Issue 094

Welcome back to E&O Fridays, a paying subscribers-only weekly newsletter focused on the world of digital pharma products and FDA-regulated digital health.

 E&O Fridays.

OK, here’s what’s happening this week in the world of pharma digital products and FDA-regulated digital health:

• Akili Interactive just published results from a follow-up study to its big one from last year. STARS Adjunct included participants who were taking medications for ADHD as well as those who were not. (The original STARS study excluded kids taking ADHD meds.) The new study also looked at the effect of increasing the duration of the treatment. It measured standard clinician ratings of impairments and symptoms. And it included ratings by parents of their children in daily life. (Let me know if you’d like to help me dig into Akili’s evidence base for a longer-form piece I’m working on.)
• ResApp just announced that its home country of Australia just cleared its wearable as a Class 1 medical device. It received its CE Mark earlier in March too. ResApp’s wearable is “an easily worn, clip-on, unobtrusive device which allows 24-hour patient monitoring using cough audio.” Almost exactly a year ago the FDA declined the company’s De Novo application for its ResAppDx app which helps diagnose respiratory disease.
• Speaking of the FDA, the agency just granted Tempus a Breakthrough Designation for its ECG Analysis Platform, which it developed with Geisinger.
• And while we are on the topic of AFib, Japanese pharma Daichii Sankyo inked a few deals with digital health startups to improve the diagnosis and detection of AFib in the UK market. Daichii tapped FibriCheck, neoHealthTech, and Capitol Medicare for the project.
• Celgene/BMS and Amalgam Rx’s clinical study to evaluate a digital health program called My Hematology Oncology Patient Experience (MYHOPE) for people with Multiple Myeloma (MM), just added more than a dozen new sites.
• Here’s an interesting new study sponsored by ex-Apple Health exec Stephen Friend’s 4YouandMe with help from Evidation Health and a handful of providers that will use wearables and connected health devices from Empatica, Bodyport, and Oura to see how stress impacts symptoms and flare-ups for people with Crohn’s disease.
• One more thing… Pear Therapeutics just set-up a new 60-participant clinical trial for its opioid use disorder digital therapeutic, reSET-O: “This randomized controlled pilot study will evaluate feasibility, acceptability, and potential efficacy of an app, reSET-O, for patients being started on buprenorphine in acute care settings.”

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Everlywell acquired PWNHealth. Here’s a breakdown of PWNHealth’s pricing with estimated revenues.

Had you heard of PWNHealth prior to the news this week that Everlywell acquired them?

PWN is a big player in COVID–19 testing. They provide the clinical, legal, and technical framework to quickly set-up these testing sites and their national telehealth network lends support via follow-up calls for those with positive tests. PWNHealth work with some big names — Verily, Walmart, RiteAid, Walgreens, Humana, LabCorp, and Quest to get COVID–19 tests to patients.

PWN was led by Sanjay Pingle, who also led Physicians Interactive for many years until it was acquired by Merck in 2013. Prior to PI he co-founded Medsite and sold that company to WebMD for $41 million back in 2006.

PWNHealth started up in 2015 as a spinout of Medivo, a digital health company Pingle’s Medsite co-founder Sundeep Bhan runs — but now goes by the name Prognos. PE firms EDG and Farragut Capital acquired Medivo’s labs platform business to create PWNHealth and Pingle joined as CEO.

Soon after spinning out, PWNHealth acquired Bind Health — the short-lived DTC genetics company not the health plan — and began to focus more on genetic testing and genetic counselor services.

Fast forward to March 2020, and PWNHealth began to pivot hard to COVID–19 testing. It let go some of its genetic counselors, and began inking deals with companies like Verily and Walmart and some of the others listed above.

By the end of 2020, PWNHealth had helped fulfill 12 million COVID–19 tests and its telehealth services had facilitated more than 450,000 discussions between patients with positive or indeterminate results. PWNHealth’s healthcare providers helped them figure out what to do next via a phone call. The company said it helped support more than 45 national COVID–19 testing programs.

Given those figures along with some pricing information I found in a couple of PWNHealth’s contracts, here are some rough estimates for PWNHealth’s 2020 COVID–19 revenues:

• 45 national programs * $35,000 initial set-up fee = $1.5 million
• 12 million tests * $10 fee per test = $120 million
• (450,000 discussions * 11 percent that were not in English) * $25 fee = $1.2 million

Caveats and assumptions: Now, I don’t know if PWNHealth charged every one of its 45 national programs the set-up fee. The least expensive fee per test I found was $10, which was consistent across the handful of agreements I found. In some cases, the price per test climbed as high as $13, but I just used the lower number here. (In one agreement, it was $10 per test for the first 5,000 tests and then $13 per test for any tests above the 5,000 test threshold.)

Finally, that 11 percent figure was accurate as of July 2020, so I am assuming the percentage of non-English provider-patient discussions stayed consistent for the rest of the year. And the pricepoint for the non-English provider was based on an upcharge for Spanish that I found in the California state agreement. Maybe other languages are more expensive?

So, that’s roughly $123 million in 2020 COVID–19 revenues for PWNHealth.

PWNHealth actually hosts its own COVID–19 test tracker that has a real-time count of how many COVID–19 tests the company has facilitated. Remarkably, PWNHealth has helped fulfill another 8 million tests since the start of the year. (The tracker is currently up over 19 million tests in total, but the Everywell announcement says the company has done more than 20 million tests now.) Assuming the company’s pricing and other usage trends outlined above held true for Q1 2021:

• No new programs so $0 new set-up fee revenues
• 8 million tests * $10 a test = $80 million
• (300,000 discussions * 11 percent) * $25 fee = $825,000

So, that brings PWNHealth up to about $81 million just for Q1 COVID–19 related revenue in 2021. There’s a big question mark, of course, around how big of a market COVID–19 testing will be by the end of the year. I’m sure that was a heated topic of discussion during the M&A negotiations.

Another interesting and underreported twist to this story is that PWNHealth was actually just acquired five months ago. Its owners, PE firms EDG Partners and Farragut Capital sold PWNHealth to PE firm Spectrum Equity and the Blue Venture Fund back in October 2020.

While that announcement was positioned as an undisclosed funding round of growth equity, the former owners both announced the sale in their own press releases. Also, a Form D SEC filing that no one paid attention to at the time showed an equity raise of $71 million that the form disclosed was in connection to a business merger or acquisition.

In any case, Everlywell is even more of a DTC labs powerhouse now. Definitely one to watch.

Crowdsourced list of digital health startups that spun out of pharmaceutical companies

Two weeks back I asked E&O readers to help me crowdsource a list of digital health startups that spun out of pharmaceutical companies. I had the idea after talking to a few people who didn’t realize that Oshi Health had started as an innovation project at Takeda. Thanks to your responses, I learned about quite a few other startups that had similar origin stories.

Here’s the list (that is not intended to be comprehensive — it’s just based on the E&O brain trust’s input), but feel free to keep sending them my way and maybe I’ll create a tracker for these:

As I noted in Issue 092 of E&O Fridays, Oshi Health spun out of Takeda with help from BCG Ventures. Here are a few other pharma spinouts that BCG helped incubate:

Fern Health, a startup in the very competitive digital MSK space, spun out of Germany’s Grunenthal, a pharma with a focus on pain management.

Pet insurance company Pumpkin spun out of Zoetis, a US-based animal health company that develops medicines and vaccines for pets and livestock.

Digital lab assistant company LabTwin spun out of French biopharma supplier Sartorious.

And BCG helped create a few internal projects that didn’t spin out, including loyalty program Alle at Allergan and Painscale at Boston Scientific (yea, I know, not a pharma).

Moving away from BCG Ventures-affiliated projects (I think — honestly, they might be involved in more than the ones above and maybe even some below.)

Digital biomarker company Koneksa Health was originally a part of Merck, but it spun out in 2016. Koneksa is actually older than that. It was incubated under Merck’s GHI Fund for 1.5 years before spinning out.

Belgian pharma UCB spun out Nile AI, a predictive epilepsy care platform. Like many of these pharma spinouts, UCB had difficulty creating a molecule-agnostic platform within their current org structure.

Virtual endocrinology practice Onduo, of course, was co-developed and co-owned by both Sanofi and Verily. When Sanofi sold Verily a portion of its share and reduced its stake to just under 20 percent, that constituted something of a spin out I think. (These days “Onduo by Verily” has broadened its offering beyond diabetes too.)

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