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SPACs Come to Digital Health, Funding Sets A Record, What CIOs Want & more - The HSB Blog 10/6/20

Hims, A Direct-to-Consumer Health Company, is Going Public via SPAC

Event: (10/1) On October 1st, 2020 Hims. Inc., a direct to consumer digital healthcare company, agreed to merge with a Special Purpose Acquisition Company (SPAC) formed by Oaktree Capital Management to go public. As a result of the transaction, Hims may raise up to $280M in cash, be valued at $1.6B and trade on the NYSE under the symbol HIMS.

Description: Hims, Inc., is a direct to consumer company that sells health products targeted at Millennials. for both men’s and women’s health brands. Their focusing is on a variety of everyday issues and products such as skincare, hair-loss, sexual health and more recently primary care. Hims is fairly unique in that most of its products are sold via a monthly subscription and a high percentage (approximately 90% according to the company) is recurring. The transaction is expected to close by the end of 2020. Hims is the second digital health company to go public via a SPAC according to Fierce Healthcare, following acute care telemedicine company SOC Telemed’s July deal announced with Healthcare Merger Corp. Oaktree Acquisition Corp, is a SPAC formed by Oaktree Capital Management that went public in July with the intent of using the proceeds to make one or more acquisitions. A SPAC is a “blank-check” company that has the intention of buying or merging with one or more companies with the caveat that if the capital raised from investors is not invested within two years it must be returned to them. SPACs are also seen as an easier way for private companies to go public more rapidly and have less regulatory paperwork than the typical initial public offering (IPO) process.

Implications: SPACs are an increasingly popular way for companies, typically those that may be earlier in their lifecycle, to come public with approximately 115 SPACs raising approximately $43B through October according to Bloomberg. SPACs also have the advantage of allowing companies coming public to make financial forecasts and raise greater amounts of capital. This can be especially attractive for competitive and financial purposes in an emerging industry such as digital health. As a result, SPACs could provide an avenue for some smaller and less mature digital health companies to go public and keep pace with many of the larger players in the space who came public via IPOs. (ex: Teladoc, Amwell, Oak Street Health, One Medical, etc). [As we were going to publication Clover Heatlh agreed to go public via a SPAC in $3.7B merger with Social Capital's Hedosophia Holdings III per Bloomberg].

Q3 2020: A New Annual Record for Digital Health (already)

Event: (10/5) On October 5th, Rock Health released it’s Q3 2020 Digital Health Funding report which highlighted the surge in digital health funding so far this year. According to the report, the $4.0B that has been invested in digital healthcare companies in Q3 ‘20 means the U.S. digital healthcare companies are on pace to raise an estimated $12B this year, almost 46% higher that the record $8.2B raised in 2018. In addition, deal volumes rose nearly 22% compared to all of last year with the average deal size of $30.2B being 1 ½ times greater than the average of $19.7M seen in 2019.

Description: The report noted that while the uncertainty and changes at the beginning of COVID caused a dip in funding, “since April the ...pandemic has accelerated digital health adoption by several years”. Through the third quarter of 2020, three categories of digital health investments have gained the most investment interest: on demand healthcare services, which deliver real-time or near-time health care services, saw 48 deals with approximately $2.0B invested; so called R&D catalyst companies, that support life sciences R&D, drug discovery and clinical trial management, saw 25 deals and just over $1.3B invested, while fitness and wellness companies that support fitness, nutrition and sleep, say 21 deals and just under $1.3B has been invested. While the trends in on-demand healthcare and fitness were similar to prior history, the rise in capital allocated to R&D catalysts or the life sciences was notable as it was only the 7th most funded category in 2019 according to Rock Health.

Implications: As the pandemic drove patients and providers to seek new ways to access previously in-person services, opportunities for digital health exploded and funding followed close behind. While the levels of adoption have receded from their peaks, they are likely to remain significantly above pre-COVID levels. Latent resistance among both patients and clinicians was eventually overcome strictly as a matter of necessity and circumstance. However, as society seeks to deal with COVID longer term, digital health providers will face a more demanding business environment with providers dealing with depleted budgets, payers facing declining roles of commercially insured customers and government payrors facing increased demand for coverage amidst budget shortfalls of their own. As a result this period of easy money may be followed by a period of its own challenges including legitimization of business models, justification of economic returns and development of risk and regulatory controls that could ultimately lead to additional consolidation.

What Do CIOs Want to See from Telehealth Apps? More Than a Dozen Weigh In

Event: (9/28) A recent article from Healthcare IT News highlighted the remarkable progress of telemedicine innovations since the start of the COVID pandemic and surveyed fourteen healthcare Chief Information Officers (CIOs) on what they'd like to see from telehealth platforms in the future.

Description: People’s needs for telehealth services have skyrocketed and virtual care platforms are looking for ways to enhance their products in order to meet the needs of the consumer. Some features CIOs desire in virtual care include: remote monitoring tools tied into the telehealth app, real-time monitoring of vitals from home that can trigger immediate responses or alerts, more advanced AI bots that can be used to systemize the severity of a patient's concern, the ability to have simultaneous visits with multiple providers for one patient, voice recognition technology that transcribes what the doctor is saying into the EHR, and even using fictional characters during pediatric telehealth visits so children are more comfortable. Additional access issues that need to be addressed in virtual care settings include language barriers, difficulty navigating technology for telehealth appointments, and lack of availability of high-speed internet because of one’s physical location or economic situation.

Implication: CIOs realize there is a demand for those seeking care through telehealth platforms, as a result, they want to integrate more optimal features into virtual care platforms. As we continue to embrace digital solutions with greater use of virtual and remote care, telehealth innovations will be taken to a new level in order to deliver timeliness, efficiency, and positive patient outcomes. A patient’s digital experience should afford synchronized communication efforts in one tool, however, the usage of all elements enlisted above will be dependent upon patient choice and clinical need.

Seizure Prediction Device Can Send Mobile Alerts

Event: (9/29) Engadget released an article stating that researchers from Ben-Gurion University of Negev have developed a wearable electroencephalogram (EEG) device that can predict epileptic seizures up to an hour before the onset. The system is based on machine learning algorithms for analyzing EEG signals.

Description: The device, Epiness, uses machine learning algorithms to analyze brain activity and detect potential seizures. It then sends a warning to the smartphone connected to the device. Sufficient warnings could give patients time to prepare for an onset seizure by taking medication. Those who don’t respond well enough to anti-epileptic drugs would have a chance to remove themselves from seizure-related injuries e.g driving. The algorithm has tested 97% accurate.

Implications: Epiness would not only prompt patients to take appropriate medicine in advance to control their seizures, but it would also prevent seizure-related injuries that can occur during activities such as driving. This device is giving patients control of what is typically an unpredicted traumatic event. Warned patients can prepare for the onset event and care for themselves in a safe environment.

Six Things to Know About Telehealth Medical Malpractice Concerns

Event: (9/30) On September 29th, Bloomberg Law published an article entitled “Uptick in telehealth reveals Medical Malpractice Concerns”, addressing the issues that have arisen due to the increase in telemedicine platform usage. The article highlighted that telehealth platforms create a higher risk for data breaches and more challenges for clinicians when examining patients via digital health rather than in-person and thus must be sure to protect themselves when embracing digital health.

Description: With the surge in telehealth use during the COVID-19 pandemic, The Department of Health and Human Services has temporarily relaxed regulations under the Health Insurance Portability and Accountability Act. This allows physicians to communicate with patients on various video-conferencing platforms. This raises concerns with the malpractice risks associated with virtual care since providers are now at a higher risk for data breaches of their patient’s health information. With the inability to examine the patient in-office, misdiagnosis is possible as well as improper prescription of the patient’s medication. Providers may be held liable for breaching the standard of care if patients experience any harm during “visits”, due to negligent act or omission, miscommunication, misdiagnosis, software malfunction or other technological risks.

Implications: As a result of the rise in concern, physicians are urged to become acclimated to malpractice risks to avoid civil or criminal liability, which could ultimately lead to revocation of their license, suspension of the physician’s practice of medicine, monetary penalties, or imprisonment. The Bloomberg Law article suggests best practice for providers, which includes: 1) educating patients regarding their telehealth visit and providing informed consent that details potential risks and security measures, 2) the importance of documenting virtual visits and maintaining proper patient records to ensure confidentiality and standards of care are met, 3) becoming familiar with state laws associated with telemedicine. By following these guidelines, physicians can safely continue to use telehealth platforms and patients’ health needs can be addressed in the safest manner.


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