DarioHealth is making moves to grab a piece of the digital musculoskeletal market with the acquisition of Upright Technologies.
The digital chronic condition management company agreed to acquire Upright for $31 million with $29.5 million paid in stock and $1.5 million in cash after deducting outstanding debt and making working capital adjustments. DarioHealth will issue approximately 1.7 million shares of common stock to Upright shareholders at the closing, which is expected to take place in early February.
After the closing of the acquisition, Upright's CEO and co-founder Oded Cohen will serve as Dario's general manager of musculoskeletal product and will join Dario's board of directors.
The deal expands DarioHealth's multicondition platform into the $213 billion musculoskeletal market and creates one of the most comprehensive digital health platforms, the company said during a conference call Wednesday. Musculoskeletal conditions also have high comorbidity with the conditions DarioHealth's products already address, including diabetes and hypertension.
Upright is one of the largest digital musculoskeletal health companies with 90,000 active users, and its clinically validated solution is recommended by more than 500 clinics worldwide, said Erez Raphael, DarioHealth's CEO.
The company focuses on preventing and treating the most common musculoskeletal conditions through behavioral science, biofeedback, coaching and wearable tech.
The acquisition of Upright and the addition of its musculoskeletal solution increases the company's membership to more than 150,000 people and boosts the combined companies' 2020 full-year revenue to more than $20 million, DarioHealth executives said.
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.
The musculoskeletal space in particular is attracting major investments. Last year, Omada Health scooped up virtual physical therapy company Physera for a reported $30 million to add virtual musculoskeletal care to its services. In January, digital musculoskeletal company Hinge Health scored a $300 million series D funding round, making it one of the most valuable startups in digital health.
DarioHealth has built digital solutions for the management of diabetes and hypertension, and the integration of Upright's musculoskeletal platform will give the company a point of differentiation in the market with an integrated digital health platform, Raphael said.
"What we like about Upright is it offers the right combination of hardware, software, and some element of coaching. It combines hardware with a sensor that is reporting biofeedback," he said. Raphael also noted Upright has strong clinically validated results and a user-centric design with high user engagement that fits well with DarioHealth's approach to digital health.
The company plans to offer an integrated solution that includes Upright's technology by July, he said.
The acquisition also strengthens DarioHealth's market position as it looks to expand its partnerships with employers and health plans, said Rick Anderson, DarioHealth's president and general manager of North America, during the conference call.
"MSK represents substantial costs to our customers and drives a large percentage of employee absenteeism and lost productivity. It is consistently one of the top priorities for clinical improvement and cost reduction for self-insured employers and health plans," Anderson said. "The acquisition makes our platform one of the most robust in the industry and we can provide front end and back end integrated solutions with best-in-class point conditions solutions for members."
The combined technologies from Upright and DarioHealth will offer advanced sensors, artificial-intelligence-driven behavior change and coaching, the executives said.
Upright started with a focus on the direct-to-consumer market and has been making inroads into the business-to-business space. There are significant synergies that can be derived from being part of a broader digital health platform, said Cohen in a statement.
"We believe that together with Dario, we can deliver an integrated, scalable, virtual platform to reduce employer, payor, and provider healthcare costs and offer lasting and impactful health outcomes for end-users. Dario stands apart from the rest with their shared consumer history and user-centric culture," he said.
DarioHealth's 2020 revenues are projected to reach approximately $7.6 million, including estimated revenues of $2.12 million in the fourth quarter of 2020. Upright's unaudited revenues for 2020 are estimated to reach approximately $12.8 million.
The company also announced Wednesday it had raised $70 million through a private placement of its common stock to finance growth initiatives. Dario has executed securities purchase agreements for the sale of an aggregate of 3.2 million shares of its common stock at a purchase price of $21.35 per share.
Investors in the private placement included Nantahala Capital Management, Perceptive Advisors, Driehaus Capital Management, Farallon Capital Management, Pura Vida Investments, Phoenix Insurance Ltd., More Provident Funds and others.
Upon closing of the private placement, Dario's cash balance is expected to exceed $90 million.