Brian Dolan of Mobihealthnews did some panning among Alere‘s SEC filings and found this nugget in their 8 November 10-Q (not cited in the article, but readily available on the Alere corporate website). Under ‘Acquisition-related Contingent Consideration Obligations’ (page 26), this refers to the undisclosed July acquisition price of MedApps, now Alere Connect:
With respect to MedApps, the terms of the acquisition agreement require us to make earn-out payments upon achievement of certain technological and product development milestones through January 15, 2015. The maximum amount of the earn-out payments is $22.0 million.
The headline and article, Alere to pay as much as $22M for MedApps, created an interesting debate on the Digital Health LinkedIn group (member access only) on what seemed to be a dismayingly low price for a company considered to be a development pioneer and quality leader in wireless telehealth, replete with FDA Class II, CE and Health Canada clearances, plus plenty of sweat and tears. Editor Donna pointed out that the SEC filing did not disclose the closing payment at time of sale–the earn-out structure, so typical of early-stage technology acquisitions, is in addition to the closing (which could be substantial, or little, in cash and stock) because outside investors generally want to exit at that time. What is also apparent is that the earn-out is based on ‘milestones’, which look fine in the rosy light of purchase but can prove to be very difficult to achieve, potentially reducing the $22 million earn-out. But what this bit of legwork gives us is a chalk mark on the board for mobile telehealth devices, and it’s a little lower than we thought.