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Chronic care, mental health may be M&A targets in telemedicine 'arms race'

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Chronic care, mental health may be M&A targets in telemedicine 'arms race'

Teladoc Health Inc.'s $18.5 billion acquisition of digital chronic care management provider Livongo Health Inc. — the largest healthcare deal of the year — has analysts wondering who could be next as the COVID-19 pandemic pushes more patients online.

Telemedicine companies that may be looking to conduct acquisitions include Amwell, which recently filed for an IPO; MDLIVE Inc.; and Doctor on Demand Inc. RBC Capital analyst Sean Dodge said these companies are likely looking for ways they can become all-in-one platforms instead of singular point solutions.

"When you take a step back, across the space there's a bit of an arms race happening. There [are] lots of small Teladoc and Livongo look-alikes out right now raising money as fast as they can to broaden their platforms and scale-up," Dodge said in an interview with S&P Global Market Intelligence.

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Chronic conditions

One area telemedicine buyers may immediately want to expand in is the chronic condition market, where Livongo has been active.

Sebastian Seiguer, CEO of digital medication adherence company emocha Mobile Health Inc., said these companies are valuable because they fill an unmet need in the U.S. healthcare system. The system infrequently reaches the chronic care population, even though it creates a lot of costs, according to Seiguer.

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Emocha CEO Sebastian Seiguer
Source: emocha Mobile Health

Companies that are focused on diabetes and chronic care management like Livongo include San Francisco-based Omada Health Inc. and Virta Health Corp., as well as Glooko Inc., Dodge said.

Omada raised $73 million in funding from investors Wellington Management Group LLP, Sanofi Ventures and Cigna Ventures in June 2019. Four months later, the company partnered with Abbott Laboratories to combine Omada's digital care platform with Abbott's Freestyle Libre system for people with Type 2 diabetes. Virta Health, known for its connected Type 2 diabetes remote monitoring devices and mobile app, closed on $93 million in Series C funding in January 2020, bringing total funding to $166 million.

Another area of chronic care management that companies may explore is pain. SVB Leerink analyst Stephanie Davis has seen a number of musculoskeletal telehealth players in that market. Companies developing digital therapies have suggested that they could help patients avoid or stop using addictive opioids. Digital chronic pain therapies may include wearable devices, mobile apps and virtual reality.

Digital therapeutics company Biofourmis Inc. — which recently received $100 million in Series C funding led by SoftBank Corp. — has created a wearable device and a patient-facing app to measure pain objectively. AppliedVR Inc., Karuna Labs Inc. and XRHealth Ltd. have created VR programs for chronic pain treatment. Kaia Health Software GmbH, which received $26 million in Series B funding in June, has created a mobile app with motion coaching for treating pain due to musculoskeletal conditions.

Behavioral health

Another area that buyers may have their eyes on is virtual behavioral health. Some telemedicine companies like Doctor on Demand already offer such services. But Davis said several behavioral health companies are available for buyers who may want to add those services post-pandemic.

"We've all taken a step aside and thought 'Oh my gosh, I probably should never be alone with my thoughts for this long in quarantine,'" Davis said. "[Behavioral health is] still relatively nascent even for the players that already have a behavioral health asset."

Lyra Health Inc., which connects employers with mental health services, has added 800,000 new members to its platform so far in 2020 and raised $110 million in Series D financing, according to an Aug. 25 company announcement. Online therapy company Talkspace Network LLC hired former Teladoc executive Mark Hirschhorn as president, CFO and COO in February. The company has also brokered coverage agreements for its services with major health insurers including Cigna Corp. and Humana Inc.

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While Davis pointed to many other therapeutic areas that could be desirable targets — such as virtual physical therapy products and companies geared toward pediatric care — Seiguer said ultimately the most successful platforms will be the ones that benefit patients and providers.

"It's yet to be seen which one of these concepts can actually improve the outcome and drive down the cost of patient care," Seiguer said.