Infant monitoring tech brand Owlet announces SPAC merger for Q2 2021

The company currently sells connected wearables and smart monitors to consumers, but said that it will be seeking FDA authorization for new products with broader indications and telehealth capabilities down the line.
By Dave Muoio
03:30 pm
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Editor's note: This article has been updated with original quotes from the heads of Owlet Baby Care and Sandbridge Acquisition.

Owlet Baby Care, the maker of connected infant-monitoring products targeted at consumers, today announced its plans to merge with Sandbridge Acquisition Corporation, a special purpose acquisition company (SPAC) backed by Sandbridge Capital and PIMCO private funds, and to begin trading on the NYSE.

The deal is expected to close during Q2 2021, subject to stockholder approval, and will deliver as much as $325 million to the combined company through cash ($230 million) and concurrent private placement (PIPE) of common stock ($130 million).

All told, the deal will leave Owlet at a total enterprise value of roughly 1.07 billion, according to the companies.

"Partnering with Sandbridge allows us to accelerate our ability to invest in growth and product expansion, while bringing a holistic, connected nursery experience to generations of parents to come," Kurt Workman, CEO and founder of Owlet, told MobiHealthNews in an email. 

"We have always planned on taking the company public and we were actually starting that process when we met [Sandbridge Acquisition Chairman and CEO Ken Suslow] and team. We looked at several different routes from private capital raise in a Pre IPO round to other SPAC partners and ... I felt like we were getting the best of all worlds. The long-term thinking that you usually see in growth equity, real value add partners in Ken and [Sandbridge Founding Senior Advisor Domenico De Sole] and ability to take the company public and fill our own destiny as the platform for parenting," he said. 

Headlining the company's brand is the Owlet Smart Sock, a connected wellness wearable that uses pulse oximetry to track a baby's oxygen levels and heart rate during sleep. The company has combined this with the Owlet Cam, a WiFi-connected 1080p video camera baby monitor, and an app interface that parents can use to watch their child or to receive automatic alerts.

Owlet also sells an app-based healthy sleep program called Dream Lab, and is building up to the release of a pregnancy-band wearable for expecting mothers.

WHAT'S THE IMPACT?

As with all SPACs mergers, the news comes with an SEC filing that describes a company's recent top-line financials, future product strategy and an (often rosy) look at its potential business.

In their initial slide deck, Owlet is reporting a 2019 net revenue of $49.8 million with a 46% gross margin, and estimates that 2020's numbers will land at $75.2 million and 47.5%, representing 51% year-over-year growth. Go a few years further down the timeline, and the company said that it is hoping to reach a net revenue of up to $1.06 billion by 2025.

However, the company noted that its limited operating history includes net losses, and that it currently relies on sales of the Smart Sock "for the majority of our revenue and expect to continue to do so for the foreseeable future."

To hit those higher benchmarks, the company said that it plans to expand its brand by releasing new connected products, pursuing the budding landscape of telehealth reimbursement and launching outside of the U.S.

In particular, the company said that it is seeking FDA marketing authorizations for new products that would shift the company's lineup beyond the wellness and into the realm of medical devices.

Those listed by the company include the BabySat, an infant pulse oximeter designed for telehealth and intended for use by babies with health conditions, and an over-the-counter version of the Smart Sock with expanded claims, so that it can be used for telehealth and can opportunistically screen for health conditions. The company is currently seeking FDA authorization for the BabySat, and plans to do so in the future for the OTC Sock as well.

This strategy will be fueled by the new funds brought in from the SPAC deal and PIPE, according to the investor slide deck. Additionally, it plans to invest in its connected nursery, software and services platform; acquisitions; customer acquisition; international expansion; and infrastructure upgrades over the course of two-to-three years.

"The long-term vision of the company has always been to keep babies and their families safe and healthy," Workman said. "We have the largest data set of infant health and sleep that is driving our ecosystem engine and plan to expand both in product and software services, including tele-health integrations in the platform, which we believe consumers are seeking due to changing behaviors in remote care as a result of COVID-19."

THE LARGER TREND

Smart baby-monitors and connected baby-tech like Owlet's have long held a place in the digital health landscape. Investors have backed products ranging from smart baby monitors and wearables to sleep coaching and smart baby bottles, while tech shows over the years have frequently highlighted baby tech tools built with consumers in mind.

Owlet is also the latest in a growing number of health technology or consumer-health companies to enter the public markets via SPAC mergers. Among those who've jumped onboard this bandwagon are SharecareSema423andMEHims & HersTalkspaceButterfly Network, UpHealthClover HealthAugmedix and SOC Telemed (with rumors circulating that Ro may be soon to follow as well).

ON THE RECORD

"Owlet impressed as the purest example of a trusted brand with an unfair advantage given its competitive moat which is supported by the company’s substantial technology head start and proprietary data flywheel, the combination of which has effectively translated into strong brand equity and high barriers to entry, all in a compellingly attractive sector with a very large global [total addressable market]," Sandbridge Acquisition's Suslow told MobiHealthNews in an email. 

"We believe that Owlet is super well positioned to dominate the connected nursery with a big data driven telehealth opportunity in the works as well. As such, we are gratified to partner with the company and their visionary and proven leadership team and share our knowledge and expertise in brand-building, storytelling, and international growth opportunities."

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