News roundup: GoodRx pays $1.5M to FTC on Meta Pixel use, ATA concerns on Covid PHE end, defending Livongo sale to Teladoc, Philips lays off 18K, Amazon health layoffs–and big ’22 loss, Ireland HSE digital head quits, Matt Hancock assaulted on Tube

Rounding up the week–and it’s not over. 

Prescription discounter GoodRx settled with the FTC for $1.5 million for the unauthorized sharing of user health data with Facebook, Google, Criteo, and other advertising sites. GoodRx used the Meta Pixel and other Javascript trackers in software development kits (SDK) for sharing user data with third-party advertisers. They would then be capable of serving personalized health and medication-specific ads to GoodRx users. This differs from the earlier Meta Pixel incidents which involved hospitals using the tracker on their website appointment schedulers and patient portals which exposed personal health information (PHI) under HIPAA regulations. GoodRx is not a covered entity, thus does not fall under HIPAA violations of PHI.

For the first time, the Federal Trade Commission (FTC) used the Health Breach Notification Rule, created in 2009, in charging GoodRx in a Federal court with misuse of consumer health information. The action was taken in US District Court for the Northern District of California, which has yet to approve the FTC order and the settlement.

GoodRx responded to the charges in their release that they stopped using pixel trackers in 2019 to protect user privacy. The trackers transmitted no PHI but primarily IP addresses and web page URL information. GoodRx maintains that this is a “novel application” of the Health Breach rule. But they settled with the FTC to avoid ‘the time and expense of protracted litigation’ on privacy issues they’ve already updated. HISTalk, The Markup, FierceHealthcare  TTA’s Meta Pixel articles

The good news for most of us is that the Public Health Emergency for Covid-19 will be ending 11 May. Not such good news, according to ATA and ATA Action, for mental health patients. While the omnibus budget passed at the end of the 117th Congress last year extended many telehealth provisions for two years [TTA 4 Jan], it did not extend the remote prescribing of controlled substances as part of the Ryan Haight Act. They are urging the Drug Enforcement Administration to release its rules for special registration for telemedicine as a first step. Release

With Teladoc’s $6.6 billion writeoff of the costs of acquiring Livongo in Q1 2022 [TTA 4 May 22], did Teladoc pick up an $18 Billion Bunch of Lemons in Livongo? Or did Teladoc mess up the expensive buy? You have to hand it to MedCityNews’ Arundhati Parmar for asking that burning question of Zane Burke, who was Livongo’s CEO at the time and the engineer of the sale, now CEO of Quantum Health. Not surprisingly, he said that “When we left the business, it was a freaking good business”, had just turned a big funding, was EBITDA positive, and wasn’t seeking a buyer. The massive difference was in the cultures, a ‘chasm’ that wasn’t bridged. One indicator: none of the top 16 Livongo executives stayed with Teladoc–and they were not required to as a condition of the sale. Teladoc considered it a ‘roll up’. 

This Editor was skeptical about it from the start–see TTA analyses 6 August and 11 August, as it happened in 2020. And while many smart observers were enthusiastic, others were not–the synergies (forgive me) they saw and the bottom line boosts were not there as predicted. In retrospect, which is always 20/20, it’s now proven to be a terrible buy. Teladoc has rebooted Livongo as of last month. More than the writeoff cost for Teladoc, it cost the industry, and affected lives.  It’s an important read in today’s situation.

Philips will be laying off 6,000 globally over the next two years, in addition to 4,000 booted this past October. Reasons why are the 2021 recall of Respironics ventilators, BiPAP machines, and CPAP machines because of the potential health risks of deteriorating polyester-based polyurethane (PE-PUR) foam, supply-chain challenges, lower sales in China, and the fallout from the Russia-Ukraine war. Their new focus will be on R&D and fewer ‘more impactful’ projects. Dataquest India, Mobihealthnews

Amazon’s layoffs of 18,000–and huge 2022 loss–also affected their developing healthcare areas. The shutdown of Amazon Care affected 159 jobs. But surprisingly, growth areas that had just rolled out new programs also lost staff. Amazon Pharmacy, which just rolled out RxPass, a $5 per month medication prescription service, laid off some of its program managers, risk compliance managers, and billing managers. Employees working on Halo health and fitness trackers were also laid off.  Becker’s Hospital Review  Yet many health executives see Amazon as the #1 threat to health systems’ core business. In a survey by Health Tech Nerds (sic), these execs predicted that Amazon might buy Color, Walgreens, and Smile Digital Health–in addition to a health plan! At this point, their One Medical buy is under scrutiny by both the DOJ and FTC [TTA 15 Sept 22] and on 2 February they reported a $2.7 billion net loss for 2022, the first since 2014 (The Verge) so those predictions on aggressive healthcare moves might be very blue side up.  Becker’s Hospital Review

In Ireland, Prof. Martin Curley, who headed digital innovation for the Health Services Executive (HSE), resigned in an unusual fashion. On LinkedIn announcing his resignation effective immediately, he said he has “called off this particular ascent on Everest”. In the post, he expressed frustration with supply chain and funding blockages, but later interviewed by the Irish Times cited poor IT infrastructure creating patient adverse outcomes, even death–and that senior administrators blocked new technology solutions. He is now a visiting professor at the University of Bath and a professor of innovation at Maynooth University. Irish Times 16 Jan, 25 Jan

And former Health Secretary Matt Hancock cannot catch a break. First, he was suspended from the Conservative Party in November, having decided that traveling to Australia for several weeks to appear in a reality show was more important–while he was Conservative Whip and Commons was still sitting. Now as an independent representing West Suffolk, in December he announced he will not stand for re-election next year. The insult upon injury was being assaulted last month by a 61-year-old man on the London Underground, following Mr. Hancock through Westminster station and onto a train, and earlier by the same man on Parliament Street. The Lancashire man was arrested. Lately quite in the BBC News.

Short takes: Will there be an Amazon Clinic?, Transcarent and Teladoc, perfect together?, Get Well partners with Palomar Health, expands with Veterans Health Administration

Did Amazon prematurely leak an initiative? Or was it an error? The Verge reports that a video was uploaded to Amazon’s YouTube page on Tuesday–then taken down–describing a new service that would offer assessment, diagnosis, and treatment of common conditions such as allergies. The Amazon Clinic video depicts a user taking an online questionnaire about their symptoms, After paying a fee, a clinician reviews it, diagnoses, and prescribes as needed, sending to the patient’s pharmacy. The disclaimer: “Telehealth services are offered by third-party healthcare provider groups.” The video directs to amazon.com/clinic which is not live. Another Amazon Mystery. Amazon Care is shuttering and the company is jumping through Federal hoops to get approval to close their buy on OneMedical. Hat tip to HISTalk today.

HISTalk also pointed to a Forbes article on health navigator companies such as Castlight and Firefly Health, with a bit of a ‘sting’ at the end. Transcarent, a health navigator that takes on risk integrating its services into employee benefits, is the latest enterprise founded by Glen Tullman, a serial entrepreneur who founded Livongo, investor group 7Wire Ventures, and built up Allscripts as CEO. The writer speculates that Tullman should buy Teladoc to give Transcarent a distribution system–a built-in network of physicians and health system relationships. Yes, this is the same Teladoc that Tullman sold Livongo to for a tidy $18.5 billion, then earlier this year wrote off $6.6 billion as an impairment. This one drips with irony. With its stock down nearly 90% from its January 2021 high, it’s never been cheaper!

Get Well, an RPM, patient care management, and workflow automation company, announced new and expanding partnerships. The new one is with Palomar Health, a health system in Escondido, California. This will implement Get Well services in four phases in five areas to improve patient experience: digital care management (GetWellLoop), inpatient experience (Get Well Navigator and a workflow automation for hospital staff), emergency department experience, care gap closure, and health equity through additional features. Becker’s  The second is an expansion with the Veterans Health Administration (VHA) into 70 Veterans Affairs Medical Centers (VAMC) and a fifth Veterans Integrated Service Network (VISN) with nine facilities. They also now have a FedRAMP “In Process” designation for cloud services which is enabling expansion of GetWellLoop care plans with a VAMC. Release (Business Wire)

Thursday news roundup: Cigna deploys over $12B for investment, Cerner’s Feinberg to Humana board, Teladoc on Amazon Alexa, admitting Livongo problems, and XRHealth VR therapy scores $10M

Cigna’s opportunity piggybank just added $12 billion+. It’s a combination of selling off non-core businesses, share repurchasing authorization, and redeploying funds to areas such as capital investment and Cigna Ventures. This includes:

  • $5.4 billion after-tax from the sale of its international life, accident, and supplemental benefits businesses in seven countries
  • $450 million invested in Cigna Ventures, its innovation investment arm
  • An expected $7 billion for share repurchase this year from a $10 billion authorization. To date this year, Cigna has already repurchased $1.2 billion of shares.

The Cigna Ventures funding will go towards three announced areas: insights and analytics; digital health and experience; and care delivery and enablement. Originally formed in 2018 with $250 million, they now have seven VC partners and 15 direct investments, including Arcadia, Babyscripts, Cricket Health, Ginger, Omada, and RecoveryOne. 

Buried in the release is this: “…the company is not currently contemplating large-scale mergers or acquisitions” which would seem to put a tight lid on the long-rumored acquisition of parts or all of Centene [TTA 28 Jan]. (Too much wake turbulence?) But following on this, “The company intends to continue making strategic investments in innovation through targeted bolt-on or tuck-in acquisitions” which fits sell-offs, as well as investment in early-stage companies through Cigna Ventures. Also FierceHealthcare

Insurer Humana’s board expands to 14 with the addition of David Feinberg, MD, the current CEO of Cerner and future executive of Oracle, provided the merger is approved. He joins the current seven independent directors on the Humana board. Last week, Starboard Value LP, an activist investor hedge fund, reached an agreement with Humana to appoint two Starboard-backed board members starting next month and retire two incumbents. Humana limped through last year with a $14 million Q4 loss and Medicare Advantage losses to both traditional rivals and insurtechs. With over 25 years in healthcare management including CEO positions at Geisinger Health System and three divisions of UCLA Health, it’s a smart move. Release, FierceHealthcare

“Alexa, I want to talk to a doctor”–and that doc will be through Teladoc. Amazon customers with supported Echo devices, such as an Echo, Echo Dot, and Echo Show, will now be able to access Teladoc and a virtual care session 24/7. Initially it will be voice-only with audio/video to come. The release states that visits may be free through insurance or $75 direct pay. It did give a much-needed lift to Teladoc shares, which have been hammered by 76% in the past year, on the announcement and in the past few days, feeding the usual rumor mill that Amazon may be writing a check for Teladoc shares.

Teladoc has finally admitted via its annual report (SEC 10-K) that the Livongo acquisition has not been all beer and skittles. It impacted its indebtedness (page 35) and on page 52, significant insecurities on the integration of the two companies, well over a year after the acquisition.

Our failure to meet the challenges involved in successfully integrating the operations of the two companies or to otherwise realize any of the anticipated benefits of the merger, including additional cost savings and synergies, could impair our operations. In addition, the overall integration of Livongo post-merger will continue to be a time-consuming and expensive process that, without proper planning and effective and timely implementation, could significantly disrupt our business.

Healthcare IT News and HISTalk

VR physical therapy has remained a “we try harder” area of telehealth for several years, with a lot of initial promise in treating returning veterans with PTSD in de-escalating symptoms but having a hard time getting takeup. XRHealth, an early-stage company offering VR-driven physical, occupational, and speech therapies, gained a $10 million venture round backed by HTC, Bridges Israel impact investment fund, AARP, and crowdfunding on StartEngine.com and existing investors. According to Crunchbase, this is par for their course since 2016; their total of $35 million has been in pre-seed, seed, grant, crowd, and venture funding. Based in Brookline, Massachusetts with R&D in Israel, it is good to see them progress, having ‘been there and done that’ with two early-stage health tech firms.

However, their release does them a great disservice. It is, frankly, 90% nonsense in trying to position them out of the gate as “the gateway to the healthcare metaverse” and “growing the open ecosystem and providing greater access to care while reducing costs. Interoperability is key…”. This Editor had to go to their website to find out what they do. As a marketer and reporter, the First Rule of Press Releases is say what the news is, what the company does, and why it’s important in the first two paragraphs. The rest is reinforcement and expansion, with the spokesperson quote part of that and never in paragraph #2. Additional advice: don’t pick up a word now branded by Facebook (Meta). Hat tip to HISTalk

Short takes: Athenahealth close to sold, Teladoc wants More of the Patient, CVS fewer store customers

Some thought starters for your weekend…

Reportedly, EHR and systems provider Athenahealth is thisclose to being sold. Via Becker’s Health IT, Seeking Alpha, a stock analysis site, connects the dots. In September, Bloomberg reported that private equity firms Veritas Capital and Elliot Investment Management (Evergreen Coast Capital) were considering selling Athenahealth for $20 billion or filing an initial public offering (IPO), two dramatic ways to exit. They entered in 2019 for $5.7 billion when it was already public, taking it private and combining it with a GE acquisition, Virence Health.

Timing is now Q1 2022. The most interested investors apparently are Hellman & Friedman, Bain Capital, KKR, Thoma Bravo, and Brookfield Asset Management. While no longer the powerhouse it once was in EHRs and related systems, it still can fetch a good return and provide a favorable exit for the two companies. Athenahealth had no comment for Becker’s. 

Teladoc and Big Telehealth wants More of the Patient, but will it be profitable? Our Readers are well aware of the War of the Roses (because it’s gone on so long) among the traditional telehealth players: Teladoc, Amwell, Included Health (Grand Rounds-Doctor on Demand), MD Live, with other smaller players jumping out of the juggernauts’ way and sticking to their knitting. With the addition of primary care (and, one can assume, the pandemic push), health systems and companies like Amazon Care and Babylon Health have jumped into the mix with ‘hit them where they ain’t’ offerings–Amazon offering house calls and services direct to employers, and Babylon 360 being offered to health plans and employers. Babylon and Teladoc’s Primary360 cover much the same ground, though, in connecting the patient users with an assigned doctor and primary care team for ongoing care.

As noted last month [TTA 7 Oct], the walls between payer and provider in primary care are collapsing in multiple ways in telehealth and payer models like insurtechs. Another model is Amwell’s reinforcing behavioral health capabilities (SilverCloud) and sliding into care management (Conversa and Amwell’s Converge platform).

Readers do not have to go far for confirmation that Teladoc aggressively wants most or all of the patient and isn’t going to settle for less. This is conveniently summarized by HISTalk from Teladoc’s Investor Day (with Editor’s emphasis)

image

Teladoc’s investor day presentation predicts that consumers will expect virtual-first encounters whose quality equals in-person ones and that offer them a variety of coordinated care services. The company says it has evolved from fee-for-service video visits and will become a partner with its customers in offering whole-person care at under value- and risk-based arrangements. It says it will be “the first place consumers turn to for all healthcare needs” for “whole-person care that is personalized, convenient, and connected.” TDOC shares dropped 8% on the day and have shed 25% in the past 12 months, with the company’s market value being $20 billion versus the $18.5 billion in cash it paid to acquire Livongo in late October 2020.

As we’ve previously noted, Teladoc has never made a profit. Many felt it overpaid for Livongo and cut loose too many in the leadership with truckloads of gold. Investors weren’t quite on board with the whole-person vision either, looking at the share price trends. 

CVS Aetna, on the other hand, wants fewer store customers, more patients. Their announcement this week is that they are closing 10% of their stores (900 of 9,900) to focus on urgent/chronic care HealthHUBs, expand those services, and cut down on the brick-and-mortar. This responds to Walgreens buying a majority interest in VillageMD/VillageHealth with adjacent full-service primary care practices and CareCentrix for home care [TTA 14 Oct]. Reuters

Say goodbye to the local, easily navigated ‘boulevard’ CVS, often furnishing food, writing tablets, wrapping paper, and paper towels along with prescriptions and shampoo, often patronized by an older age group, for a barn-like, coldly-lit superstore that you have to drive to. (And say goodbye to pharmacy head Neela Montgomery.) And why is every HealthHUB this Editor has seen unimpressive–strangely under-staffed or no-staffed, tatty waiting areas with a couple of plastic chairs, expanded with ugly outside trailers that cut down on parking spaces?

Cui bono? According to CNN Business, it’s Dollar General, which loves those local locations and has been planning to beef up its health-related OTC meds. They also now have a chief medical officer who is evaluating in-store eye exams, telemedicine, and partnerships with local pharmacies. Given inflation, more customers will be checking Dollar General out.

Is healthcare too much for Big Tech’s Google and Apple? Look at the track record. And David Feinberg’s $34M Cerner package.

With Google scattering Google Health to the four winds of the organization--the heck with what employees recruited for Health think of being reorg’d to, say, Maps or YouTube and falling through the corporate rabbit hole–more detail has leaked of Apple’s struggles. This time, on the scaleback list (a/k/a chopping block) is Health Habit. It’s an app in the Apple Store that connects users with AC Wellness, a doctor’s group in Cupertino, California. The ‘eligible participants’ are restricted to Apple employees. From the app site, they can check weight, nutrition, blood pressure, and schedule wellness checks. It seems to be the typical ‘skunk works’ project that’s not ready for prime time, but its public fate seems to be poorly timed and simultaneously, overblown because they are–well–Apple

Bottom line, is healthcare once again proving rather resistant to being leveraged by technological solutions? Those of us who go back to the Stone Age of health tech, or those of us who joined in the Iron and Bronze Ages, remember when you couldn’t get into a conference cocktail party without a “wellness” app. (You say you’re in behavioral and remote patient monitoring for older adults? Oh, look! A squirrel!)

Microsoft was going to dominate consumer health with their HealthVault for personal health records (PHRs). We know how that turned out–dead apps, Fitbit an also-ran bought, Pebble and Misfit going to the drawer of failed toys, Jawbone t-boning plus Intel and Basis written off in 2017, and HealthVault unlamentedly put out with the trash at the end of 2019. Oh yes, there was an earlier Google Health for PHRs, which died with a whimper back in 2012 or so.

The press releases crow about Big Tech’s mastery of complexity, yet going off on their own without partners–or even with partners–never seems to work. In the industry, it makes for a few good articles and the usual rocket launching at places like Forbes, but the pros tend to treat it with a shrug and pull out a competitive plan. Glen Tullman, founder of Livongo who will never have to worry about paying for chateaubriand for two for the next billion years or so, stated the obvious when he said that patients cared about the overall experience, not the tech.

Speaking of experience, Amazon Care promises the best for its employees and enterprise accounts–a one-minute telehealth connection, a mobile clinician if needed within the hour, and drugs at the door in two hours. All with direct pay. This has met with skepticism from telehealth giants like Teladoc and Amwell with established corporate bases. There’s also CVS Health and Walgreens. The Editor has opined that care isn’t Amazon’s game at all–it’s accumulating and owning national healthcare data on Amazon Care and Pharmacy users that is far more valuable than whatever is spent on providing care and services [TTA 16 June]. Will Amazon really be able to pull it off?

Paddy Padmanabhan, the author of Healthcare Digital Transformation, lists a few more reasons It’s Too Hard For Big Tech In Healthcare in his HealthcareITNews article here….

  • Healthcare is a part-time job for Big Tech
  • Big tech firms want to solve the healthcare problem by themselves
  • Selling technology is not the same as selling healthcare services

…but holds out some hope that the initial success of “digital-first and virtual-first providers of healthcare emerging as challengers” will point the way for them.

And speaking of Google Health and former employees, Cerner’s necessary SEC disclosure today of new CEO and president David Feinberg, MD’s compensation package was sure to create some talk in Googleville among his now-scattered team. $34.5 million over the next 15 months is structured as follows:

  • $900,000 base salary
  • a target cash bonus of $1.35 million
  • a one-time cash bonus of $375,000 stock
  • $13.5 million in Cerner’s restricted shares for 2022
  • $3.375 million in stock shares for the fourth quarter of 2021
  • a new hire award of $15 million in restricted stock shares to offset his equity loss with Google. 

Whew! Becker’s HealthIT

A smash Q1 for digital health funding–but the SPAC party may be winding down fast

An Overflowing Tub of Big Funding and Even Bigger Deals. The bubble bath that was Q1 deals and funding is no surprise to our Readers. Your Editor at one point apologized for the often twice-weekly roundups. (Better the Tedium of Deals than COVID and Shutdown, though.)

Rock Health provides a bevy of totals and charts in its usual quarterly summary of US digital health deals.

  • US funding crested $6.7 bn over 147 deals during January through March, more than doubling 2020’s $3.1 bn in Q1 over 107 deals.
  • Trending was on par through February, until it spiked in March with four mega-deals (over $100 million) over two days: Clarify (analytics), Unite Us (SDOH tech), Strive Health (kidney care), and Insitro (drug discovery). These deals also exceeded 2020’s hot Q3 ($4.1 bn) and Q4 ($4.0 bn).
  • Bigger, better. Deals skewed towards the giant economy size. $100 million+ deals represented 66 percent of total Q1 funding
  • Deal sizes in Series B and C were bigger than ever, with a hefty Series B or C not uncommon any more. Series B raises were on average $49 million and C $77 million. One of March’s megadeals was a Series B–Strive Health with a $140 million Series B [TTA 18 Mar].
  • Series A deal size barely kept up with inflation, languishing in the $12 to $15 million range since 2018.
  • Hot sectors were a total turnaround from previous years. Mental health, primary care, and substance use disorders, once the ugly ducklings which would get their founders tossed out of cocktail parties, became Cinderellas Before Midnight at #1, #2, and #3 respectively. Oncology, musculoskeletal (MSK), and gastrointestinal filled out the Top 6 list.
  • M&As were also blistering: 57 acquisitions in Q1, versus Q4 2020’s 45

Given the trends and nine months to go, will it blow the doors off 2020’s total funding of $14 bn? It looks like it…but…We invite your predictions in the Comments below.

Les bon temps may rouler, but that cloud you see on the horizon may have SPAC written on it. A quick review: Special Purpose Acquisition Companies (SPACs) typically are public companies that raise money through their own IPOs for the express purpose of buying other companies. Often called a ‘blank check’, they have no purpose other than buying one or two other companies–in the latter case, merging them like the announced Cloudbreak and UpHealth last November–and converting over to the company’s identity and business. The timeframe is usually two years. Essentially, the active company goes public with a minimum of the messy, long, expensive, and revelatory process of filing directly with the SEC (in the US). This quarter, Rock Health’s stat on SPACs was that they raised $83.1 bn this quarter, exceeding by $0.5 bn all SPAC activity in 2020, mainly late in the year. Their count was two SPACs closing in Q1 and 8 more announced but not yet closed (counting Cloudbreak/UpHealth as one).

As an exit door for investors, it’s worked very well–but is dependent on private equity and public investors having confidence in SPACs. One thinning of the bubble may be the scrutiny of Clover Health’s SPAC by the SEC [TTA 9 Feb] over not revealing that they were under investigation by the Department of Justice (DOJ). Certainly this was a material circumstance that could dissuade investors, among other dodgy business practices later unveiled. Mr. Market tells a tale; Clover went public 8 Jan at $15.90 and closed today at $7.61. Their YahooFinance listing has a long list of law firms filing class-action lawsuits on behalf of shareholders.

Clover may be the leading edge of a SPAC bust. SPACs are losing their luster because there are too many going through, jamming bandwidth at the bank and law firm level. As time ticks by and deals are delayed, the private funders of SPACs are growing squeamish, according to this report in National Review’s Capital Note (yes, National Review has a finance newsletter). “In the past two weeks alone, four blank-check deals have been halted, with SPAC shares declining significantly from their highs early this year. The slowdown follows an influx of short-sellers into the opaque financial vehicles and a sell-off in high-profile SPACs such as Churchill Capital Corp IV.” Reasons why: lower quality of companies available to go public via SPAC–the low hanging ripe fruit has been picked–and the last mile in SPACs, which is PIPE funding (private equity-investment-in-public-equity financing) is getting skittish. The last shoe to drop? The SEC in late March announced an investigation into SPACs, making inquiries into several banks seeking information on their SPAC dealings, which is alluded to near the end of the Rock Health report. CNBC  (Read further down into the NR article for a Harvard Business Review dissection of the boom-bust dynamics of ‘controversial practices’ like reverse mergers as a forecast of what may happen to SPACs. Increased popularity led to increased negativity in reverse mergers.)

And speaking of SPACs...Health tech/digital health eyes are upon what Glen Tullman and the ‘late of Livongo’ team will be doing with their SPAC, Health Assurance Acquisition Corp., which is backed by Hemant Taneja’s General Catalyst, also a former Livongo funder. Brian Dolan, who is now publishing Exits and Outcomes. His opinion is their buy will be Color, formerly Color Genomics: opinion piece is here. Messrs Tullman and Taneja are also leading Transcarent, a company that brings together employers, employees, and providers in a seamless, app-driven integrated care model. Forbes

The cool-off in SPACs may burst a few bubbles in the bath–and that may be all to the good in the long term.

Deal and news roundup: Cigna acquires MDLive, Oscar Health $1bn IPO preview, Teladoc’s smash revenue–and losses, Medisafe’s $30M Series C

The big news this week in Telehealth World is Cigna’s agreement to acquire MDLive. MDLive will be part of Evernorth, Cigna’s health services portfolio. From the release and news reports,  Cigna has been a long-time partner of and investor (through Cigna Ventures) in MDLive, which has grown to 60 million members. No purchase price nor management changes have been disclosed. Headquartered in Florida, since 2009 MDLive raised close to $200 million in investment in five rounds, the last $50 million in private equity in September, and was rumored to be prepping an IPO. 

Evernorth was rebranded within Cigna last September for management services which can be sold outside of Cigna, a move that follows both CVS Aetna and UnitedHealthGroup. It contains pharmacy benefit management company Express Scripts, specialty pharmacy Accredo, and medical benefit manager eviCore along with several other smaller related businesses. Last year, it brought in $116.1 billion in revenues for Cigna last year, a 20 percent jump from 2019, according to Cigna’s annual report. MDLive release, Healthcare Dive, FierceHealthcare

‘Neoinsurer’ Oscar Health’s IPO raise, scheduled for next week, is now estimated to be in the eye-blinking $1 bn to $1.2 bn range, with over 30 million shares valued at $32-34 per share. At the beginning of the month, it was estimated to be a modest $100 million [TTA 9 Feb]. Daffodils in February? More in TechCrunch, Reuters

Meanwhile, the Big Kahuna of Telehealth, Teladoc, ended 2020 with a smashing $1.1 bn in revenue and equally smashing losses. Their Q4 revenue was $383 million, up 145 percent from $156 million in Q4 2019. Visits skyrocketed due to the pandemic of course–10.6 million, up 156% from 2019. Paid membership hit 51.8 million, up 41 percent from 2019’s 36.7 million. Both membership and visits are expected to increase in 2021. Livongo, acquired in October, added substantially to 2020’s losses of $485 million, up 389 percent from 2019’s $99 million. Q4 losses were $394 million in the fourth quarter, up from $19 million in 2019. FierceHealthcare, Teladoc release

And happily, but more modestly, Medisafe’s smartphone-based medication management app has raised a $30 million Series C, led by Sanofi Ventures and ALIVE Israel HealthTech Fund. From a basic app when this Editor first profiled the company and met Omri ‘Bob’ Shor over a coffee in 2013, the app now is more a digital drug companion and a platform for patient adherence programs. Kudos! Release

News and deal roundup: Signify Health’s $564M IPO, RapidSOS’ $85M Series C, Poland’s Telemedico raise, Livongo’s Zane Burke to Bardavon

The Big Deal of the Week is Signify Health‘s IPO which on 11 February raised $564 million on a sale of 23.5 million shares on the NYSE. Signify provides comprehensive care and management services such as complex care management, SDOH, episodes of care/bundled care programs, and specialized medical services in the home, utilizing technology and data analytics. Signify now has a market capitalization of $7.12 bn. FierceHealthcare, MarketWatch, Signify release.

RapidSOS, an emergency response data platform that provides Next Generation 911 and Emergency Services Network services to Emergency Communication Centers, had a Series C raise of $85 million led by Insight Partners and Global Venture Capital. The RapidSOS technology in global use links 350 million connected devices to first responders and 4,800 data centers. They have raised $205.7 million over 14 rounds since 2016. Crunchbase, release

On the other side of the deal continuum, Poland’s Telemedico, a telemedicine provider in multiple European and Middle Eastern countries, raised a modest €5.5 million (~$6.6 million) in a Series A round. The round is led by Flashpoint Venture Capital, Uniqa Ventures, PKO VC, Black Pearls VC, and Adamed. Mobihealthnews, TechCrunch

And in a coda to the Telavongo story (Teladoc and Livongo), former CEO Zane Burke joined as a director of workers compensation digital health company Bardavon Health Innovations. Mr. Burke led the $18.5 billion merger with Teladoc in his two years as CEO, after 20 years at Cerner. Becker’s Health IT, release (DigitalJournal)

Digital Health as Boom Town: 2020’s dizzying funding rounded up by Mercom Capital, StartUp Health

BOOM! Mercom Capital Group published their Q4 and 2020 roundup of global digital health investment and, no surprise, the investment picture for just about anything digital health was in sharp contrast to most of the COVID-afflicted world economy.

The topline:

  • Global VC funding (private equity and corporate venture capital) was $14.8 bn across 637 deals. It was a 66 percent increase in funding compared to 2019’s $8.9 bn in 615 deals. The modest increase in deal number and huge increase in funding points to the acquisition of more established companies requiring Big Deals.
  • Total corporate funding, including VC, debt, and public market financing, totaled $21.6 billion

 

In a stunning change, telemedicine was Top Of The Pops, with $4.3 bn in investment, 139 percent over 2019’s $1.8 bn. It was over double the former star categories of data analytics and mHealth apps.

The top five disclosed M&A transactions in 2020 they tracked were:

  • Teladoc’s acquisition of Livongo Health for $18.5 bn
  • Blackstone’s acquisition of a majority stake in Ancestry.com for $4.7 bn (despite the ‘bloom off the rose’ of consumer genetic testing)
  • Philips’ acquisition of BioTelemetry in cardiac monitoring for $2.8 bn
  • Invitae’s acquisition of ArcherDX for $1.4 bn
  • WellSky’s acquisition of Allscripts’s CarePort Health (CarePort) for $1.35 bn

The Executive Summary is available for free download at the link in the release. The full report will set you back $599 – $999, depending on the version.

StartUp Health has slightly different numbers but in total investment tracks almost to Mercom Capital’s estimate at $21.5 bn. For telemedicine, it still triples year-over-year but StartUp’s totals are lower: 2019’s $1.1 bn to 2020’s $3.1 bn. Part of the difference may be remote monitoring, which StartUp considers separately. It doubled from $417 million to $941 million. Their deal counts were also higher: 764 in 2020 compared to 716 in 2019. Another fun fact in their tracking are their city leaders in health innovation funding: Beijing, Tel Aviv, and London, confirming that New York and the San Francisco metro no longer have money, interest, or their former attraction. A fuller list would have been interesting. More is in their Part 1 study. Part 2, to be released next week, will cover their dozen ‘health moonshots’.

Breaking: Teladoc and Livongo close merger in $18.5 billion deal, staff/board changeovers

Breaking: Today (30 October) Teladoc announced the closing of its merger with Livongo. The release itself is pro forma. The acquisition is interesting in how rapidly it was completed: from ‘git to gone’ in under three months. By contrast, Teladoc’s close on much smaller InTouch Health took eight months. It is, of course, still positioned as a merger, but it is clearly a purchase based on the terms and their branding. (More of Editor Donna’s thoughts on this here and here.) 

Livongo shareholders will receive 0.5920 Teladoc shares plus cash of $11.33 for each Livongo share (including the special dividend declared by Livongo). The Motley Fool did the math and valued it at $18.5 million after the shareholder approval. Current Teladoc shareholders will own 58 percent, with Livongo investors holding 42 percent. Mr. Market continues to be cross, as the day started with TDOC above $215 with the current price (1pm Eastern time) at just above $197, though Teladoc’s 3rd Q earnings were excellent. TDOC’s share price just before the acquisition hovered in the $230s.

This Editor has already noted the reported exodus of many of Livongo’s top management, presumably to the bank: CEO Zane Burke, President Jennifer Schneider, MD, CFO Lee Shapiro (widely conceded as the merger engineer), and SVP of business development Steve Schwartz. David Sides, Livongo’s COO, and Arnnon Geshuri, Cheif (sic) Human Resources Officer, retain their same position as at Teladoc. According to their latest (29 Oct) 8-K, new members of the board effective 19 November will include Glen Tullman (formerly Livongo Executive Chair), Chris Bischoff (Kinnevic AB), Karen L. Daniel, Sandra Fenwick, and Hemant Taneja (General Catalyst, of which more follows).

MedCityNews detailed the above plus that R&D will be headed on an interim basis by Yulun Wang, PhD, who came over from InTouch. Also, a number of Livongo execs (Glen Tullman, Schneider, and three other managers) are putting their new wealth to work for their futures with General Catalyst’s Hemant Taneja, a Livongo backer. An S-1 was filed on 19 October to create a new special-purpose acquisition company with the goal of raising $500 million. Commonly dubbed a ‘blank-check’ company, a SPAC is a public company designed to quickly take a private company public versus the slower process of an IPO. Recent healthcare examples have been Hims Inc. and SOC Telemed

Livongo’s website as to management is already updated and cut over. The Teladoc site does not have a Livongo page other than on press releases and a landing page here. Much remains to be seen in this consolidation of telemedicine and monitoring/coaching, including whether the combined company can deliver on much-needed profits.

News roundup: Kaiser/Best Buy Lively partners; Teladoc’s mental telehealth, Livongo execs depart; approved apps make comeback in US, DE; United Airlines tests COVID CommonPass for international flying

Kaiser Permanente is adding to its existing partnership with Best Buy Health. The joint program will develop remote patient-monitoring tools for older adults centered on Lively Mobile Plus. By pressing a button on the phone, users can connect with individuals trained to triage emergency and nonemergency situations, from car trouble, home lockouts, or medical emergency. Kaiser Permanente has rolled it out to their Medicare members as part of its Medicare Affinity Program for independent living at home. In 2019, the Kaiser system piloted Lively Mobile Plus after Best Buy’s acquisition of GreatCall. Becker’s Hospital Review 6 October and 22 October. Photo from Best Buy via Kaiser on Twitter, @aboutKP.

Teladoc launches mental telehealth to Canadian employers. Four Livongo C-levels will depart after closing. The Teladoc Mental Health Care program is available to employees of Canadian companies and provides access to psychiatrists, psychologists, and therapists via phone, web or mobile app. It is in addition to Teladoc’s Mental Health Navigator and disability products in Canada. Press release, Becker’s Hospital Review  Becker’s has also been keeping a close eye on Teladoc’s SEC filings. The letter, filed 15 October, stated that Livongo CEO Zane Burke, President Jennifer Schneider, MD, CFO Lee Shapiro (widely conceded as the merger engineer), and SVP of business development Steve Schwartz will leave the company after the closing. Livongo’s Executive Chair Glen Tullman will keep his seat on the combined company’s board of directors. Look for more changes that won’t make Livongo employees happy. Our previous Skeptical Takes on the merger here.

Approved Apps Revive! The American Telemedicine Association (ATA) announced a new partnership with the UK’s ORCHA–the Organisation for the Review of Care and Health Apps–to develop an approval procedure for health apps. Announced at the virtual HLTH conference, the objective is to create a review process to vet safe and effective health apps out of various app stores. ORCHA’s automated, intelligent review engine can assess thousands of apps against more than 300 measures in order for a healthcare organization to build and manage a health app program. Both are trying to solve the same problem faced by Happtique and IMS Health (now IQVIA) in those long-ago days of 2014. ATA release, Healthcare IT News 

For Readers with long memories, iMedical Apps is still with us and their team is still reviewing health apps both personal and professional. They’ve extended their reach to reviewing apps to prescribe with iPrescribeApps.

Meanwhile, in Germany, the Digital Healthcare Act (DVG) now finally permits doctors to officially prescribe apps to patients. The Federal Institute for Drugs and Medical Devices (BfArM) certified Kalmeda for tinnitus and Velibra, a therapy program for anxiety disorders as Germany’s first two insured health apps. Germany also is kick-starting prescribed health apps through fast-tracking medical apps that are CE-marked as Class 1 and 2a low-risk medical devices. Healthcare IT News

United Airlines is testing an app-based ‘health pass’ to speed safer global travel. CommonPass, created by the Commons Project Foundation and the World Economic Forum to enable travelers to securely share their COVID-19 test status, taken 72 hours before flight, across borders. The app will also facilitate a health declaration that may be required by the destination country and generates a quick response (QR) code scannable by airline staff and border officials. UAL’s London-Newark test follows on a test with Cathay Pacific between Hong Kong and Singapore. FierceHealthcare, MarketWatch

Digital health investment smashes the ceiling: $9.4 bn invested through 3rd Q

$9.4 bn is a whole lot of bubbly! To no one’s surprise in the industry, kick-started by telehealth, Rock Health’s tracking of US digital health company investment through 3rd Q smashed through 2018’s full-year high point ($8.2 bn) with a cannonball of a total. Adding $4.0 bn to first half’s $5.4 bn, it represents 311 deals and is 27 percent above last year’s oddly fading-in-the-stretch $7.4 bn [TTA 7 Feb]. Rock Health projects the year total to be about $12 million and 400 deals. 

  • Average deal size topped $30.2 million, 150 percent greater than the $19.7 million average in 2019.
  • Driving this total were “mega deals” of $100 million or more, accounting for 41 percent of all deals (compared with 30 percent for year 2019). Even with the inclusion of fitness companies that this Editor does not consider true health tech, such as Zwift (interactive fitness entertainment), ClassPass (online fitness), and Tonal (more online fitness), the 20+ remaining companies indicate a concentration of Big Capital into Big Deals. The Big Deals concentrate in three sectors: on-demand virtual care delivery, R&D process enablement, and fitness/wellness.
  • Not surprisingly, telehealth and telemedicine are soaring: $1.6 bn in funding compared to $662 million same period 2019
  • Also pointing to concentration: 64 percent of this year’s investors have previously made investments in digital health, which exceeds any prior year. Institutional venture firms have the largest share of transactions (62 percent), with corporate venture capital accounting for 15 percent of transactions.
  • Given COVID and election year craziness, IPO action has moved right along and matched 2019’s six. Accolade and GoHealth in July; Amwell, Outset Medical, and GoodRx in September. Hims Inc. is merging with a blank-check company as SOC Telemed did in August. MDLive may be going public in early 2021.
  • What is down so far this year is merger and acquisition activity. Through September, there are only 63 acquisitions, which will likely trail by year’s end 2019’s 113. Teladoc is the 9,000 Elephant in M&A, with InTouch Health closing in August ($1 bn final due to the stock value soaring) and Livongo at $18.5 bn dwarfs the remainder. Optum-AbleTo has been reported in ‘advanced talks’ but there’s no confirmation of closing; it was reported to be at $470 million. 

Note: Rock Health only counts US deals in excess of $2 million, so international activity by companies like Doro are not included.

Also Mobihealthews.

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