TTA’s Blooming Spring 2: Teladoc buys UpLift to buck up BetterHealth, Novo Nordisk partners with Hims, other teleprescibers on Wegovy, Masimo’s former CEO claiming un-granted shares, Commure-HealthTap partner, more!

May 2, 2025 | by | No Comments

2 May 2025

Cherry blossoms are starting to fall, much like Teladoc’s revenue for Q1 in our lead story. Can their acquisition of a small virtual mental health provider with insurance coverage help turn around BetterHelp? And what about their main business? Novo Nordisk would rather partner than fight with teleprescribers Hims & Hers, Ro, and LifeMD for GLP-1 Wegovy–will this be a trend? Commure adds to its ‘house that Jack built’ tech stack with a HealthTap partnership. And Masimo’s latest episode of its ongoing soap opera is that its former CEO (and major shareholder) is claiming ownership of shares as part of his severance–but they haven’t been granted and very much in dispute. (Irony alert: they’ve increased in value since his departure!)

This just in: Teladoc acquires UpLift for $30M, bolstering struggling BetterHelp telemental health; Q1 revenue down 3% (Can this telemental health be saved with one acquisition?)

News roundup: Hims, Ro, LifeMD and Novo Nordisk partner on Wegovy prescribing (updated); Commure partners with HealthTap for virtual care after hours; WebMD Ignite adds texting to member health ed; hellocare.ai raises $47M for virtual nursing  (When you can’t beat ’em in weight loss meds, join ’em. With a side of Commure’s interesting M.O. on acquisitions.)

Masimo updates: former CEO Kiani claims 13.2% ownership, and a review of the new management’s style (updated) (The soap opera continues)

From last week: Cherry blossoms are blooming (finally) and so is the news. The roundups include Walgreens’ continuing Aisle 9 cleanup of their Federal opioid prescribing allegations, a huge and mysterious breach of Google Analytics sending Blue Shield CA member info to Google Ads, and Veradigm’s interim CEO will be taking the summer off. Our big reads include two surveys: the first on the state of healthcare AI (more show than go) and the second on RPM utilization–and effectiveness. Two raises, a BCI/telehealth merge, and international initiatives.

Product & funding very short takes: South Australia 1st with Sunrise EMR; S. Korea pain research, new emergency services app; BCI + telehealth for stroke patients; VirtuSense monitoring launches at Emory; Series B raises for Nourish, Healthee

Short takes: Veradigm’s interim CEO departing, Blue Shield CA breached 4.8M members’ PHI to Google, advice on expanded M&A premarket notification rules (You can’t blame that CEO for ankling after all the trouble he’s seen! And Blue Shield has 2nd largest breach–involving Google Analytics. Bad timing for Google.)

News roundup: Walgreens’ $350M opioid settlement, only 30% of healthcare AI pilots reach production, Medicare RPM usage up 10-fold despite benefit limitations (Walgreens cleans up again, and two surveys on AI and RPM for weekend perusal)

Holding this over: 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. Updated–Also Tecco’s blog post on why she quit being an angel investor.) 

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Masimo updates: former CEO Kiani claims 13.2% ownership, and a review of the new management’s style (updated)

April 30, 2025 | by

Medical device company Masimo may not be able to rid itself entirely of its meddlesome former CEO, Joe Kiani. In fact, if a court awards him the shares exercised under his various employment agreements, he could be 1) a billionaire and 2) the second largest shareholder in the company after Fidelity Investments (FMR). He currently and undisputedly holds 7.5% of Masimo’s shares (Nasdaq: MASI), trading today at over $163.00 and ironically up substantially since his departure. The latest is that Mr. Kiani cleverly filed with the SEC a mandatory “beneficial ownership” report (Schedule G/A, designating an amended form) stating that he owned 13.2% of shares.

The difference? The options, restricted stock units (RSUs), and performance stock units (PSUs) that he attempted to exercise, but have not been granted by the current management, controlled by Politan Capital Management, owner of 8.8% of common shares. Mr. Kiani maintains  that he resigned from Masimo on 19 September 2024, the day of the Annual Shareholders Meeting, “for good reason” after losing his board seat and control of the company to Politan. The new, Politan-controlled board on that day placed him on indefinite leave, named an interim CEO (Michelle Brennan), then in October expanded the board by two directors and formally terminated him on 24 October ‘for cause’, invalidating the terms of his eye-watering (and questionable) $400 million severance agreement. That difference–5.7%–is a whopping 3,226,702 shares on top of his existing 4,085,799 shares. In the Schedule 13G/A comments section, the non-granted shares are delicately termed as “subject to a dispute between the Issuer and the Reporting Person” (Mr. Kiani).

This Editor’s source is the excellent and detailed analysis done by Ted Green of Strata-gee. His reporting on Masimo is from close attention to their audio business as they attempt to shed Sound United, comprising major brands such as Polk, Marantz, Denon, and Boston Acoustics. As of this writing, that has not happened though in 2025 financial reporting, it is classified as a “discontinued operation”. His opinion on the strategy behind the unusual filing on shares claimed to be owned, but not in the possession of Mr. Kiani, is that it is a legal tactic thrown into the ongoing dispute around Mr. Kiani’s employment and severance/change of control agreements. Quentin Koffey, Masimo’s vice-chairman plus CIO of Politan, has argued that the previous board controlled by Joe Kiani signed off on compensation packages so rich that they threatened the company’s stability, among other things. 

As previously noted in our 6 March and 30 January updates, both Mr. Kiani and Masimo ever since have been going mano-a-mano in the courts–the Southern District of New York (SDNY), Delaware Chancery Court, and in California with the Private Attorneys General Act (PAGA) notice submitted to the California Labor & Workforce Development Agency (LWDA) alleging multiple Labor Code violations concerning wages, multiple stock options, and severance owed to Mr. Kiani under his employment agreements. None of these have been resolved yet to this Editor’s knowledge. 

Masimo has been going about its business, holding their annual stockholders’ meeting today. They’ve had good news since September regarding share price, with its rise largely maintained in this roller coaster market, despite a 2024 that was in the red. Strata-gee has an excellent delving into their SEC Schedule 14A filing issued in advance of the stockholders’ meeting. Mr. Green notes that it is full of disclosures and rationales on board and management duties, longer-term compensation structures, and more, written to be investor-friendly in contrast to the over-stuffed filings of the prior regime:

Written in a highly professional, precise, and clear tone, the company is changing many long-held policies – policies related to business management, board oversight, management performance, compensation, and more. And this document delves deeply into these many changes, often explaining what was done in the past, how it will be changed in the future, and why it needs to be done.

Mr. Green’s prognostication is that he expects all directors to be elected (there are no holdovers from the prior regime) and proposals to pass. Masimo’s emphasis on growth and R&D will mean developments in the medical device area. The company is now led by a 100% medical device CEO. They have a core market in hospital monitoring with some extensions into wearables. What direction they go in digital health will play out over this year and next.  

Update 30 April: The main website (masimo.com) has been ‘down’ for two days–unusual–while the ‘shop’ pages are still up but not really working. And their W1 watch is no longer for sale as ‘coming soon’. What is afoot?

Masimo update: SEC announces investigation of RTW Investments and role in proxy war voting

December 6, 2024 | by

The Securities and Exchange Commission comes knocking on RTW Investments’ door…and they have no sense of humor. Though the proxy war is over now for two months and Politan Capital Management is firmly in control, with losing founder Joe Kiani departing in a classic ‘you’re fired/I quit’ scenario that’s dissolved in a flurry of lawsuits from New York to California [TTA 15 Nov], the next shoe dropping can land Kiani and his ally Roderick Wong of RTW into some extremely hot soup, to strain two metaphors.

The SEC is now investigating the “empty voting” scheme apparently used by Kiani’s side in the proxy war. Masimo had already sued Kiani and RTW in the US District Court for the Southern District of New York charging that they used empty voting to manipulate the shareholder vote in favor of Kiani. Masimo is claiming that this action rigged 19% of the vote under Kiani’s and allies’ control. As noted in our November article, empty voting is done through put options or by selling the shares after the record date but before the shareholder meeting. It’s a way for an investor to build up share control and sway the outcome of a shareholder vote at little cost.

Strata-gee yesterday (5 Dec) reported that Bloomberg News (paywalled), during last week’s pre-Thanksgiving ‘news black hole’, broke that the SEC is probing RTW, a $6.5 billion hedge fund. Its head Roderick Wong is cooperating with the probe. He characterized it to his investors as a ‘fact-finding investigation’ and accurately characterized it as “the existence of a probe doesn’t mean laws were broken” in a message on Monday 25 November. A SEC probe is not necessarily safe as milk–see the last part of this article.

However, as Strata-gee reports, empty voting is not necessarily illegal. It is Masimo’s stating that it has evidence that Kiani and RTW conspired to form an insider group–and insider groups always ring bells for the SEC especially during a proxy fight. And where there’s the SEC, there is the Department of Justice. Witness the interest in insider trading in the form of stock sales by executives at UnitedHealth Group while a DOJ probe was happening but not public–and the resurgence of interest in UHG’s legal difficulties as part of the shocking recent events–which have caused industry executives to scrub their profiles from corporate websites. Healthcare Dive.

Why this matters to us in healthcare tech. Masimo makes consumer and professional medical devices, including smartwatches, that measure vital signs including pulse oximetry where they have a brace of patents. Their global revenue in 2023 was over $2 billion. Medical Design and Outsourcing  Last year at this time, Masimo was the David wrestling Goliath Apple to the mats with  ITC (International Trade Commission) bans on the new Apple Watch 9 and Ultra 2 last Christmas season, forcing Apple to pull them from sale and disable the feature violating the Masimo patents. Masimo continues to challenge Apple patents in court with mixed results, most recently reported in mid-October. Since the new Masimo is actively selling or spinning off its audio brands, what remains is their healthcare technology business.

A cautionary tale. This Editor, as a subscriber to Strata-gee (an audio business specialist website) after finding Editor Ted Green’s talented writing there in following the Masimo Mess, wanted to share from today’s subscriber email his description of a SEC probe at a former employer. Basically, the SEC doesn’t launch investigations unless they have good reason to do so, and they turn your company’s life upside down doing it. Mr. Wong will be holding court for a group of guests for awhile. Editor Ted has a reminiscence of when it happened at the well-known audio brand Onkyo, which was treated as a suspect in the legendary Crazy Eddie (“his prices are insaaaaane!”) retail electronics chain fraud.

Have I ever told you the story about the day, many years ago, when about 20 agents of the Securities and Exchange Commission (SEC) and the Federal Bureau of Investigation (FBI) came storming through the main entrance of Onkyo USA, marched into the President’s office (who was in a meeting that was hastily dismissed) and delivered a Search Warrant? (This is not a joke!) I learned a few things that day about the men and women of the SEC: 1) Most of them were armed with weapons that could deliver deadly force; 2) They were as serious as a heart attack; and 3) They would take office space in our facility and stay for weeks, as they forensically examined everything about our business. It turned out that this was part of an investigation into Crazy Eddie, a New York dealer that they suspected had engaged in illegal activities. As one of their top suppliers, Onkyo was considered a potential co-conspirator until we proved we weren’t…which, thankfully, we did – and they came to see us as one of the victims of Eddie Antar’s scheme and NOT a partner.

No apologies rendered, I’d guess. Or payback for the sandwiches and coffee.

Breaking: Walgreens considering sale of entire stake in VillageMD

August 8, 2024 | by | 2 Comments

The other shoe just dropped. Walgreens Boots Alliance filed today (7 August) Form 8-K with the Securities and Exchange Commission (SEC) that confirms that they are considering a VillageMD sale. On page 2, Walgreens is considering the “sale of all or part of the VillageMD businesses, possible restructuring options and other strategic opportunities.”

The broad reason why is that VillageMD has “substantial ongoing and expected future cash requirements”. The specific event is VillageMD’s default as of 2 August on the VillageMD Secured Loan, a senior secured term loan and credit facility amounting to $2.25 billion. Currently (6 August), the loan is in a forbearance agreement while the companies work out terms. The 8-K also reiterates that Walgreens “is actively engaged in discussions with VillageMD’s stakeholders and other third parties with respect to the future of its investment in VillageMD”.

None of this should be surprising given recent statements made by CEO Tim Wentworth on the dismal Q3 earnings call [TTA 2 July], disclosing that Walgreens plans to lower its Village MD ownership below a majority holding (currently 63%). This signaled a partial sale at least–and that Walgreens was giving up on VillageMD as an integral part of the company. Between the direct investment of $5.3 billion and subsidizing Village MD’s purchase of Summit Health/CityMD with an additional $3.5 billion plus development costs, the Village MD Money Pit has disappeared roughly $10 billion of Walgreens’ fisc. Closing 160 locations did not, and could not, unsink this ship. While VillageMD is not the only dark spot for Walgreens’ business (retail is crashing, pharmacy is going soft), the plunging stock price has kicked off multiple shareholder class action lawsuits.[TTA 17 July]

It’s going to be tough to find any buyer at all at even a fraction of what Walgreens invested. An industry analyst estimated VillageMD’s 2023 losses at $800 million last April. WBA took a writedown last quarter, a $12.4 billion non-cash impairment charge related to VillageMD goodwill. Cigna also wrote off $1.8 billion of its 2022 $2.2 billion investment which gave it a ‘in the teens’ share [TTA 2 May]. Even CVS is trying to amortize its $10.6 billion buy of its own Money Pit–much smaller Oak Street Health–by finding a joint venture private equity partner [TTA 29 May].

This filing, coupled by the announcement of a third sale of Cencora stock to generate cash [TTA 7 Aug], points to no end in sight of Walgreens’ troubles. The SEC filing took place after markets closed; investors can expect a very down morning in an unstable market. Crain’s Chicago Business, Forbes 

Mid-week roundup: Pear Therapeutics’ Chapter 11; Workit Health pinkslips 100; Outcome Health principals convicted of $1B fraud

April 13, 2023 | by

Pear Therapeutics ran out of runway and is in the drink. On Friday, CEO Corey McCann announced in a post on LinkedIn that the company filed for Chapter 11 bankruptcy and has laid off 170 employees, including him. Dr. McCann will continue on the board and as a compensated consultant, while chief operating and financial officer Christopher D.T. Guiffre will remain through the Chapter 11 process along with about 15 employees to manage the asset sale process, limited operations, and transition on behalf of the debtors.

According to their Securities & Exchange Commission (SEC) 8-K filing, terminated employees were paid through April 7, 2023, received two weeks’ salary as severance, and were asked to sign a separation agreement, which includes a general release of claims against the company resulting in a $1.2 million charge.

Only last month, Pear announced that it was exploring ‘strategic alternatives’ including a sale or being acquired. According to the release, the debtors are still seeking a sale of the whole business or to part out specific assets. Now such sales and the bidding process must be approved by the US Bankruptcy Court in Delaware. Release  The sale is anticipated for May.

Another behavioral health casualty in a model that proved unworkable. Pear developed and marketed Prescription Digital Therapeutics (PDTs) concentrated in behavioral health and substance use including opioid use disorder. While these seemed to be accepted by providers, patients, and some payers, payment didn’t materialize from the last, according to Dr. McCann’s LinkedIn post. According to Forbes, “There were more than 45,000 prescriptions written for Pear’s products in 2022, but only around half were filled and the company was able to collect payment for only 41% of those.” The other factors were price and reimbursement. Pear’s products averaged $1,195, which took them out of private payment. Only a limited number of commercial insurers and Medicaid plans would pay for them. Medicare did not. In 2022, Pear reported an operating loss of $123.4 million on $12.7 million in revenue, which doesn’t fly in 2023.

This is quite a change from the heady days of 2021, when Pear went public on Nasdaq via a SPAC in December, raising about $175 million in additional funding. A sign of trouble was that the raise was far less than the anticipated $400 million. At that time, Pear was valued at about $1.6 billion. Prior to the SPAC, they had raised about $284 million through Series D funding (Crunchbase)  Mobihealthnews, MedCityNews

Another virtual behavioral health company facing loss of business is Workit Health, This is due to the Drug Enforcement Administration’s (DEA) planned return to the in-person visit requirement for Schedule III-V non-narcotic controlled medications. Workit is a virtual therapy/treatment company for alcohol, stimulant, and opioid abuse, a crowded field. The company, rationally, is cutting 100 staff in anticipation of a drop in activity. To date, it has over $130 million in funding through a Series C, not a lot.  Behavioral Health Business  Also TTA 15 March on the DEA rule debate

Outcome Health–the other late 2010’s scandal after Theranos–had its denouement in a Federal court in Chicago yesterday (11 April). Convicted of $1 billion in fraud were:

  • Rishi Shah, 37, the co-founder and former CEO of Outcome Health: five counts of mail fraud, 10 counts of wire fraud, two counts of bank fraud, and two counts of money laundering
  • Shradha Agarwal, 37, the former president of Outcome: five counts of mail fraud, eight counts of wire fraud, and two counts of bank fraud
  • Brad Purdy, 33, former chief operating officer and chief financial officer: five counts of mail fraud, five counts of wire fraud, two counts of bank fraud, and one count of false statements to a financial institution

Each count carries specific maximums of between 10 to 30 years which are usually served concurrently. Sentencing for the three executives and for three other employees who had pleaded guilty to lesser charges will be at a date to be determined. SEC charges are pending against the executives, along with Ashik Desai, former chief growth officer, who testified against his former bosses in the criminal trial and was one of the three who pleaded guilty.

Outcome delivered patient education on screens in doctor’s offices and circa 2016 was one of the hottest companies in Chicago. During the pandemic, it merged with PatientPoint. Their problem was inflating their ad delivery numbers to their sponsors such as Pfizer, Biogen, and Sanofi. This puffery included third-party analyses of the ads’ effectiveness, e.g. for prescriptions written. This was exposed by the Wall Street Journal in October 2017. Advertiser makegoods and clawbacks from lenders in the millions resulted. TTA 29 Jan 2018   But the executive crew above plus the other three employees concealed the under-delivery problem, faked revenue numbers, and presented them for debt financing plus equity funding in 2016-17 that rewarded them richly–thus the Federal fraud charges. Mobihealthnews, FierceHealthcare, DOJ release  TTA’s coverage from that time here

Let’s hope for more cheerful news out of HIMSS next week.

The Theranos Story, ch. 71: Holmes appears in court, lawyers argue celebrity, lavish lifestyle, Silicon Valley ethics

May 8, 2021 | by

After 15 months, Elizabeth Holmes puts in her Day in Court. Last Tuesday’s and Wednesday’s hearings in US District Court in San Jose were not virtual, but in court–and with Ms. Holmes present. The arguments between counsel were about what would be admissible; the relevance of her lifestyle (fine dining, houses, private jets), her wealth, spending, and celebrity to the charges of criminal fraud, first of hundreds of millions of dollars by investors plus patients and doctors with false claims that the Theranos labs actually gave accurate readings.

The defense argued that admitting information on the lifestyle and spending behavior would be inflammatory and prejudicial to the jury. The travel, the perks, the company-paid-for services were there because she was traveling on company business. Her stock was never sold and her salary at $200,000 to $390,000 (per SEC) was actually low for her peer group. To a certain degree, Judge Edward Davila agreed with the defense. Being in Silicon Valley, home of tech high flyers and Sand Road investors, Judge Davila said to the prosecution, “It seems like that’s designed to engage a class conversation amongst the jurors which I think you’d agree would be a little dangerous. What’s the value of, ‘Did she stay at a Four Seasons versus a Motel 6?” The prosecution countered that information regarding the increasing value of the stock and Holmes’ billionaire lifestyle largely funded by the company, more so than her salary, is relevant to the continuing fraud. “The perks that she is enjoying greatly reduce the pressure on her to cash in, sell stock and make more money.” And, one could say, to come clean and end the fraud around their technology.

According to the Mercury News, Judge Davila said he would rule on the dispute over lifestyle and compensation evidence later. The trial is scheduled to start 31 August. CNBC video, 5 May, 6 May  

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

April 7, 2021 | by

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.

‘Neoinsurer’ Oscar Health goes for $100 million IPO; Clover Health’s big SPAC under SEC microscope

February 9, 2021 | by

Oscar Health, one of a number of US ‘insurtech’ or ‘neoinsurance’ private health insurance companies that have nipped at the heels of the Big 9, announced late Friday an IPO on the NYSE. The number of shares and their value is not on the SEC S-1 filing but the estimate of the raise is $100 million. Timing is not disclosed but rumored to be by March or early Q2. The offering is underwritten by Goldman Sachs, Morgan Stanley, and Allen and Company.

Oscar was one of the first to offer members apps, telehealth, and fitness trackers–revolutionary back in 2012 but routine now. Expanding beyond its original base of individual health insurance coverage, it now offers Medicare Advantage and small group coverage in 18 states to over 500,000 members. Oscar remains a virtual-first platform with the majority of its members in Florida, Texas, and California. Oscar makes much of member engagement and its partnerships; 47 percent of its overall subscribing membership and 44 percent of its 55-and-up subscribers are monthly active users. Oscar has also partnered with Cleveland Clinic and other larger insurers like Cigna. 

Financing for Oscar to date is over $1.5 bn. It has tidily grown in geographic coverage, members, and revenue–$1.67 billion in 2020 and $1.04 billion in 2019–no simple feat against the Big 9. Oscar’s problem is profitability–operating losses grew proportionately, $402.3 million (+56% from $259.4 million). Operating expenses also grew by 16 percent. TechCrunch gives additional crunch in the financial analysis (article in part, full paid access). Mobihealthnews

Oscar is one of a few health-tech heavy survivors of insurance companies that bloomed like flowers–and wilted–during and post-Obamacare. Clover Health, which thrived in a slice of the Medicare Advantage market, went the SPAC (blank check) route 8 January with Social Capital Hedosophia Holdings. Now with an enterprise value of approximately $3.7 billion, the SPAC indeed put Clover in the clover [TTA 14 Jan].

But perhaps short-lived. Clover’s SPAC is now being scrutinized by the SEC based on last week’s explosive charges by short-seller maven Hindenburg Research (!). Hindenburg’s research report alleges that Clover “lured retail investors into a broken business” by not disclosing a Department of Justice (DOJ) investigation that started (at least) last fall. Clover countered that the investigation is “routine” since Clover is in the Medicare business. Thus, it was not disclosed by Clover to investors as ‘non-material’. DOJ investigations are far more serious than CMS fines for compliance violations, which are not uncommon. Back in 2016, Clover was fined just over $106,000 by CMS on misleading marketing practices.

In short, DOJ investigations are never routine. They usually are the start point for enhanced claims scrutiny and a concatenation of charges, as WellCare, then a scrappy upstart insurer, found out over six agonizing years, 2006-2012, that were serious enough to send much of top management to Club Fed.  The Hindenburg paper (linked above) details other business practices that if true, are dodgy at best and fuel for further investigations.

The SEC notice of investigation was disclosed by Clover last Friday evening, usually a good time to disclose Bad News. This SPAC may have feet of clay.  PYMNTS.com, CNBC

News roundup, lockdown edition: Oscar Health’s $140M raise, IPO filing; Centene’s Diameter Health investment; Abbott’s telehealth-guided COVID antigen test

December 23, 2020 | by

Before we break for the Christmas and New Year’s festive season, though most of us are partially or fully locked down for travel and get-togethers, binge-watching the telly for comfort, a few items of interest–we’ll keep it short:

An Oscar Health Double Header. Not only did this relatively new payer in the individual, small group, and Medicare Advantage markets gain a $140 million funding round last week, adding to a $225 million raise in June (Fierce Healthcare), but they quietly filed their S-1 registration with the US Securities and Exchange Commission (SEC) to go public on Monday (Healthcare Dive, Oscar release). Since their founding in 2012, the company has raised $1.6 bn in 10 rounds. The fresh funding will go towards 19 new markets and four new states in 2021, adding to their current 18 states and 211 counties. 

Speaking of payers getting into other lines of business, Centene Corporation, which has Medicare plans with different brands in all 50 states, seems to be moving in a different direction with some recent acquisitions and investments. Centene was the lead investor in an $18 million Series B round for Diameter Health, an enterprise data interoperability developer. Optum Ventures, LRVHealth, Connecticut Innovations, and Activate Venture Partners also participated. Fierce Healthcare Centene recently finalized their acquisition of Apixio (AI-assisted clinical data mining of unstructured data) [TTA 14 Nov] and is acquiring Pantherx, a specialty pharmacy focused on orphan medications and rare diseases, to blend into their Envolve Pharmacy Solutions unit. It does appear that Centene is moving into the UnitedHealthcare/Optum model of dividing services and innovations which can be sold to third parties (Optum) from their health plan and pharmacy businesses (UHC), which may be less profitable in the next few years.

An antigen test for COVID-19 with a telehealth spin is Abbott Pharmaceuticals’ BinaxNOW 15-minute antigen test. It is the first at home, telehealth guided test to get an FDA emergency use authorization (EUA). The Ag Card Home Test requires a prescription and used telehealth to guide users through the sample self-collection process, then to help them read and understand their results. MedTech Dive  It was followed up this week by Quidel’s EUA for a dipstick-style collection with a reading in minutes, similar to that of a pregnancy test, but is only cleared for healthcare settings for now. MedTech Dive

Above: Rockefeller Center, 2011. This year’s tree was mangy and the decorations leading to the plaza scarce.

Outcome Health’s Desai reaches settlement with DOJ, SEC

February 7, 2020 | by

Ashik Desai, the former chief growth officer of point-of-care advertising firm Outcome Health, settled the charges against him brought in Federal court by the Securities and Exchange Commission. The filing was on 4 February. Monetary relief and/or penalties against him will be disclosed at a later date.

Last month, Mr. Desai pleaded guilty to the charges and announced cooperation with the authorities on the criminal charges of securities fraud related to Outcome Health’s capital raises of about $1 bn during 2011 into 2017. Similarly, his former analysts Kathryn Choi and Oliver Han did the same at the end of January.

Remaining are the senior executives who have all entered pleas of  ‘not guilty’: founders Rishi Shah and Shradha Agarwal, both of Chicago, and Brad Purdy, their former COO and CFO, all in their 30s. All of them blame Mr. Desai, who is presently 26 and started at Outcome Health as an intern.  Pass the popcorn for a dramatic tale of complex and multi-layered fraud, likely in the spring. Becker’s Health IT and CIO Report, Chicago Tribune  Also TTA 17 Dec and 3 Dec

“There were practices going on there that were wrong”: Outcome Health’s Desai pleads guilty, cooperates with DOJ.

December 12, 2019 | by

Perhaps the smartest move, under really, truly bad circumstances. Ashik Desai, the former executive vice president of business operations/chief growth officer of point-of-care health information/advertising company Outcome Health, ‘copped a plea’ this past Monday to felony wire fraud charges. According to the Chicago Tribune, Assistant US Attorney Matthew Madden told Judge Thomas M. Durkin of the Northern District of Illinois Federal Court in Chicago that Mr. Desai is cooperating with the investigation. “When I was at Outcome Health, there were practices going on there that were wrong,” Mr. Desai said, understatedly, during his court appearance Monday. “I participated in those practices that ended up defrauding Outcome’s customers.”

According to the article and other sources (WTTW), Mr. Desai is only 26; he started at Outcome as an intern when it was still Context Media and departed in 2017. With continued cooperation, the prosecution is recommending only 10 years in prison, half of what a conviction might bring at the statutory maximum of 20 years. He was released on bond and surrendered his passport.

The multiple and most serious charges in the indictment are for the two founders, Rishi Shah and Shradha Agarwal, both of Chicago, and Brad Purdy, their former COO and CFO, all in their early 30s. These are criminal charges of fraud relating to their capital raises of about $1 bn during 2011 into 2017, deceiving their investors, lenders, and their own auditors for profit and misrepresenting to advertisers their delivery performance.

On Monday 9 December, Mr. Purdy pleaded not guilty to six counts each of mail fraud and wire fraud, two counts of bank fraud and one count of making false statements to a financial institution. His counsel, not unexpectedly but amusingly for those of us who are experienced in the corporate pecking order and what exactly a CFO is responsible for, stated: “Ashik Desai and several of his underlings committed a massive fraud. The evidence will show Brad Purdy was not part of that fraud,” he said. “Evidence is going to show Ashik Desai repeatedly lied to Brad and others to conceal his fraud from people like Brad.” Mr. Purdy also was released on bond and surrendered his passport.

Two of those underlings, Kathryn Choi and Oliver Han, pleaded not guilty on Thursday 5 December to their respective charges of wire fraud. They face five years maximum if convicted. In this Editor’s opinion, they were indicted to bring forth additional information to buttress the major charges on Mr. Desai and the three top executives. As ‘small fry’ with at most a little profit sharing, they are sideshows–easy to pressure. They may truly spill the beans if they and their counsel sense that things are going badly–if they have any more beans to spill. 

Mr. Shah and Ms. Agarwal are scheduled to appear in court next Monday, 16 December. They have previously stated that they will plead not guilty (FiercePharma). Flight risk is undoubtedly a concern for the prosecution regarding Ms. Agarwal. According to this Refinery29  interview from 2017, Ms. Agarwal is an Indian citizen and, while a long-time legal resident, not a naturalized American. Mr. Shah was born in the US. This cautionary Tale of the Unicorn, told in the Chicago Way, warns us all to be careful of what we see, are asked to do, sign on to–and sign off on.

SEC, DOJ charges Outcome Health founders Shah and Agarwal, others, with $487 million fraud, 26 counts of indictment (updated)

December 3, 2019 | by

All the points of information here. While we here in the US were enjoying our Thanksgiving feasts of turkey, steak, lobster, and lasagna, Outcome Health founders former Chief Executive Rishi Shah, former President Shradha Agarwal, and former executives Brad Purdy (COO/CFO), and Executive VP Ashik Desai, were being served a vastly different dish on 25 November. Underreported in the run-up to the holiday were two major legal actions against these individuals:

  • SEC charges of $487 million in investor fraud by “misrepresent(ing) the company’s business successes while raising hundreds of millions of dollars from unsuspecting investors”, billing clients (primarily pharmaceutical companies) for ads that never ran in medical offices, and manipulating third-party studies to make the company’s ad delivery look more effective than it actually was to create the impression of meteoric growth. The falsification trail was such that even they had trouble matching up their claims versus actual in their ‘selling of futures’.
  • 26 counts from a Department of Justice grand jury indictment on criminal charges of fraud relating to their capital raises of about $1 bn during 2011 into 2017 and their business practices. The indictment alleges deception of their investors, lenders, and their own auditors for profit and misrepresenting to advertisers their delivery of actual advertising in doctors’ offices which they may or may not have had, in extreme and additional detail to the SEC complaint. Arraignments for the defendants started on Tuesday 3 Dec.

Two young analysts, Kathryn Choi and Oliver Han, reported to Mr. Desai and are being charged with wire fraud. They are alleged to have created statements to deceive company auditors and providing advertisers with false patient engagement metrics on Outcome Health’s tablets. Both were hired in 2014 and placed on leave in late 2017. This action is highly unusual in reaching down to this level and naming two young subordinates.

One-time unicorn Outcome Health is, of course, still in business, selling advertising and educational materials at point-of-care, having settled with the SEC in October for $70 million in advertiser make-goods [TTA 31 Oct]. It also restructured/recapitalized in May by selling a majority stake to private equity firm Littlejohn & Co. In coming down to earth, the posturing of the executives should be less than two years ago, when Outcome was going to build its own Chicago office building–but this early October article from FiercePharma hardly moderates the healthcare change-agent hype for what is really POC advertising to inform and mostly distract patients who wait…and wait.

Additional information:

In this Editor’s view, once both SEC and DOJ are double-teamed on an indictment, avoiding Club Fed will be extremely difficult for the four main executives. (One assumes their US passports have been confiscated.) There is a huge amount of financial fraud leading to losses by some powerful companies. Even when losses are small, the Feds get their man most of the time. This Editor had a view of this at a distance, as the CEO of a company where she formerly worked was convicted of financial fraud in an enterprise formed after that company. He and his accomplice are serving five years in a Federal prison. Not even Elizabeth Holmes is facing the full fury of both Federal agencies, and she’s facing only nine counts in her indictment. 

The Theranos Story, ch. 61: Elizabeth Holmes as legal deadbeat

October 9, 2019 | by

Did her lawyers expect otherwise? This weekend’s news of Elizabeth Holmes’ legal team at Cooley LLP withdrawing their representation services due to non-payment should not have caused much surprise. Cooley’s attorney team petitioned the court to withdraw from the case, stating that “Ms. Holmes has not paid Cooley for any of its work as her counsel of record in this action for more than a year.”

Cooley was representing Ms. Holmes in a class-action civil suit in Phoenix brought against her, former Theranos president Sunny Balwani, and Walgreens, charging fraud and medical battery. (When they withdraw, will she seek public representation based on poverty?)

Perhaps Ms. Holmes is the one who’s setting priorities, as the civil suit would be for monetary damages, and no money means there will be none for the plaintiffs to collect. The DOJ charges are a different story. She is on the hook for nine counts of wire fraud and two counts of conspiracy related to her actions at Theranos. Conviction on these could send her to Club Fed for 20 years plus a fine of $250,000 plus restitution for each charge. [TTA 16 June]. 

Last Wednesday, both Ms. Holmes and lawyers for her and Mr. Balwani were in Federal court in San Jose on the wire fraud and conspiracy charges, demanding that the government release documents from the Food and Drug Administration (FDA) and the Centers for Medicare and Medicaid Services (CMS) that allegedly would clear them. After an hour, Judge Davila set 4 November as the next hearing date. 

Defending oneself does not come cheap, but after your company’s value crashes to $0 from $9bn, one might be looking for change in your Roche-Bobois couch and wondering if your little black Silicon Valley-entrepreneur formal pantsuit/white shirt ensembles will last through the trial. CNBC 2 Oct, CNBC 4 Oct, Fox Business, Business Insider

The Theranos Story, ch. 58: with HBO and ABC, let the mythmaking and psychiatric profiling begin! (updated)

February 20, 2019 | by

This Editor thought that her next articles about Theranos would be trial coverage. There are court dates pending for Elizabeth Holmes and Not-So-Sunny Balwani–with the DOJ for 11 counts of wire fraud [TTA 16 June] and, for Mr. Balwani, with the SEC on (civil) securities fraud [TTA 15 March]. 

Instead, Theranos hits the headlines again. On 18 March, there’s the debut of an HBO documentary on Theranos. Titled The Inventor: Out For Blood In Silicon Valley (YouTube preview), we can treat ourselves once again to the SteveJobs-esque presence of Ms. Holmes, down to the unnaturally deep voice, blondined hair, and wide blue eyes, unpacking the deception and fraud that was part of the company from early days. But that’s not all! There’s a six-part ABC Radio ‘Nightline’ docu-podcast that started on 23 Jan and airs in six parts through February, which includes audio of depositions taken of board members, whistleblower Tyler Shultz, and patients affected by bad test results. (This Editor will give a listen on this alone.) Episode 5 and links to 1-4 are here via Yahoo.

On websites, we’re regaled with rehashes. The articles range from Teasing the Doc to Where The Ex (Balwani) Is Now (they don’t know) to What Is Her Net Worth (not $4.6 bn). There’s even a flurry of sensational podcasts and videos on YouTube–just Google them. 

Fascinating Fraud. There’s fascination in The Long Con perpetrated by the principals, and less examined, our tendency to Want To Believe. Many of us like legal procedurals and the drama inherent in them (the eternal appeal of the long-running Law & Order in several countries.) Let’s face it, there’s a substantial dollop of schadenfreude mixed in.

What we are witnessing is the building of a myth, increasingly divorced from the real world where it happened, and not improbably or with superpowers. 

Where it goes a little off the cliff. There is a curious article in Forbes that is written by a contributor who writes and teaches courses on stocks and entrepreneurship. He interviewed a former neighbor of Ms. Holmes, Richard Fuisz, MD. It turns out this psychiatrist, inventor, and former CIA asset knew her in childhood. The families were friends and Dr. Fuisz helped out her father when he hit a bad patch. There’s some sketchy profiling in this article, but it does make a fair attempt to get to the heart of the forces that put the gap in Elizabeth Holmes’ ethical makeup, including the Big Steal of Ian Gibbons’ IP. His position is somewhat complicated by a patent dispute (settled) between Dr. Fuisz & Son and Theranos. He’s still hammering on at it on Twitter (@rfuisz).

What’s missing? Much credit to the estimable John Carreyrou, who broke the story in the Wall Street Journal and got his livelihood (and perhaps a few other things) threatened a few times by Tough Guy Lawyer David Boies.

(Updated) At least it is here in a Vanity Fair article on the Last Days of Theranos, where they had to move to downscale Newark (California) and Ms. Holmes’ dog pooped where he wanted to poop. Her ‘persecution’ doesn’t seem to faze her from living in SF, frequenting cafes with said dog, and her new romance with a ‘younger hospitality heir’–a far cry from her former employees who wear the months or years of their lives at Theranos like a Scarlet Letter as they look for work and loose cash in the sofa.

We’ve gotten to the point where the hard business analysis ends and the looser parts of psychologizing begins, as we attempt to understand why. Beyond a certain point, does why matter when damage to real patients has been done? Collateral damage persists in funding of startups and for entrepreneurial women in health tech.

For this Editor, she looks forward to the warmer weather, when it’s expected when the Legal Action–and reality–resumes. 

The Theranos Story, ch. 54: cue up ‘Tainted Love’ in the courtroom

August 2, 2018 | by
[grow_thumb image=”https://telecareaware.com/wp-content/uploads/2018/07/Rock-1-crop-2.jpg” thumb_width=”150″ /]Tainted Love, Labs, and Lucre Indeed. Drop the needle on the Gloria Jones version from 1964 or the Soft Cell version from 1981.…

Consider that the very fates of Ms. Elizabeth Holmes, the now not-so-Sunny Balwani, and the formerly $9 bn Unicorn Theranos may hinge on the nature of their personal relationship and its influence on the governance of the company.

There are two legal actions against the company and the two principals, one by the DOJ for criminal fraud [TTA 16 June] and by the SEC on (civil) securities fraud [TTA 15 March].  Both are out on $500,000 bail on the DOJ charges. The possibilities on the latter can be up to 20 years in Club Fed, plus $250,000 in fines and clawing back of investor funds, if any can be found.

While Ms. Holmes settled with the SEC, paying a fine and exiting the company, Mr. Balwani did not and is fighting the charges, though this declaration was made before the DOJ charges.

Bloomberg Markets brings up an interesting set of dynamics which can play well with potential jurors and make the prosecution’s case far more convincing for a Northern California jury. To wit, in 2009 when she started running out of money, Ms. Holmes turned to Mr. Balwani, her boyfriend, for a $12 million line of credit. In return, he became president and COO. The nature of their relationship was kept strictly hush-hush to the board and investors. Secrecy was ratcheted up at the company and management started to break down. And the timing: a week after Mr. Balwani left, the news of bad patient test results and problems with their lab started to break big.

Jurors, even in Silicon Valley, love drama and personal intrigue–especially the type that underscores deception and $900 million in fraud perpetrated by a Stanford dropout who clumsily attempted to channel Saint Jobs and a somewhat schlubby dude who Should Have Known Better. Far more than gullible corporate suits at Walgreens and hedge funds….add to it the personal stories of patients harmed by bad Theranos tests and you get an emotional story worthy of Law & Order.

Do expect Ms. Holmes to bring up her Saint Joan if not a female Saint Sebastian analogy. Burning at the stake versus being shot full of arrows are too memorable images which she’ll try out. Add a #MeToo spin of a young woman coerced by an older man–a tale of at least tit-for-tat to get the $12 million. 

The rompin’ soap opera is likely to start next year. Stay tuned…. 

The Theranos Story, ch. 52: How Elizabeth Holmes became ‘healthcare’s most reviled’–HISTalk’s review of ‘Bad Blood’

July 5, 2018 | by
[grow_thumb image=”https://telecareaware.com/wp-content/uploads/2018/07/holmes-barbie-doll-1.jpg” thumb_width=”125″ /]A Must Read, even if you don’t have time for the book. During the brief Independence Day holiday, this Editor caught up with HISTalk’s review of John Carreyrou’s ‘Bad Blood’, his evisceration of the Fraud That Was Theranos and The Utter Fraud That Is Elizabeth Holmes. Even if you’ve read the book, it’s both a lively recounting of how the scam developed and the willingness–nay, eagerness!–of supposedly savvy people and companies to be duped. The reviewer also reveals that Mr. Carreyrou wasn’t the first to raise questions about Theranos after raves in the press and kudos from the prestigious likes of Eric Topol. Mr. Carreyrou’s first article was in October 2015 [TTA 16 Oct 15] whereas Kevin Loria wrote the first exposé in Business Insider on 25 April 15 which raised all the fundamental questions which Theranos spun, hyped, or otherwise ignored–and Mr. Carreyrou eventually answered. (Our blow by blow, from him and other sources, is here.)

The review also picks out from the book the scabrous bits of Ms. Holmes’ delusions; her makeover to become the blond Aryan female Steve Jobs mit Margaret Keane-ish waif eyes–something she took far too literally; the affair between her and Sunny Balwani, certainly in violation of the usual ethics–and her Hitler in the Bunker, April ’45 behavior as Theranos collapsed around her. 

The review concludes by telling the healthcare community something we need said plainly, often, and written in 50-foot letters:

Theranos is a good reminder to healthcare dabblers. Your customer is the patient, not your investors or partners. You can’t just throw product at the wall and see what sticks when your technology is used to diagnose, treat, or manage disease. Your inevitable mistakes could kill someone. Your startup hubris isn’t welcome here and it will be recalled with great glee when you slink away with tail between legs. Have your self-proclaimed innovation and disruption reviewed by someone who knows what they’re talking about before trotting out your hockey-stick growth chart. And investors, company board members, and government officials, you might be the only thing standing between a patient in need and glitzy, profitable technology that might kill them even as a high-powered founder and an army of lawyers try to make you look the other way.

In other words, what you (the innovator, the investor) is holding is not a patient’s watch, it could be his heart, lungs, or pancreas. (Musical interlude: ‘Be Careful, It’s My Heart’)

The Theranos Effect is real in terms of investment in small companies out there on the ‘bleeding edge’. The cooling is mostly salutory, and we’ve been seeing it since late last year (see here). But…will we remember after it wears off, after the fines are collected, the prison time is served?