WTM Bulletin #7: From Wall Street to Care Street. Latest news in Health Care VC, PE, and care delivery. Innovation. Transformation.
As a former Citigroup investment banker and economist turn Medical Doctor, entrepreneur, consultant, and investor, I see health care evolve and transform through a very unique lens.
Sitting at the intersection of health, technology, and business with functional roles as an executive in strategy, partnerships, and innovation, I’m eager to share my weekly findings with you, my growing worldwide audience.
6 links = 3 headlines. 2 startup or VC/PE firm news. 1 closing thought. Or some combination there of. You can also find me on twitter @Mahek_MD .
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Headlines
CVS removes purchase limit on Plan B pills, says sales have ‘returned to normal’
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Oklahoma reaches $250 million opioid settlement with drug distributors
The citizens of Oklahoma can finally have some relief. Oklahoma has reached a $250 million settlement with AmerisourceBergen Corp, Cardinal Health Inc., and McKesson Corp to resolve allegations the drug distributors contributed to the opioid epidemic. Interestingly, current CEO Melanie Nallicheri of EQRx (mentioned later as it is Arch Ventures portfolio company) was formerly Senior Vice President, Corporate Strategy and Business Development, at McKesson Distribution Solutions.
This $250 million settlement is actually more than they would have gotten if they remained on the national $26 billion settlement last year. Kudos Oklahoma.
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Aidoc, an AI Healthcare Startup, Nabs $110 Million Expansion Round
The company’s software aims to help radiologists spot serious conditions — strokes, lung clots, brain bleeds and others — more quickly with Artificial Intelligence
Having done some recent work in this area and interviewed cofounder and CEO Elad Wallach, this is very exciting news demonstrating continued execution and growth in the AI-Healthcare space. This new round of funding is aimed at allowing them to expand beyond radiology images into a platform for the entire hospital, having already penetrated via the radiology department.
Founded in 2016, the company says 12,000 doctors at 1,000 medical centers in the U.S., Europe, Israel, Brazil and Australia already use its software. This new funding will help scale in the US and gather more evidence of their benefits.
Forward thinking health systems like Novant Health will continue to embrace partners like Aidoc as it only increases efficiency and effectiveness of the radiologist and soon other clinical personnel. With 1 of every 2 diagnoses in the US depending on medical imaging, sorting out the “bread and butter” from the “needle in the haystack” that require more time and human input will be a game changer. It offers better patient care, a more satisfied radiologist, and better gathering of standard data set up for analytics to inform a health system.
Venture Capital:
ARCH Venture Partners ($7.7B AUM, 12 funds, Chicago, USA)
ARCH Venture Partners raises $3 billion fund to invest in biotech startups despite brutal stock downturn
Gutsy and impressive by ARCH to raise $3B in this market, public and private, in what I’m referring to as the Great Reset and for biotech, the Uber Great Reset… but as Matthew Harper of STAT news reports, ARCH’s Bob Nelsen and Kristina Burow are bullish on the science and where it is leading.
“There’s a lot of great companies we want to start, and a lot of great opportunities that we’re seeing percolate up out of academic institutions,” said Kristina Burow, another of the firm’s managing directors. Some of those opportunities, she said, require a level of investment that is “made easier by a fund of this size.”
And she’s correct. With $3B to deploy over the fund lifecycle, it allows biotech companies to have enough initial capital and follow on to hit milestones in the safer more nimble environment of private markets, possibly making them more attractive to strategics who have cash on hand(e.g. Pfizer, Moderna, AstraZeneca, AbbVie, etc.) because at least for the interim, the IPO market and certainly the SPAC market is closed. There were simply too many $100M SPACs in 2021, many of whom never should have gone public because they were effective pre-revenue, pre-approval, and made a lot of promises off of shaky data (Chinese only studies, etc.)
Nelsen pointed out that two of ARCH’s biggest wins — Receptos, acquired by Celgene in 2015 for $7.2 billion and Juno, acquired by Celgene for $9 billion in 2018 — were cases in which the company’s stock fell but ARCH kept its shares, eventually getting a big payoff. Celgene as many know, was acquired by Bristol-Myers Squibb for $74B in Nov 2019.
However, there are a few duds for ARCH, which held on to some shares after IPO, which differs from some other VC firms like a16z or Casdin Capital, which would typically sell the entire stake at public offering or liquidity event, to use proceeds for the next venture.
Such failures include cell therapy firm Sana Biotechnology, whose shares have fallen 76%; EQRx, which aims to lower drug prices and has seen shares fall 60% from its SPAC in 2021; and gene-editing firm Beam Therapeutics, down 70% from its 52 week high. It goes back to fundamentals, product that can get US approval with reliable data, and not a lot of promises.
But some would not see it this way. However I ask the reader, who is often the bag holder in this thriller saga. Many times it’s the retail investor and mutual fund holders (funded by your 401K, IRAs, etc).
Nelsen goes on to say “Surprisingly, we haven’t been particularly worried about our portfolio because the fundamentals are still strong.” Let’s come back in 2023 to see how they do. I know for sure: I will be right or wrong.
Unicorns in Venture Capital — an update
Where are thou Unicorns? As you’d expect a slowing of unicorn valuations but many suspect this may not last as long as anticipated once venture capitalists readjust their investment strategy to evaluate unicorns based on FCF, profitability horizon, and other metrics than purely growth + comp revenue multiple to justify a valuation. 2022 is back to fundamentals, path to profitability, burn multiple management, and a reliable repeatable growth strategy.
My definition of a tomorrow’s best VC is one that backs companies that become unicorns and nurtures them through the public markets (atypical): an empathetic advisor/investor who lends you their quality time and cash!
I don’t expect the unicorn figures to get back into the 130s but around 50 Q3, 60 Q4 2022.
Private Equity
Antitrust Authorities Take Aim at Private-Equity Healthcare Deals The FTC restricts some investments by JAB Consumer Partners
In the WSJ, FTC Chairwoman Lina Khan is scrutinizing JAB Consumer Partners for anti-competitive practices, particularly in the veterinary space: divest veterinary clinics in California and Texas following the planned $1.1 billion takeover of SAGE Veterinary Partners LLC by JAB-backed National Veterinary Associates Inc. If JAB sounds familiar to you, it should: they own Krispy Kreme Donuts and Keurig Dr Pepper, Inc. In fact, JAB is the 3rd largest non-alcoholic beverage company in the world.
Private-equity firms have invested $22.7 billion in the U.S. healthcare sector this year through May, following a record $91.5 billion of investments last year, according to PitchBook Data Inc., which tracks private-markets investments.
Closing Thought
Wearables
I really have been into wearables since the early Jawbone days. I’ve had at least 5— v1 and v2 Jawbones, an Apple Watch, a FitBit, an Amazon Halo in my collection.
What time is it? Time for you to get a wearable
Wearables are showing up in everything, from the metaverse to sleep to fitness. Behold a wearable NFT!?!
Even pet trackers and smart jewelry are gaining momentum. I still think most consumers who are on the other side of the chasm (i.e. crossing the chasm) prefer passive seamless measurement and then provide a platform or dashboard for them to access. Fashion especially ath-leisure should have it integrated into clothing. They could charge a premium, thus command more gross margin, and draw a newly informed consumer who can become educated on the benefits of effectively what is Quantified Self.
Make it simple, easy, seamless, and passive. The easiest things are the hardest to do. As Steve Jobs said:
“Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.”
I really like the second sentence above. The outcome of the hard work.
Check out CBInsights market map of the early-stage wearable companies delivering more personalized experiences to consumers here.
Disclaimer: The information presented here does not serve as investment advice. This is for informational purposes only.
Please clap below and feel free to leave a comment and feedback in the comments section below. I sit at the intersection of Wall Street. Tech. Medicine. I’m an MD with Buy-side, Sell-side, & Bedside Manner. Alumni and faculty networks from Harvard, Cornell, Baylor College of Medicine, and Rice. I’m the world’s only Doctor to work with business icons Michael Porter, Robert Kaplan, and Clay Christensen. You can find me on twitter @Mahek_MD .