SPAC update: Butterfly Network's blank check deal and UpHealth's three-way merger

Butterfly's cash reserve grows while it aims to expand its business. UpHealth, meanwhile, is bringing telehealth, telepsychiatry, digital pharmacy and integrated care management under one roof.
By Dave Muoio
03:20 pm
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The back half of November saw two special purpose acquisition companies (SPACs) announce merger agreements valued at more than $1 billion.

First on the list is Butterfly Network, maker of the Butterfly iQ handheld ultrasound devices and a corresponding workflow platform. The well-funded startup will be merging with Longview Acquisition for a final valuation of $1.5 billion. The company's common stock will be traded on the New York Stock Exchange.

The other big news is a three-way deal involving UpHealth Holdings, a collection of digital health services including patient care management and a digital pharmacy; Cloudbreak Health, a telehealth provider that specializes in helping patients with limited language proficiency; and GigCapital2, a SPAC. Upon the merger's expected closure in Q1 2021, the $1.35 billion company will take on UpHealth's name and continue to list on the New York Stock Exchange. According to the announcement, it will also have agreements in place to deliver its digital health services within "more than 10 countries globally."

WHY IT MATTERS

Butterfly's merger follows the lead of several other digital health startups that have looked to SPACs as an appealing alternative to a traditional IPO in 2020. Since its founding in 2011 and commercial launch in 2018, the company has raised more than $400 million from the Bill and Melinda Gates Foundation and other investors, and shipped over 30,000 of its smartphone-connected devices.

With the combined entity expected to hold roughly $584 million in cash following the close, Butterfly said it's in a strong position to continue expanding its business.

“The success of Butterfly is fueled by a clear mission, superior technology made simple, a passionate community of healthcare practitioners and an immensely talented team,” Butterfly CEO Laurent Faracci said in a statement. “We believe the combination with such a premier healthcare partner as Longview Acquisition Corp. will amplify and accelerate the adoption of Butterfly iQ around the world. This partnership will enable us to bring more Butterfly innovative solutions to market faster, helping us improve patient outcomes and the way healthcare is delivered.” 

But whereas Butterfly's business is something of a known quantity, UpHealth's new funds and assimilation of Cloudbreak's telehealth offerings potentially add a new international player to the digital health stage.

Prior to the deal, UpHealth already worked to secure digital pharmacy, integrated care management and telepsychiatry offerings. According to an investor presentation on the mergers, UpHealth now aims to offer health systems, plans and employer customers these three services and Cloudbreak's telehealth as part of a unified digital platform. The company views itself as the middle ground between Teladoc/Livongo, Optum and Amazon (to cite a few names from its pitch deck), and expects that its estimated $115 million of 2020 revenue will balloon at a 74% compound annual growth rate to $346 million in 2022.

According to a press release, Cloudbreak has provided its services to more than 1,800 providers in the U.S. and has "signed several country-wide contracts with government ministries across India, Southeast Asia and Africa." UpHealth said that its digital pharmacy has a network of 13,000 providers, and that its integrated care management business has reinvested $100 million in customer revenue toward the further development of its proprietary tech platform. The company has not yet had to reveal its past financials.

“Combining with UpHealth and its complementary suite of solutions will further our ability to power healthcare’s digital transformation and resolve disparities on a massive scale," Jamey Edwards, CEO and cofounder of Cloudbreak Health, said in a statement. "We are proud to be part of this mission together."

THE LARGER TREND

2020 has turned out to be a big year for digital health companies eyeing the public markets, and so far blank check deals have given IPOs a run for their money. Hims & Hers, SOC Telemed, Clover Health and Augmedix each announced or completed mergers with SPACs over the last several months. The list of IPOs, meanwhile, includes GoodRx, Amwell, One Medical, Eargo and Accolade.

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