Digital chronic condition management company DarioHealth is buying Twill to build out its mental health capabilities and boost revenue.
The company said the deal creates a comprehensive digital health offering to address mental well-being, maternal health and the costliest chronic conditions.
The transaction provides immediate scale, with three of the top eight national health plans, multiple Fortune 100 employers and several major pharmaceutical companies as customers, DarioHealth claims.
DarioHealth will pay $10 million in cash plus stock valued at over $20 million at the end of Tuesday trading.
The acquisition of Twill is expected to nearly double pro forma 2023 revenue, and gross margins are expected to reach approximately 80% to 85% by 2025, DarioHealth executives said.
The deal comes amid increased consolidation among digital health players.
"The Twill acquisition is an incredible opportunity to bring together our complementary solutions and create an unrivaled platform for the next generation of consumer-centric digital health. The addition of Twill instantly boosts revenue and margins, leveraging a robust SaaS-like model to fuel expected rapid growth and accelerating profitability. We are confident in our ability to integrate Twill and its employees and operations, as we have a track record of integrating previously acquired businesses," said Erez Raphael, CEO of DarioHealth, in a statement.
Along with the acquisition, the company priced a $22.4 million private placement of convertible private stock.
The expected doubling of pro forma revenues in 2023 is based on extrapolated, pro forma revenues through the nine months ended Sept. 30, 2023, of $30.5 million, comprised of $16.7 million in DarioHealth revenues and $13.8 million in Twill revenues.
DarioHealth brought in $27.7 million in revenue in 2022, up 35% over $20.5 million in 2021.
Founded in 2011, DarioHealth provides artificial-intelligence-powered digital health solutions for conditions including diabetes, hypertension, weight management, musculoskeletal and behavioral health, the latter two of which were added to its platform just last year. It's the company's first acquisition since 2021, when it bought three digital health companies—wayForward, MSK solution Upright and Physimax Technologies.
DarioHealth provides its solutions to health plans and other payers and self-insured employers. It also inked a strategic deal with Sanofi to accelerate the commercial reach of its digital therapeutics.
Wellness app Twill, previously named Happify Health, raised $73 million in 2021, and, a year later, the company pivoted and rebranded as a tech infrastructure company. Its Sequences platform is a digital back end that ties together a health plan, employer or pharma company's various digital point solutions to create comprehensive solutions for patient care journeys based on condition or patient population, Jessica DaMassa with WTF Health wrote in The Health Care Blog.
Twill says it works with three of the five largest U.S. health plans, more than half of the top 20 global pharmaceutical companies and three of the five largest global tech companies. The company says it covers 18 million lives.
DarioHealth and Twill said the acquisition is expected to accelerate market penetration and drive greater sales opportunities as a direct result of the breadth of combined solutions. The companies currently have very little overlap, which opens up an opportunity to increase revenue per customer through cross-selling into both companies' existing customer bases, executives said.
DarioHealth expects to be able to realize cost synergies immediately and expects to reach nearly 30% in annualized cost synergies within two years following the close of the transaction. The combination of revenue scale, expected improved gross margins and significant cost synergies are expected to accelerate the path to profitability within the second year post-acquisition, executives said.
"The market is demanding more conditions from less vendors to reduce point solution fatigue and the high cost of managing multiple vendors. The combination of our solutions provides the single solution the market wants and expands Dario's artificial intelligence and solution navigation capabilities, including immediate enhancements to Dario's current GLP-1 solution," said Rick Anderson, president of DarioHealth, in a statement.
"It's not just a goal, it's a pathway," said Tomer Ben-Kiki, Twill's co-founder and CEO, in a statement. "This shared vision fuels our powerful union, transforming data into a vibrant tapestry of individual health stories. Imagine three million threads of the combined company's data, interwoven with rich insights and diverse perspectives, brought to life by our AI expertise. This tapestry reveals unprecedented depth, predicting needs and optimizing treatment for every person."