DarioHealth is expanding its reach into the growing digital mental health market.
The digital therapeutics company is acquiring PsyInnovations Inc., doing business as wayForward, for $30 million. Under the agreement, DarioHealth has agreed to pay $30 million, with $25 million due at closing and a future contingent payment of up to $5 million if behavioral health revenues from the company exceed a certain threshold in 2022.
The upfront component of the purchase price will be paid by a combination of $6 million in cash and $19 million in shares of Dario common stock.
WayForward is a behavioral health digital platform that includes artificial-intelligence-enabled screening to triage and navigate members to specific interventions, digital cognitive behavioral therapy, self-directed care, coaching and access to in-person and telehealth provider visits.
The startup is currently providing its full suite of digital behavioral health services to approximately 20,000 members and 20 self-insured employers.
Approximately 20% of the population has a behavioral health need each year, and approximately 29% of people with a chronic condition have a behavioral health issue, the company said. With the addition of wayForward's solution, DarioHealth offers a multi-condition solution covering diabetes, hypertension, prediabetes, behavioral health and musculoskeletal health.
The acquisition of wayForward follows DarioHealth's acquisition of Upright Technologies for $31 million to expand into digital musculoskeletal solutions.
"Dario is a strong, flexible AI-driven platform that allows for new offerings to be seamlessly added to our open architecture. Over the last year, we have consistently stated our desire to provide a suite of best-in-class solutions for multiple chronic conditions on one platform, including behavioral health as a top priority. We are excited to deliver on our stated goals. We believe the wayForward offering and management team will be great, synergistic additions to our technology foundation," said Erez Raphael, Dario's CEO, in a statement.
2020 was the biggest year yet for the digital behavioral health market with companies raking in a record $2.4 billion in venture funding, according to Rock Health, a San Francisco-based seed and early-stage venture fund. The COVID-19 pandemic has exacerbated behavioral health conditions. In January 2021, 41% of U.S. adults reported symptoms of anxiety and/or depressive disorder, a fourfold increase from 2019.
The deal marks a broader trend in the market with increased acquisition activity as digital health companies look to broaden their capabilities. The biggest deal so far has been telehealth giant Teladoc's $18.5 billion deal to buy chronic condition management company Livongo. Also, Doctor On Demand merged with Grand Rounds this year. Last year, Omada Health scooped up virtual physical therapy company Physera for a reported $30 million to add virtual musculoskeletal care to its services.
DarioHealth reported first-quarter 2021 revenue of $3.6 million, representing growth of 73% sequentially from the fourth quarter of 2020, and 116% year over year. The company reported $7.6 million in revenue in 2020, representing flat growth from $7.56 million in 2019.
According to DarioHealth, wayForward's platform is unique in the industry in that it focuses on AI-based screening, digital tools and coaching to match members to the optimal level of care, including those who may not require care by a licensed clinical psychologist or psychiatrist, while providing access to those providers through a customer's existing network or partners' networks. This results in improved engagement and clinical outcomes, the company said.
Rather than competing with existing in-person and telehealth-based solutions, wayForward integrates with them, creating a pathway to work collaboratively with other behavioral health solutions and provider networks.
The startup has demonstrated strong member utilization and clinical outcomes, including a 48% reduction in anxiety and a 59% reduction in depression in third-party studies.
As part of the acquisition, the wayForward team, including its two founders, CEO Ritvik Singh and Navya Singh, M.D., chief clinical officer, will join the Dario team.
DarioHealth expects wayFoward to be accretive to revenue in 2021 with substantially more contribution to revenue in 2022. Post-acquisition, Dario's platform will cover six of the seven top benefit areas employers seek to address, according to a survey by Mercer.