DarioHealth buys into MSK with Upright Technologies acquisition and announces $70M private placement

The $31 million purchase will add new capabilities to DarioHealth's condition management and behavior change platform.
By Dave Muoio
02:01 pm
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A product shot of Upright's digital MSK offering.

DarioHealth announced today that it is expanding its digital chronic-disease-management business beyond diabetes and hypertension with the purchase of Upright Technologies, a musculoskeletal (MSK) health company that specializes in connected posture correction devices and digital coaching.

The deal is expected to close on or around February 7, and will run DarioHealth $31 million to complete the acquisition. This comes in the form of $1.5 million in cash and $29.5 million in stock – which equates to about 1.7 million DarioHealth shares.

Oded Cohen, CEO and cofounder of Upright, will stay with the new company, serving as general manager of MSK product and a member of the board.

At the same time, DarioHealth announced that it has locked in agreements to sell nearly 3.3 million shares of its stock and raise $70 million.

Nantahala Capital Management, Perceptive Advisors, Driehause Capital Management, Farallon Capital Management, Pura Vida Investments, Phoenix Insurance Ltd., More Provident Funds and others took part in the private placement.

WHAT'S THE IMPACT?

For years, DarioHealth focused its efforts on a D2C glucose management platform that relied on a smartphone glucometer dongle.

In more recent years the company shifted its attention toward more of a B2B approach highlighting data-driven behavior change among users managing conditions like diabetes or hypertension. DarioHealth says its platform currently has about 150,000 users, and is estimating $7.6 million in unaudited 2020 revenue.

By acquiring Upright (and its estimated $12.8 million in unaudited 2020 revenue), DarioHealth will be leaping into a hot corner of the digital health market. The company noted in the announcement that more than 90,000 people are actively using Upright's devices, which are also recommended to MSK patients by hundreds of clinics worldwide.

"MSK represents substantial costs to our customers and drives a large percentage of employee absenteeism and lost productivity," Rick Anderson, DarioHealth's president and general manager of North America, said in the announcement.

"It is consistently one of the top priorities for clinical improvement and cost reduction for self-insured employers and health plans. Adding Upright's solution to our integrated platform will substantially expand our opportunity to address a broader spectrum of our customers' needs."

The companies said that they believe the two digital platforms will be a natural fit. MSK issues are common among the diabetic or hypertensive patients DarioHealth already serves, they said, and both products are bringing D2C user experiences to enterprise clients.

"Similar to Dario, we have had great success building our product with roots in the D2C market and have begun to make inroads into the B2B space. We believe there are significant synergies that can be derived from being part of a broader digital health platform," Cohen said 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."

But while DarioHealth was open about plans to expand its digital chronic disease management platform it was fairly close-lipped about the private placement, only saying that the net proceeds would be used "for general corporate purposes." Following both deals, the company said that it will be left with an outstanding cash balance of more than $90 million.

THE LARGER TREND

DarioHealth's MSK platform purchase falls in the shadow of its competitor Omada, which announced last year that it would be acquiring remote MSK physical therapy company Physera. That deal was similarly described as one to add complementary offerings to a digital chronic-disease-management program heavily reliant on connected devices and data-driven behavior change – and to distinguish the brand from other hot competitors like Livongo.

While DarioHealth's push into MSK gives it a unique selling point over digital disease-management businesses, the company will now have to contend with other digital health companies squarely targeting the MSK space.

Chief among these is Hinge Health, which just a few weeks ago announced a massive $300 million Series D funding round. Others active in the space include Sword Health, which most recently raised $9 million in the beginning of 2020; Kaia Health, which closed $26 million in June; and digital physical-therapy-software provider Physitrack, which acquired its chief competitor Physiotools just last month.

ON THE RECORD

"I am very pleased to be able to achieve this milestone and expect that MSK will be a meaningful growth driver for our company for years to come," Erez Raphael, DarioHealth CEO, said in a statement.

"We are committed to delivering the industry's most comprehensive, clinically proven solution for the management of chronic conditions, and the addition of Upright, which is an expansion of our core competency, represents a significant step toward that goal. With similar approaches to building highly engaging and clinically effective products and similar cultures, I anticipate a rapid and seamless integration."

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