TTA Where *Is* Spring? 3: SPACs–why they cracked, Hinge Health and FTC-PBM delays, Transcarent’s tune change, UK’s pivot on NHS research data, why OpenAI is losing its way, more!

April 11, 2025 | by

 

11 April 2025

It’s still a chilly Spring in your Editor’s whereabouts, but we have, fresh out of the hothouse, a bumper crop of news and opinion. The big read for the weekend is Halle Tecco’s quantifying of the Cracked SPAC phenomenon and what’s happened with OpenAI. Transcarent closes its Accolade buy and changes its tune to ‘one place’, Walgreens doing a bit better. In touting, Keir Starmer’s bet on NHS data research and Elon Musk on human trials for Neuralink Blindsight. Hinge Health may postpone its long-awaited IPO and FTC pauses its long-awaited toss of the book at PBMs. Plus a new Perspectives on rural healthcare and telehealth.

The weekend read: why SPACs came, went, and failed in digital health–the Halle Tecco analysis/memorial service; why OpenAI is going to be a bad, bad business (Grab the cuppa and lunch for a good read and podcast) 

Extra, extra!: ATA Action forms Virtual Foodcare Coalition, Ophelia and Spring Health partner on opioid treatment, ISfTeH renews NSA status with WHO (More action from ATA Action and a partnership to watch in telementalhealth)

Midweek roundup: Transcarent closes Accolade; Walgreens beats Street; New Mountain Capital’s Office Ally buy-in; Neuralink Blindsight human trial coming up; PM Keir Starmer touts NHS data research; FTC’s PBM litigation break (Transcarent’s pivot?)

Rock Health’s digital health Q1: more money, fewer deals, more additions and partnerships in ‘leapfrogging’ (Still in a minor key this year)

News roundup: Hinge Health may postpone IPO, Rite Aid may enter 2nd bankruptcy, Veterans Affairs committees want new EHR costs & timeline, fired Texas health plan head hired private eyes to spy on members, providers, lawmakers (The last one is shocking)

Perspectives: Bridging the Gap in Rural Healthcare Through Telehealth (From Yosi Health)

Last week: A relatively light news week in a so-far chilly, stormy Spring. Our top article is not one, but two dives into the Unicorn Known as Hippocratic AI. 23andMe’s sale isn’t attracting a lot of buyers (deliberate?) but presents even more problems for the users who took their surveys. Dr. Oz confirmed for CMS as HHS goes on a GLP-1 diet and then some. VA adds to their Oracle 2026 rollout, ATA Action enlarges, and DOJ seeks execution for Brian Thompson’s assassin.

News roundup: 9 additional VA centers named for Oracle 2026 EHR rollout; ATA Action acquiring, expanding with DTA; Dr. Oz to lead CMS while HHS cuts; DOJ seeks death penalty for Mangione  (VA creeps forward, ATA Action enlarges, HHS chops, justice awaits)
Are Hippocratic AI and AI “nurses” the wave of the future–or just another tide of hype? Two articles question. (A needed discussion on this particular unicorn and whether its AI capabilities are all they’re pitched to be)
23andMe’s slim list of prospective buyers–who must uphold privacy policies, according to the FTC. But what about that survey information? *Updated* (More problems with 23andMe’s sale–and if you took their surveys, they have more data on you)

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Telehealth & Telecare Aware – covering news on latest developments in telecare, telehealth and eHealth, worldwide.

The weekend read: why SPACs came, went, and failed in digital health–the Halle Tecco analysis/memorial service; why OpenAI is going to be a bad, bad business

April 10, 2025 | by

Let us now hold the formal memorial service for the SPAC–the special purpose acquisition company, at least for digital health. Halle Tecco, whom many of us know as the founder and past CEO of Rock Health, plus angel investor, plus adjunct professor in digital health at Columbia, now has an opinion blog on Substack. As our Readers know, this Editor, who is none of the above, has been shoveling dirt on SPACs here on TTA since they became an Easy Way To Avoid the cumbersome, oh-so-tiresome preparation for a public IPO during the Digital Health Boom of 2020-22 (RIP). She has been covering their Trouble Every Day and demise ever since. Having not kept quantitative track of Cracked SPACs, only the news as they floated, declined, and failed, this Editor enjoyed Ms. Tecco’s quantitative analysis of the overall picture. She puts it into a readable business context. 

Shockingly, SPACs across all IPOs are still going on. In 2023 and 2024, total SPACs as a percent of IPOs neared 40%. Their high was reached in 2022 at 73%. The attractiveness of SPACs was obvious: an investor sets up a publicly traded company and goes through the hassle of an IPO. It raises money on public markets and from investors to acquire another company. Then it hunts for a company to acquire. The target is landed, is acquired, symbols change, and the deal is done, all in three to six months. The acquired company doesn’t have to go through the investor pitches, the due diligence, the incessant filing…less fuss and muss, but missing the rigor of a traditional IPO. For the SPACs, especially those focusing on digital health, 2020-22 became FOMO Fever–the fear of missing out.

For digital health companies, the boom became a race to the bottom. 

  • 30.4% went bankrupt, some spectacularly, others with a whimper as they’ve failed, one after the other: 23andMe, Cano Health, Babylon Health, Nuvo, Pear, others
  • 26.1% were acquired well below their SPAC entry price: Sharecare, SOC Telemed, Akili and others. The only exception: Augmedix, with a $40 million SPAC valuation, was bought for $139 million by Commure. (Commure is backed by General Catalyst and Andreessen Horowitz; Commure/Athelas itself is an interesting and complex story.)
  • 39.1% are still in business but trading below their SPAC entry price. A number flirted with the Devil of Demise and are recovering: Clover Health, Owlet (baby monitors), Butterfly (ultrasound POC), Talkspace. DocGo became a Covid play and then got into political trouble and is nearing $2/share from their late 2022 high of just below $11. And others.
  • There is exactly one success story: hims & hers (4.3%)

Enjoy this read on her blog. If you prefer a podcast, here’s Ms. Tecco on her ‘Heart of Healthcare’ with Mohamad Makhzoumi (link is to Spotify), co-CEO of New Enterprise Associates (NEA), a VC in healthcare and technology (33 minutes), discussing healthcare’s evolution, so to speak, from “the trailer park of venture investing” and the hilarious ‘healthcare hokey-pokey’. And here’s a Gimlety View of SPACs from 26 June 2024.

Another Big and Disastrous Fail in the making may be OpenAI, the creator of ChatGPT. It is converting from a non-profit to a for-profit company, losing its founder group, fundraising like crazy, and generally has ditched its Mission. “OpenAI is an AI research and deployment company. Our mission is to ensure that artificial general intelligence benefits all of humanity.”  OpenAI has raised the largest venture-backed fundraise of all time, $6.6 billion, and is now valued at $157 billion. Why overvalued? A tell is that SoftBank has invested $500 million into this megillah–this Editor recalls that SoftBank invested in Theranos and WeWork. Another tell–the NY Times and The Information estimated that Open AI lost $5 billion in 2024, it loses money on every copy of ChatGPT, and its revenue projections are near-absurd at $11.6 billion in 2025 and $100 billion by 2029. It totally ignores that every major player has an AI program, from Microsoft to Google. If you’re a fan of ChatGPT or need your eyes cleared around this type of AI, grab your cuppa and a bottle of your favorite pain reliever for Ed Zitron’s article, OpenAI Is A Bad Business. (Ed is an English tech writer, podcaster, and PR specialist)

A Gimlet Eye view on IPOs and Cracked SPACs: Altaris buys Sharecare for $518M, takes it private; a look at Waystar and Tempus AI post-IPO

June 26, 2024 | by

Gimlet EyeSharecare finally gets itself bought and taken private, less than three years after its SPAC. One-time health tech darling Sharecare, now a patient navigation and employee benefits platform and once valued at $3.9 billion, will be acquired by healthcare-focused private equity company Altaris LLC for $1.43 in cash per share, or about $518 million. The shares on the buy date, 20 June, were trading at $0.77 so the offer is about an 86% premium, though shares are now trading at around $1,38. (Notably, Sharecare was below the $1.00 threshold for Nasdaq since February.) The transaction is expected to close in Q2 subject to formal shareholder approval and regulatory agencies. In terms of management, the executive team is expected to continue at least for now, with founder Jeff Arnold voting his shares in favor of the transaction and continuing as a shareholder. Release, FierceHealthcare, Mobihealthnews

Founded in 2010 by WebMD founder Jeff Arnold and celebrity doc/former political candidate Dr. Mehmet Oz, Sharecare had IPO’d a decade later via a SPAC, Falcon Capital Acquisition Corporation. It announced in February 2021’s Pandemic Palmy Days then hit markets on 2 July. At that time as essentially a personal care management app, it debuted at above $9.00 and received $571 million in gross proceeds with a reported valuation of $3.9 billion. A month later, it acquired CareLinx, an on-demand home care provider, from Europ Assistance in a $65 million cash/shares deal. By late 2021, Sharecare entered the Cracked SPAC Track as shares cratered. Dr. Oz is no longer on the board of directors or the advisory board. As share values fell precipitously, in November 2023 Mr. Arnold turned over the CEO reins to Brent Layton, a 20+ year Centene veteran and its retired president, picking him from the BOD and moving to chairman.

Shortly thereafter, Fruit Street sued Sharecare, a former partner, for $25 million charging that their diabetes prevention program (DPP) was supplanted by Sharecare’s own, breaching their contract and appropriating intellectual property. [TTA 14 Dec 2023] This suit is apparently still wending its way through the infamous Fulton County, Georgia courts. Sharecare also faced an escalating number of shareholder class action lawsuits alleging false and misleading statements on their financial condition (KRON 4).

What can we learn from IPOs as they are reviving? The first, of course, is that SPACs have gone the way of the dodo and passenger pigeon. The second is that there are quality IPOs, and then there are the ones to watch out for even if you are not an investor.

Remember first and foremost that VC and PE investors want to exit, profitably. And quickly. Exit=Sell to Someone Else. “Someone else” can be an IPO or another investor. An IPO means offloading the risk to the investing public. Please do keep in mind that what follows 1) is not investment advice, only observations and 2) your Editor is only a marketer, but one who has seen investments go up, down, and sideways since her days at the Frank Lorenzo School of Airline (Mis)Management, a/k/a New York Air (right, below) including a year observing up front and personally the dismal fate of Eastern Airlines. (Somewhere she has her old Texas Air share certificates…)

The investment scene in health tech and AI strongly resembles the Wild West days of airlines post-deregulation 30 years ago. Investor money in, now fleeing for the exits, whether the bankruptcy court or passing the hot potato to others with money.

Waystar IPO’d earlier this month at $21.50 per share. Checking in today, it’s trading at $21.55, essentially in a narrow and flat trading range in a down market. The IPO gave Waystar a fully diluted valuation of $3.69 billion. It’s early days, but three factors in favor of WAY staying the course at least short term are:

  1. They waited to IPO for the better part of a year and pulled it back when their initial valuation of $8 billion made Mr. Market ROTFL.
  2. Their investors have held on tight: EQT AB, Canada Pension Plan Investment Board (CPPIB), and Bain Capital will beneficially own approximately 29.2%, 22.3%, and 16.8%, which is over 68% of the company.
  3. They occupy a boring part of healthcare and aren’t new kids on the block. Payments and revenue cycle management (RCM) aren’t sexy or trendy. Waystar is the combination of ZirMed (1999) and Navicure (2001) which merged and renamed in 2018. 

The downsides: Competition. Lots of it. The usual unprofitability. Waystar lost money the past two years. Last quarter, those losses accelerated (Google Finance). Will that show up later this year in share price?

Tempus AI also IPO’d mid-month at an eyewatering $37/share, at the top of its offering range, and a valuation in excess of $6 billion. It’s AI! It’s backed by Google! And it rose 15% on its first day of trading, 14 June! Precision Medicine! Intelligent Diagnostics!

But where are shares today on 26 June? It closed yesterday at $24.96. That’s a downer of 32% from the IPO price–38% if you take it against the first-day close above $40. I’m sure the first-day investors, unless they have cast-iron stomachs, have already reached for the antacids.

So what’s going on here? Tempus AI’s business combines AI for data analytics and a vast database to guide doctors in therapy and treatment, identify clinical trials, guide treatments, and close gaps in care. The analysis is done on blood samples, buccal swabs, and liquid tests. It’s a familiar pitch that multiple companies are using around AI and their ‘vast databases’ from the time of IBM Watson’s lofty ambitions.

  • Their CEO has already traversed the hype circuit. “We’re on a really good trajectory,” Tempus AI CEO Eric Lefkofsky, the founder of Groupon, said on CNBC’s “Squawk Box” Friday morning before shares started trading. “As revenues have been growing quickly, we’re not investing all that gross profit dollar growth back into the business. We’re generating improved leverage every quarter.” (Exactly what does that mean? Probably that money is sent down to the profit line.) Setting expectations–within the next year, the company is expected to be cash flow and EBITDA positive within the next year. It’s twice been on CNBC’s Disruptor 50 list of private companies which historically has been a mixed bag.
  • In their favor is that they already have as of today 510(k) clearance from FDA for its Tempus ECG-AF device to identify patients who may be at increased risk of atrial fibrillation/flutter (AF). It’s the first FDA clearance for an AF indication in the category known as “cardiovascular machine learning-based notification software”. But it needs to be integrated into resting 12-lead ECG recordings collected at a healthcare facility and analyzed against other patient data. What is that timeline and market?
  • Tempus has already survived and evolved from one major pivot. Looking back, they started in the genomic testing business in 2015, primarily concentrating on oncology. In 2020, it branched out to then-trendy Covid-19.  CNBC 17 June 2020  Genomics is now subsumed on the site by terms such as pharmacogenomics (PGx) coupled with patient-reported outcome (PRO) software.

Investors up to the IPO were listed as Google, Baillie Gifford, Franklin Templeton, NEA, Softbank, and T. Rowe Price. Who’s sticking around? The underwriters are Morgan Stanley, JP Morgan, Bank of America Securities, and Allen & Company. Reuters  Customers include AstraZeneca and GSK (GSK.L). One of its competitors, Guardant Health, which has patents in DNA blood testing for cancer, is suing on infringement on five patents. Reuters

All in all, Tempus AI started off way high–and there is only one way to go from there. They have a great story and a potentially good business, but it bears watching, not investing, at this point.