth, but a multiplicity of issues. Philips hits a home run with VA with remote ICU tech, and enters sensor-based RPM with BioIntelliSense.

Telehealth, virtual, and ‘omnichannel’ health winners in CVS’ ‘Path To Better Health’ study (Telehealth gains, but reflects the fractionalization of US healthcare)
Philips awarded by VA 10-year, $100 million remote ICU, telehealth contract; partners with BioIntelliSense for RPM (A major win and a win for BioIntelliSense)

And a bit more….Walgreens Boots goes big with billion-dollar medical office deal with VillageMD (See the competition move–and raise ’em)

News Roundup: Doctor on Demand’s $75M Series D, Google’s Fitbit buy scrutinized, $5.4 bn digital health funding breaks record (Three big stories)
Hackermania runs wild, Required Reading Department: The Anatomy of a Ransomware Attack (Weekend reading for you and your IT department)

NHSX COVID contact tracing app exits stage left. Enter the Apple and Google dance team. (Not a surprise to anyone, and some changes made)

Another COVID casualty: a final decision on the Cigna-Anthem damages settlement (It’s only 3 years and billions at stake!)
Telehealth and the response to COVID-19 in Australia, UK, and US: the paper (Malcolm Fisk and team’s comparative study)

Have a job to fill? Seeking a position? Free listings available to match our Readers with the right opportunities. Email Editor Donna.


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Telehealth & Telecare Aware: covering the news on latest developments in telecare, telehealth, telemedicine and health tech, worldwide–thoughtfully and from the view of fellow professionals

Thanks for asking for update emails. Please tell your colleagues about this news service and, if you have relevant information to share with the rest of the world, please let me know.

Donna Cusano, Editor In Chief
donna.cusano@telecareaware.com

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Amwell plans $100 million IPO, plus $100 million from Google as a kickoff

As expected [TTA 6 Aug], Amwell on Monday filed S-1 forms with the US Securities and Exchange Commission (SEC) registering them for an IPO to raise about $100 million. The number and amount of shares on the New York Stock Exchange, under ticker symbol AMWL, were not disclosed. Interestingly, and somewhat unexpectedly, Google’s cloud business is taking a private placement of $100 million in shares equal to the IPO price, to be executed on the IPO closing.

The partnership will mean that Amwell’s cloud services on Amazon Web Services (AWS) will be moving to Google Cloud. Amwell will also move some video performance capabilities to that platform, and will also cooperate on technology plus build out a dedicated sales effort to expand Amwell’s footprint in the sector.

Amwell’s telehealth business, like Teladoc’s, skyrocketed during the worst of the pandemic shutdown. According to the CNBC article on the IPO, Amwell told them in May that it’s seen a 1,000 percent increase in visits due to coronavirus and closer to 3,000 – 4,000 percent in some places (which without further data is meaningless). The IPO filing stated that revenue was up 77 percent January-June 2020 versus same period 2019, from $69 million to $122 million. Profits are not following, however. Its net loss nearly tripled over the same period, growing from $41 million in the first six months of 2019 to $111 million in the first half of this year. Seeking Alpha has the operating loss at a slightly higher $113.58 million.

This past May, Amwell also raised $194 million in a second Series C [TTA 23 May]. Their financing to date is over $700 million.

Amwell states that it provides telehealth solutions for over 2,000 hospitals and 55 health plan partners with over 36,000 employers, covering over 80 million lives, a higher metric than members. This is in comparison with Teladoc which claims 51.5 million members, 50 health plans, 70 global insurers, and 12,000 clients in 175 countries. Amwell is having to compete with a larger suite of services that a Teladoc-Livongo combination will eventually offer. Amwell’s by-contrast modest IPO and private placement corresponds to their relative size, but a contrarian would also look at Teladoc’s huge expenditures for InTouch Health ($1bn) and Livongo ($18.5bn) and rightly be concerned about their runway to ROI and profitability.

Reflections in a Gimlet Eye: further skeptical thoughts on the Teladoc acquisition of Livongo (updated)

Gimlet EyePerhaps it’s Reflections in a Gimlet Eye, but this Editor remains bemused and slightly dyspeptic about the acquisition of ‘health signals’ remote patient monitoring management platform Livongo by telehealth giant Teladoc.

Here’s the latest, courtesy of Credit Suisse equity research analyst Jailendra Singh on deal rationale and the potential synergies, based on his Q&A with Teladoc and Livongo management (link here):

  • Livongo: “The company was not for sale, and LVGO did not view the transaction with TDOC as a sale. Instead, management views the deal as a merger of the two leaders in virtual care.” 
  • It had nothing to do with pressure from CVS and UnitedHealth Group (UNH). 
  • There are major cross-selling opportunities, starting with an overlap of 25 percent of their clients. There are also opportunities with the InTouch Health client base in acute care, Aetna plus UNH on the health plan side, and employer administrative services only (ASO) plans. This is part of the calculation of synergies totaling $500 million in 2025 which they believe are conservative given the math.
  • They are also seeking to approach their client base before the closing through a reseller agreement, as Teladoc was able to do with InTouch.

Mr. Singh’s analysis is conservative and sober from a strictly financial viewpoint. His two-page analysis is, as usual, worth the read. 

But then we stumble across one particularly helium-charged claim. It’s projected that Teladoc and Livongo would have a combined company market cap of $38 bn, whereas the pre-pandemic value of the companies was $8 bn. (Steve Kraus, Partner at Bessemer Venture Partners, now on the board of Ginger, as quoted in Forbes). That is optimistic, considering that patient primary care virtual visits have flattened down to about 7.4 percent of visits as of June (Commonwealth Fund/Harvard/Phreesia study). It’s assuming a great deal that people will continue to shy away from in-person care going forward. Perhaps to a degree this will, as in-person fear is only starting to flatten, but not everything can be done virtually, even RPM. Telehealth and RPM also present challenges for practices in value-based care models, in workflows, and even with the liberalization of Medicare reimbursements, financially.

Livongo’s great asset, which was understandably compelling for Teladoc, is chronic condition management, RPM, and all that patient data, which can be broadened past their diabetes base (with a small one in behavioral health courtesy of their myStrength acquisition) into other chronic conditions which was Livongo’s strategy anyway. To be determined is how compelling this will be for Teladoc’s customer base and for new customers, particularly if the economic environment is constrained and health plans don’t get on board. 

So why is Mr. Market not mad about this ‘merger’? TDOC has taken a spill since its (adjusted) close on 4 August at $249, and is trading below $200 at $193. LVGO took a lesser hit, from $144 to $121. Another Bessemer Venture Partners investor, Morgan Cheatham, in the Forbes article linked above, was quoted that Livongo had clear market leadership in the employer and health plan market, then expressed surprise at why Livongo agreed to be acquired: “The company had a real shot at becoming a $100 billion business by running the ‘digital hospital’ playbook. In some ways, the acquisition feels premature.” Teladoc’s COO David Sides promised that the combined company will aid practices in the transition from hospital to home care, touting the consumer focus of both companies. (Have they consulted already burdened and strained providers how this can be made easier for them and fit into value-based care models as well as their financials?) But they may have to make more acquisitions to facilitate this. So $18.5 billion plus $1 bn for InTouch isn’t enough to get the job done?

Is it synergy, the wave of the future, or an overloaded Christmas Tree of features, not benefits?

Reminder: to date, neither company has been profitable.

So, what does this mean for other digital health companies? Initially, it’s quite positive that Teladoc could round up nearly $20bn in six months. John Halamka MD, a well-known digital health visionary now at Mayo Clinic, sees it as a bridge to the digital health ecosystem including other companies. A contrarian view was expressed by Mr. Cheatham.  Teladoc-Livongo is a challenge for other digital health companies in that they won’t, and cannot, be Teladocs and Livongos–in other words, an unrealistically high bar for them. “Why can’t Telavongo build this?”

Finally, a personal and slightly jaundiced view from this Editor. Let’s take a good hard look at the Human Factors that make companies go. This is an acquisition by Teladoc of smaller Livongo, despite the merger statements. Employees in both companies are wondering who will go, who will stay, who they will report to if they stay, and where they will be. They have about four to six months to mull what their future might look like at a tough economic time. This will — not may, will–have an effect on operations and attitudes, especially at Livongo.

There are some doubleplus ungood signs that make the assertion that this is a “merger” of companies questionable:

  • Jennifer Schneider, MD, president of Livongo, has stated that both companies are currently hiring and don’t plan layoffs as a result of the merger (Becker’s Health IT). Blanket statements like this are usually made at the start to assure employees. Anyone who has been through a merger knows there are overlapping areas such as HR, marketing, and financial. There are only so many chairs at the organizational table especially at the director and above level. The happy talk doesn’t change the reality that not everyone will be given the option to stay.
  • Statements on similar cultures notwithstanding, the fact is that both companies have different cultures and experiences because they have radically different histories and personalities running them. This Editor would suspect that Livongo employees, having come up in a young and smaller company, in an intense entrepreneurial environment, with employees who were among the first 50 or 100, have a great identification with Livongo and pride in their success.
  • Not one Livongo senior executive was named publicly as taking a new operational role in the merged entity. (Board seats don’t count. But then again, they will be walking away with a major payday, reputed to be in the hundreds of millions for the top executives. What they will do with their future is a major unknown.)
  • The HQ will be in Purchase. Most Livongo employees are in California.
  • The company will be named Teladoc and will not be renamed. That says a lot, even though industry wags are calling it Telavongo and other names.

One would hope that both companies make every effort to reorganize the company staffs in a way where layoffs are minimal, those who are packaged out are treated generously, but better, valued employees from both companies are retained and incentivized to stay–sooner rather than in 4th quarter–in a fair and unbiased evaluative process in how they support their businesses presently and going forward as part of the combined companies future. But this is not typically the case.

One would also hope that the clients and individuals who pay the bills were told, timed with the public announcement, that this was happening and what it means for them. Leaving them to read the announcement online is usually what happens. It’s not automatic, and I’ve seen this treated as an afterthought in both large companies and small, with line of business folks scrambling to put together customer messages, and delayed in getting them approved as after all they have to go through both corporate and investor communications. This is typically the case, as communications cease to be a priority at the market/LOB level when the SEC or DOJ are involved.

Reminder: the Human Factors will fly this aircraft–or auger it in. 

Agree? Disagree? Comments welcomed.  TTA’s earlier ‘skeptical take’ commentary here.

An admittedly skeptical take on the $18.5 billion Teladoc acquisition of Livongo (updated for additional analysis)

Gimlet EyeIs it time to call back The Gimlet Eye from her peaceful Remote Pacific Island? Shock acquisitions like Wednesday’s news that Teladoc is buying ‘applied health signals’ platform developer Livongo may compel this Editor to Send a Message by Carrier Seagull. 

Most of the articles (listed at the bottom) list the facts as Teladoc listed them in their announcement. We’ll recap ‘just the facts’ here, like Joe Friday of ‘Dragnet’ fame:  

  • The merged company will be called Teladoc and be headquartered in Purchase, NY. There is no mention of what will happen to operations and staff currently at Livongo’s Mountain View California HQ. 
  • The value of the acquisition is estimated at $18.5 bn, based on the value of Teladoc’s shares on 4 August. As both are public companies (Livongo IPO’d 25 July 2019, barely a year ago), each share of Livongo will be exchanged for 0.5920x shares of Teladoc plus cash consideration of $11.33 for each Livongo share. When completed, existing Teladoc shareholders will own 58 percent of the company and Livongo shareholders 42 percent. 
  • Closing is stated as expected to be in 4th Quarter 2020
  • Expected 2020 pro forma revenue is expected to be approximately $1.3 billion, representing year over year pro forma growth of 85 percent.

The combination of the two is, this Editor admits, a powerhouse and quite advantageous for both. It is also another sign that digital health is both contracting and recombining. Teladoc has over 70 million users in the US alone for telemedicine services and operates in 175 countries. Livongo is much smaller, with 410,000 diabetes users (up over 113 percent) and over 1,300 clients. They reported 2nd Q results on Tuesday with a revenue lift of 119 percent to $91.9 million but with a net loss of $1.6 million. 

What makes Livongo worth $18.5 bn for Teladoc? Livongo has made a major name (to be discarded, apparently) in first, diabetes management, but has broadened it into a category it calls ‘Applied Health Signals’. Most of us would call it chronic condition management using a combination of vital signs monitoring, patient data sets, and information from its health coaches to make recommendations and effect behavior change. Perhaps we should call it their ‘secret sauce’. For Teladoc, Livongo extends their virtual care services and provider network with a data-driven health management company not dependent on virtual visits, and integrates the virtual visit with Livongo’s coaching. It also puts Teladoc miles ahead of competition: soon-to-IPO Amwell, Doctor on Demand ($75 million Series D, partnerships with Walmart and Humana), MDLive, and ‘blank check’ SOC Telehealth. For Livongo’s main competitor in the diabetes area, Omada Health, it puts Omada certainly in a less competitive spot, or makes it attractive as an acquisition target.

It is also a huge bet that given the huge boost given by the COVID pandemic, the trend towards remote, consumer healthcare and management is unstoppable. Their projection is (from the release): expected 2020 pro forma revenue of approximately $1.3 billion, representing year over year pro forma growth of 85 percent; in year 2, revenue synergies of $100 million, reaching $500 million on a run rate basis by 2025. 

Taking a look at this acquisition between the press release and press coverage lines:

  • The market same day responded poorly to this acquisition. Teladoc was off nearly 19 percent, Livongo off 11 percent. (Shares typically recover next day in this pattern.) Livongo had, as mentioned, recently IPO’d and was experiencing excellent growth compared to Teladoc which was boosted by the pandemic lockdown. This Editor also recalls Teladoc’s financial difficulties in late 2018 with the resignation of its COO/CFO on insider trading and #MeToo charges.
  • The projected closing is fast for a merger of this size–five months.
    • Teladoc does business in the Medicare (Federal) and Medicaid (state) segments. It would surprise this Editor if the acquisition does not require review on the Federal (CMS, DOJ) and state health insurance levels, in addition to the SEC.
    • Merging the two organizations operationally and experiencing all those synergies is not done quickly, and cannot officially happen until after the closing. A lot is done formally behind the scenes as permitted, which has the effect of hitting the rest of the company like a hammer.
  • Unusually, the release does not advise on what Livongo senior executives, including Livongo founder Glen Tullman and CEO Zane Burke, will be coming over to Teladoc. The only sharing announced will be on the Board of Directors. It’s quite an exit for the senior Livongo staff.
  • Both have grown through acquisition. These typically present small to large organizational problems in merging the operations of these companies yet another time into yet another structure. There’s also always some level of client discomfiture in these mergers as they are also the last ones to know.
    • Livongo bought myStrength in 2019, RetroFit in 2018, and Diabeto in 2017. 
    • Teladoc just closed on 1 August its acquisition of far smaller, specialized hospital/health system telehealth provider InTouch Health. Originally a bargain (in retrospect) at $600 million in $150M cash and 4.6 million shares of TDOC stock, after 1 July’s closing, due to the rise in Teladoc’s stock, the cost ballooned to well over $1bn.
  • Neither company has ever been profitable

Your Editor can speak personally and recently to the wrench in the works that acquisitions/mergers of this size present to both organizations. Livongo is a relatively young and entrepreneurial organization in California with about 700 employees, compared to Teladoc’s approximately 2,000 or more internationally. Their communications and persona stress strong mission-driven qualities. On both sides, but especially on the acquired company side, people have to do their short and long term work amid the uncertainty of what this will mean to them. Senior management is distracted in endless meetings on what the merged organization will look like–departments, where will they be, who stays, who is packaged out, and when. Especially when the press releases make a point of compatible cultures, on the contrary, you may be assured that the cultures are very different. The bottom line: companies do not achieve $60 million in cost synergies without interrupting the careers of more than a few of their employees.

Another delicate area is Livongo’s client base, both individual and enterprise. How they are being communicated with is not necessarily skillful and reassuring. Often this part is delayed because the people who do this in the field aren’t prepared.

One has to admire Teladoc, almost without needing a breath, coming up with $18.5 billion quite that quickly from their financing partners after the InTouch acquisition. The growth claimed for the combined organization is extremely aggressive, on top of already aggressive projections for them separately. It’s 18x 2021 enterprise value to sales (EV/S) targets. The premium paid on the Livongo shares is also stunning: $159 per share including $550 million in convertible debt.  If patients start to return to offices and urgent care, Teladoc may have trouble meeting its aggressive goals factored into both share prices, as Seeking Alpha will explain.

Editor’s final comment: In the early stage of her marketing career, this Editor had a seat on the sidelines to much the same happening in the post-deregulation airline business–debt, buyouts, LBOs, and huge financings. Then there is the morning after when it’s all sorted out.

Wednesday’s coverage: TechCrunch, Investors Business Daily, STATNews, mHealth Intelligence, FierceHealthcare, MotleyFool.com

Joint announcement website    Investor Presentation    Hat tip to an industry observer Reader for assistance with the financial analysis.

For a follow-up analysis (with apologies to Carson McCullers): Reflections in a Gimlet Eye: further skeptical thoughts on the Teladoc acquisition of Livongo

News Roundup: Doctor on Demand’s $75M Series D, Google’s Fitbit buy scrutinized, $5.4 bn digital health funding breaks record

More evidence that telehealth has advanced 10 years in Pandemic Time. Doctor on Demand, estimated to be the #3 telemedicine provider behind Teladoc and Amwell, announced a Series D raise of $75 million, led by VC General Atlantic plus their prior investors. This increases their total funding to $240 million.

Unlike the latter two, DOD actively courts individual users in addition to companies and health plans. In May, they announced that they were the first to be covered under Medicare Part B as part of the CMS expansion of telehealth services in response to the pandemic (and for the duration, which is likely to be extended past July), which would reach 33 million beneficiaries. Other recent partnerships include a pilot with Walmart for Virtual Primary Care in three states (Colorado, Minnesota, Wisconsin) in conjunction with Grand Rounds and HEALTHScope Benefits as well as with Humana for On Hand Virtual Primary Care (regrettably only a video clip on the DOD press site with the noisome Jim Cramer). DOD covers urgent, chronic, preventative care, and behavioral health and claims about 98 million users, doubled the number of covered lives in 1st half 2020, and passed 3 million visits. Crunchbase NewsMobihealthnews

Google’s Fitbit acquisition scrutinized by EU and Australia regulators, beaten up by consumer groups in US, EU, Canada, Australia, and Brazil. None too happy about this acquisition is a swath of powerful opponents.

  • EU regulators have sent 60-page questionnaires to both Google and Fitbit competitors asking re the effect the $2.1 bn acquisition will have on the wearables space, whether it will present disadvantages to competitors in Google’s Play store, and how Google will use the data in their advertising and targeting businesses. While #2 and 3 are no-brainers (of course it will present a competitive disadvantage! of course, they’ll use the data!), it signals further investigation. The next waypost is 20 July where EU regulators will present their decision.
  • The Australian Competition and Consumer Commission (ACCC) announced in mid-June their concerns in a preliminary decision, though they don’t have the jurisdiction to block it. “Buying Fitbit will allow Google to build an even more comprehensive set of user data, further cementing its position and raising barriers to entry to potential rivals,” according to ACCC Chairman Rod Sims. This adds to the controversy Down Under on how Google and other internet companies use personal information. Final statement is 13 August. Reuters
  • The US Department of Justice is also evaluating it, as is the Federal Trade Commission. But an acquisition like this doesn’t easily fall under antitrust regulation as Google and Fitbit aren’t direct competitors. Fitbit has only about 5 percent of the fitness wearable market. However, this plays into another related investigation by DOJ — Google’s abuse of advertising data and its dominance of the market in tech tools such as Google Ad Manager in the US. DOJ asked competitors for information at the end of June. There are separate investigations by state attorneys general and also by Congress of Google and Apple. Reuters
  • The consumer group opposition rounds up the usual suspects like Open Markets Institute, Omidyar Network, Center for Digital Democracy, Open Knowledge and Public Citizen in the US, and in the EU Open Society European Policy Institute and Access Now. Their grounds expressed in a letter to regulators in the above countries are the usual dire-sounding collection of “exceptionally valuable health and location datasets, and data collection capabilities.” Sound and fury….

It will keep Google’s attorneys in DC, Brussels, and elsewhere quite busy for a lot longer than perhaps Google anticipated. Meanwhile, Fitbit is in the Twilight Zone. The Verge, Android Authority, FierceHealthcare 

US digital health companies smash funding records in 1st half 2020. Despite–or because of–the pandemic, US digital health investment funding tracked by Rock Health is at a torrid pace of $5.4 bn–$1.2 bn above the record first half posted in 2019.  That is despite a pullback in 1st Q + April.

Investors came roaring back in May and June, spurred by telehealth success and a rallying market, closing 2nd Q with $2.4 bn in investment. That was 33 percent higher than the $1.8 bn quarterly average for the prior three years. And the deals were big: on average $25.1 million, with the big boosts in Series C and bridge financing. M&A is still cloudy, but what isn’t? Notably, Rock Health is not projecting a final year number, a good move after they stubbed their collective toe on last year’s final investment total, down from both forecast and 2018. [TTA 7 Feb]

The big moves of 1st half in real digital health (not fitness) were Teladoc-InTouch Health (just closed at $600 million stock and cash) and Optum-AbleTo (at a staggering $470 million, which has apparently not moved past the ‘advanced talks’ state). Two of last year’s Big IPOs–Phreesia and Livongo— are doing just fine; Health Catalyst not so much. The bubble bath we predicted turned out to be a cleansing one–but there’s six months more to go. Also Mobihealthnews

Considering 2019’s digital health investment picture: leveling off may be a Good Thing

2019 proved to be a leveling-off year for digital health investment. The bath may prove to be more cleansing than bubbly.

We noted that the always-fizzy Rock Health engaged in some revisionist history on its forecasts when the final numbers came in–$7.4bn in total investment and 359 deals, a 10 percent drop versus 2018. When we looked back at our 2019 mid-year article on Rock Health’s forecast [TTA 25 July], they projected that the year would end at $8.4 bn and 360 deals versus 2018’s $8.2 bn and 376 deals. That is a full $1bn under forecast and $0.8 below 2018. Ouch!

In their account, the 10 percent dip versus 2018 is due to average deal size–decreasing to $19.8M in 2019–and a drop in late-stage deals. Their analysts attribute this to wobbliness around some high-profile IPOs, citing Uber, Lyft, and Slack, as well as the near-collapse of WeWork right before its IPO towards the end of 2019.

New investors and repeat investors increased to 627 from 585 in 2018, with no real change in composition.

The headliners of 2019 were:

  • Amazon’s acquisition of Health Navigator adding symptom-checking tools to its health offerings
  • Google’s buy of Fitbit
  • Optum’s purchase of Vivify Health, which gives it a full remote patient monitoring (RPM) suite (right when CMS is setting reimbursement codes for RPM in Medicare)
  • Best Buy’s addition of Critical Signal Technologies for RPM
  • Phreesia, Livongo’s and Health Catalyst’s IPOs. For Livongo and Health Catalyst, current share prices are off from their IPOs and shortly after: past $25 for LVGO and $31 for HCAT. Phreesia closed today at a healthy $33, substantially up from PHR’s debut at $15. (Change Healthcare, on the other hand, is up a little from its IPO at $16, which isn’t bad considering their circumstances on their financing.)

Rock Health only counts US deals in excess of $2 million, which excludes the global picture, but includes some questionable (in this Editor’s estimation) ‘digital health’ players like Peloton, explained in the 25 July article.

Rock Health’s analysts close (and justify their revisions) through discussions with VCs expecting further headwinds in the market–then turn around and positively note the Federal backing of further developments in building the foundation for connected health as tailwinds. No bubbly forecasts for 2020–we’ll have to wait.

Is this necessarily bad? This Editor likes an occasional dose of reason and is not displeased at Rock Health’s absence of kvelling.

Confirming the picture is Mercom Capital’s analysis which also recorded a 6 percent dip 2019/2018: $8.9bn with 615 deals, dropping from the $9.5bn and 698 deals in 2018. Their ‘catchment’ is more global than Rock Health, and encompasses consumer-centric and patient-centric technologies and sub-technologies. Total corporate funding reached $10.1bn.

News roundup for the New Year: NHS £40m diet on login times, Germany’s ‘cheesy’ health ID security, Livongo and Higi partner, MTBC picks up CareCloud

NHS investing £40 million to cut health service login times, £4.5 million on digital assists for independent living. Announced by secretary Matt Hancock, the objective is to move to reduce the time to log in over the 15 systems NHS clinicians and staff may have to use with a patient. The test of a single sign-on system at Alder Hey hospital in Liverpool reduced it from 105 seconds to 10. The Department of Health and Social Care is also providing £4.5m to local authorities to fund digital programs aimed at aiding independent living for recipients of adult social care. Guardian

Germany’s health data network security is ‘swiss cheesy’. Germany’s physicians are in the process of being networked into the national health system through an electronic doctor’s card and practice ID card which identify and sign them in. Similarly, patients will have their own chipped ID card. A special research project by NDR, Der Spiegel, and  IT security experts belonging to the Chaos Computer Club (CCC), found that they could send all three to a cheese monger’s shop in Lüneburg. Looks like their security has a few ‘holes’ in it. Tagesschau.de

Livongo’s diabetes/chronic condition management platform and health kiosk Higi are partnering in 500 retail pharmacies in Michigan for a Livongo-branded health screening and tracking program, using Higi’s measurement, tracking, and Livongo’s wellness programs. Mobihealthnews

CareCloud acquired by MTBC for $17 million cash and about $41 million in total consideration such as warrants and perpetual preferred stock. Both companies are in similar businesses related to medical practice management, EHR integration, and patient communications. It reflects the deep falloff of value in the absurdly overcrowded field of EHR and practice management businesses since Meaningful Use wound up: Allscripts’ acquisition of Practice Fusion for $100 million in January 2018 [TTA 14 Aug 19] and reduced prospects for other HIT players such as Athenahealth, Watson Health and Waystar [TTA 25 Apr 19]. Total investment in CareCloud was north of $150 million in ten funding rounds (Crunchbase) which makes the price a knockdown for the investors like Norwest, Intel Capital, First Data and PNC. Seeking Alpha, MTBC release, commentary on HISTalk.

Health tech bubble watch: Alphabet-backed One Medical reportedly prepping for 2020 IPO

Another health tech company tests the IPO waters. One Medical, a primary care medical clinic group that digitizes the office experience by offering mobile apps with online scheduling, virtual consults, and same-day appointments–for an annual fee of $200 plus your insurance–is prepping for an IPO filing early next year. The sure sign is that it’s hired banks including J.P. Morgan and Morgan Stanley.

One Medical, backed by Alphabet, has 72 primary care practices in nine major US cities. It currently has a valuation of $1.5 to $2 bn based on private share sales and investment firm estimates. In 2008 it raised $220 million in a 2018 round led by The Carlyle Group for a total raise since 2007 of $408 million, backed by Alphabet’s GV venture arm and VC firm Benchmark. From an initial emphasis on individual enrollment and a ‘lite’ version of concierge medicine, it recently has concentrated on self-insured employers, corporate health plans, and service areas such as mental health and pediatrics. A big question for investors will be its valuation–tech or healthcare?

One Medical would join IPO brethren such as Health Catalyst, Livongo, Phreesia, and Change Healthcare, all of which had fairly strong openings and initial growth but have rollercoastered since then. Still, smaller IPOs such as Progyny, a company that manages fertility benefits for employees at large firms, have filed to IPO by the end of the year. Fierce Healthcare, CNBC, Business Insider

Health tech bubble watch: Rock Health’s mid-2019 funding assessment amid Big IPOs (updated: Health Catalyst, Livongo, more)

Updated for IPOs and analysis. The big time IPOs add extra bubbles to the digital health bath. Rock Health’s mid-year digital health market update continues its frothy way with a topline of $4.2 bn across 180 deals invested in digital health during the first half of 2019. 2019 is tracking to last year’s spending rate across fewer deals and is projected to end the year at $8.4 bn and 360 deals versus 2018’s $8.2 bn and 376 deals.

This year has been notable for Big IPOs, which have been absent from the digital health scene for three years. Exits come in three flavors: mergers and acquisitions (43 in their count so far), IPOs, and shutdowns (like Call9). IPOs are a reasonable outcome of last year’s trend of mega deals over $100 million and a more direct way for VCs to return their money to investors. So far in 2019, 30 percent of venture dollars went to these mega deals. (Rock Health tracks only US digital health deals over $2 million, so not a global picture.)

Reviewing the IPOs and pending IPOs to date:

  • Practice intake and patient management system Phreesia closed its NYSE IPO of 10.7 million shares at $18 per share on 22 July. The company earned approximately $140.6 million and the total gross proceeds to the selling stockholders were approximately $51.6 million for a value over $600 million. The market cap as of 26 July exceeded $949 million with shares rising past $26. Not bad for a company that raised a frugal $92.6 million over seven rounds since 2005.  Yahoo Finance, Crunchbase
  • Chronic condition management company Livongo’s picture is frothier. Their 22 July SEC filing has their IPO at 10.7 million shares at $24 to $26 per share offered on NASDAQ. This would total a $267.5 million raise and a $2.2 bn valuation. This is a stunning amount for a company with reportedly $55 million at the end of its most recent reporting period, increasing losses, and rising cash burn. Livongo raised $235 million since 2014 from private investors. Crunchbase 
  • Analytics company Health Catalyst’s IPO, which will probably take place this week on NASDAQ with Livongo’s, expects to float 7 million shares. Shares will be in a range of $24 to $25 with a raise in excess of $171 million. Their quarterly revenue is above $35 million with an operating loss of $9.8 million. Since 2008, they’ve raised $377 million. IPO analysts call both Livongo’s and Health Catalyst’s IPOs ‘essentially oversubscribed’. Investors Business Daily, Crunchbase
    • UPDATE: Both Livongo and Health Catalyst IPOs debuted on Thursday 25 July, with Livongo raising $356 million on an upsized 12.7 million shares at $28/share, while Health Catalyst’s 7 million shares brought in $182 million at $26/share.  Friday’s shares closed way up from the IPOs Livongo at $38.12 and $38.30 for Health Catalyst. Bubbly indeed! Investors Business Daily, Yahoo Finance
  • Change Healthcare is also planning a NASDAQ IPO at a recently repriced $13 per share, raising $557.7 million from 42.8 million shares. With the IPO, Change is also offering an equity raise and senior amortizing note to pay off its over $5 bn in debt. The excruciating details are here. Investors here are taking a much bigger chance than with the above IPOs, but the market action above will be a definite boost for Change.
  • Connected fitness device company Peloton, after raising $900 million, is scheduled to IPO soon after a confidential SEC filing. (UPDATED–Ed. Note: Included as in the Rock Health report; however this Editor believes that their continued inclusion of Peleton in digital health is specious and should be disregarded by those looking at actual funding trends in health tech.) Forbes

Rock Health itself raised the ‘bubble’ question in considering 2018 results. Their six points of a bubble are:

  1. Hype supersedes business fundamentals
  2. High cash burn rates
  3. High valuations decoupled from fundamentals
  4. Surge of cash from new investors
  5. Fraud or misuse of funds
  6. Unclear exit pathways

This Editor’s further analysis of these six points [TTA 21 Jan] wasn’t quite as reassuring as Rock Health’s. As in 2018, #2, #3, and #6 are rated ‘moderately bubbly’ with even Rock Health admitting that #2 had some added froth. #3–high valuations decoupled from fundamentals–is, in this Editor’s experience, the most daunting, as as it represents the widest divergence from reality and is the least fixable. The three new ‘digital health unicorns’ they cite are companies you’ve likely never heard of and in ‘interesting’ but not exactly mainstream niches in health tech except, perhaps, for the last: Zipline (medicine via drone to clinics in Rwanda and Ghana), Gympass (corporate employee gym passes), and Hims (prescription service and delivery).

Editor’s opinion: When there are too many companies with high valuations paired with a high ‘huh?’ quotient (#3)–that one is slightly incredulous at the valuation granted ‘for that??’–it’s time to take a step back from the screen and do something constructive like rebuild an engine or take a swim. Having observed or worked for companies in bubbles since 1980 in three industries– post-deregulation airlines in the 1980s, internet (dot.com) from the mid-1990s to 2001, first stage telecare/telehealth (2006-8), and healthcare today (Theranos/Outcome Health), a moderate bubble never, ever deflates–it expands, then bursts. The textbook #3 was the dot.com boom/bust; it not only fried internet companies but many vendors all over the US and kicked off a recession.

Rock Health also downplayed #5, fraud and misuse of funds. It’s hard to tell why with troubles around uBiome, Nurx, and Cleo in the news, Teladoc isn’t mentioned, but their lack of disclosure for a public company around critical NCQA accreditation only two months ago and their 2018 accounting problems make for an interesting omission [TTA 16 May]. (And absurdly, they excluded Theranos from 2018’s digital health category, yet include drones, gym passes, connected fitness devices…shall we go on?)

Rock Health’s analysis goes deeper on the private investment picture, particularly their interesting concept of ‘net liquidity overhang’, the amount of money where investors have yet to realize any return, as an indicator of the pressure investors have to exit. Pressure, both in healthcare and in early-stage companies, is a double-edged sword. There’s also a nifty annual IPO Watch List which includes the five above and why buying innovation works for both early-stage and mature healthcare companies. 

(Editor’s final note: The above is not to be excessively critical of Rock Health’s needed analysis, made available to us for free, but in line with our traditionally ‘gimlety’ industry view.)

A short but canny look at consumer behavior as a driver of health technology

Whether the global ‘smart home healthcare’ market actually totals $30bn by 2023, as a Research and Markets study trumpets, is debatable, but one thing that this Editor agrees with is that successful home health devices need to take a chapter from Steve Jobs’ Apple and famed industrial designer Raymond Loewy’s playbooks (search our Loewy references here) and design for how the consumer lives and would use their product. It isn’t flashy design awards, but how that technology can not only fit into a person’s life but also be an asset that they’d miss if someone took it away–a point often forgotten in the rush of initial design, testing, and funding.

Writer Scott Thielman of Product Creation Studio, a Seattle-based industrial design and engineering firm, outlines four health tech products/services that represent technology that is intuitive, easy-to-use, accessible, and, I would add, have a little something extra that makes them indispensable.

  • Athelas, a next-generation immune monitoring device that resembles an Amazon Alexa in being a 3D black cylinder. Instead of playing music, it measures neutrophils, lymphocytes, platelets, white blood cells, morphology, and cell activation all within minutes from a test strip inserted in the cylinder. (Investigational device awaiting FDA review)
  • Rochester Institute of Technology (RIT)’s smart toilet seat (which Editor Charles punningly referred to here) was tested with heart failure patients. It measured nine clinically relevant features, including weight, single-lead ECG, systolic/diastolic blood pressure, blood oxygenation and localized pulse timing, and a ballistocardiogram (BCG) for measuring the mechanical forces associated with the cardiac cycle. Normally, the patient would have to use several devices for these measurements rather than taking a seat. Speaking of the seat, it is standard white and replaces the one in the bathroom. Results were published in JMIR mHealth and uHealth.
  • ResMed’s connection of its continuous positive air pressure (CPAP) sleep apnea treatment devices to the cloud before the patient uses them, plus their patient smartphone app helps them to claim that 84 percent of new users reach the necessary usage threshold for Medicare adherence in the first 90 days of treatment.
  • Clarify Medical’s build-in of user feedback for its home vitiligo and psoriasis treatment that goes direct to their in-house customer service also registers patient usage, needed fixes, and outreach to those who need additional coaching and training.
  • Livongo’s acquisition of myStrength’s behavioral health app [TTA 31 Jan] also points to the importance of consumer behavior in a somewhat different aspect–the 20 percent and more who are struggling with behavioral health issues along with one or more chronic conditions managed by Livongo for employers and health plans.

How to design home healthcare devices that people will use (Medical Design & Outsourcing)

 

Short takes: Livongo buys myStrength, Apple Watch cozies with insurers, Lively hears telehealth and $16 million

Livongo gets behaviorally stronger with myStrength. Extending from their base in diabetes and chronic disease management into behavioral health, Livongo made a logical extension with early-stage behavioral health company myStrength. A large percentage of those with chronic conditions are also struggling with a behavioral health issue–Livongo cites 20 percent but in this Editor’s opinion, the estimate is low. Both Livongo and myStrength have been very successful in the payment game, with both companies achieving payment and reimbursement by employers, insurers, health systems, and state/Federal payers. The other factor is that employers and payers want single, integrated platforms for wellness and disease management. Livongo last year bought Retrofit for its weight management program. Competitor Omada Health recently acquired the behavioral health technology of defunct Lantern. MedCityNews, Fortune, Livongo release

Apple Watch wastes no time in partnering with insurers. Or vice versa! Confirming that Apple Watch’s growth strategy hinges heavily on health via its new features are fresh agreements with Aetna/CVS Health and a rumored reach into three Medicare Advantage plans. The Aetna partnership is with an app called Attain, which blends Apple Watch activity tracking data with users’ health history to create personalized programs. The program is limited to about 250,000 slots plus additional slots for employer plans, and will debut this spring. Late last year, United HealthCare announced Apple Watches would be added to existing wellness program called Motion and their Rally platform. Both Aetna and United have tiered payment programs for the watches, with United adding a HSA reward. For Medicare Advantage plans, Apple is rumored that they will subsidize the watch for use as a health tracker and coach. FierceMobileHealthcare 30 Jan (Aetna), 14 Nov 18 (UHC), and 29 Jan (Medicare Advantage).

Lively adds telehealth to hearing assistance. Lively’s mobile-connected, direct to consumer hearing aids are adding more telehealth features such as remote tuning, virtual video consults with an audiologist, and an online hearing assessment/uploading audiogram for assessment. The NYC-based company also announced closing on a $16 million seed/Series A fundraising round led by Declaration Capital with participation from Tiger Management. There are an estimated 35 million Americans with hearing loss in a $10bn annual market. Hearing aids are rapidly adding digital and DTC features–others in the field are Eargo and ReSound. Lively releaseAlleyWatch, Mobihealthnews. (Lively is not to be confused with Lively!, acquired by GreatCall two years ago)