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Dispensed: A big week for digital health IPOs, what happens when a $2.1 million drug can’t get to the kids who need it, and what a top health-tech VC is looking to invest in

Dispensed: A big week for digital health IPOs, what happens when a $2.1 million drug can’t get to the kids who need it, and what a top health-tech VC is looking to invest in

Jackson Schultheis was born with the progressive muscle disease spinal muscular atrophy.

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Jackson Schultheis was born with the progressive muscle disease spinal muscular atrophy.
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Elissa Schultheis

Hello,

Welcome to Dispensed, Business Insider’s weekly newsletter bringing you all the stories that kept our healthcare team busy this week.

While Erin Brodwin’s been out celebrating her wedding, the rest of us have been staying busy holding down the fort! Congrats, Erin!!

Are you new to our newsletter? You can sign up for Dispensed here.

First up: Some really important reporting from Emma Court, who spoke with families who are having a hard time getting access to Zolgensma, the $2.1 million treatment for spinal muscular atrophy that was approved in May.

‘Like we were being forced to gamble with our son’s life’: Health insurers won’t pay for a $2.1 million drug for kids, and parents say they’re running out of time

  • A new type of therapy that treats a devastating inherited disease at the genetic level was recently approved in the US. Its $2.1 million price tag makes the drug, Zolgensma, the most expensive in the world.
  • Four parents of children born with the disease, called spinal muscular atrophy, told Business Insider they have been fighting health insurers like Aetna and Anthem to get access to Zolgensma. One decision, by UnitedHealth, has since been reversed.
  • Sarah Stanger, whose son lives with spinal muscular atrophy, called it “heartbreaking, because this one person is everything to us. And they’re acting like his life doesn’t really matter.”
  • These kinds of barriers could create “further inequities in the healthcare system for people with genetic diseases and disabling conditions,” Stanford ethicist Holly Tabor said.

Emma’s reporting highlights an important tension that’s playing out right now – between health plans who are setting up policies that constrain who might be considered for treatment and drug companies that set the $2.1 million price tag – that leave patients and their families caught in the middle. One of the plans in question that came up in Emma’s reporting said it doesn’t cover any gene therapies.

As more and more gene therapies get to approval, tensions are only going to get higher.

A wave of digital health IPOs

Livongo executives Glen Tullman, Zane Burke, and Jennifer Schneider on the day of the company's IPO.

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Livongo executives Glen Tullman, Zane Burke, and Jennifer Schneider on the day of the company’s IPO.
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Courtesy NASDAQ

Thursday was a big day for digital health companies.

Diabetes tech company Livongo started trading, closing up 36% after pricing Wednesday at $28. Health Catalyst, which helps hospitals sift through their data, also closed out the day 51% higher than its $26 a share price set the night before.

We were tracking the IPOs closely.

Elsewhere, Bright Health on Wednesday laid out where the health insurer will be offering plans starting in 2020. By then, it’ll be in 12 states, which we decided warranted a map (big thanks to Shayanne Gal for that!).

Bright Health 2020 expansion locations map

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Shayanne Gal/Business Insider

$950 million insurer Bright Health is plotting a massive expansion as startups look to reinvent how Americans get healthcare

  • The Minneapolis-based health-insurance startup Bright Health plans to double its geographic footprint in 2020.
  • By 2020, the company expects to be in 12 states, up from six in 2019.
  • Bright offers insurance to individuals under the Affordable Care Act and coverage to seniors in Medicare Advantage, partnering with one health system in each market to help set up its insurance plan.
  • The venture-backed health insurers Oscar Health and Devoted Health are also planning to expand in 2020.

With new data coming out on the future of HIV treatment, Emma reports that three companies in particular stand to be the biggest winners. That’s in part because of new treatments, as well as more use of existing, preventive treatments.

The future of HIV treatments will change dramatically in the next decade, Citi says. These 3 companies could be the biggest winners.

  • Since 2012, a preventive HIV medication has been available in the US, making it possible for those at risk to reduce their chances of contracting the disease.
  • Citi analysts predict the US market for these types of drugs will nearly triple by 2030 to about $5.5 billion, thanks to factors like President Donald Trump’s new plan to stop HIV.
  • New drugs from the US drug giant Merck, the HIV-focused drugmaker ViiV Healthcare, and the biopharma Gilead could dominate the preventive HIV market over the next decade, the Citi team said.

This week in conversation with the healthcare team

That’s all from us this week. We’ll be back in August with some more big projects ahead you won’t want to miss.

In the mean time, tips? Plans to file your S-1 for your upcoming IPO (I really do want to know!)? Find me at lramsey@businessinsider or the whole team at healthcare@businessinsider.com.

– Lydia

Livongo is going public as the 3-year digital health IPO drought comes to an end

Livongo is going public as the 3-year digital health IPO drought comes to an end

Livongo's blood sugar monitor.

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Livongo’s blood sugar monitor.
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Livongo
  • Digital health company Livongo is set to start trading Thursday under the ticker “LVGO.”
  • The company priced its shares at $28 apiece late Wednesday. Livongo is selling about 12.7 million shares, raising $355 million.
  • The IPO values the company at about $2.5 billion.
  • Livongo’s offering is part of a wave of digital health companies entering the public markets after a three-year drought.
  • Visit Business Insider’s homepage for more stories.

Livongo, a company that uses technology to help take care of patients with diabetes, is set to go public as part of a wave of digital health IPOs.

The company priced its shares at $28 apiece late Wednesday, giving it a market value of about $2.5 billion. Livongo, based in Mountain View, California, is selling 12.7 million shares, raising $355 million. The stock is set to start trading tomorrow on the Nasdaq.

Health Catalyst, a Utah-based healthcare software company, is also expected to start trading on Thursday, after pricing its IPO at $26 a share, raising $182 million and valuing the company at $1 billion.

Livongo and Health Catalyst join a slew of health-tech IPOs this year. Already, the healthcare software company Phreesia started trading earlier this month, after raising $167 million in its IPO. Change Healthcare, a Nashville, Tennessee-based revenue-cycle-management software company, spun out of the healthcare giant McKesson in June. It’s currently trading at about $14 a share, after pricing its offering at $13.

At least two other digital health companies are reportedly gearing up for initial public offerings this year, according to news reports: the DNA-testing company Ancestry and the clear-aligners company SmileDirectClub.

Read more: These 10 buzzy digital health startups are poised to go public in the next 12 months

Livongo was founded in 2014 and operates programs to help care for people with diabetes and other chronic diseases using a glucose meter and other devices. Typically, big companies and insurers pay monthly fees for the care. Livongo’s bet is that by using technology, coaching, and other tools, it can manage those chronic conditions better and ultimately at a lower cost.

Before the IPO, Livongo had raised $237 million from investors and was valued at $800 million.

Livongo executive chairman Glen Tullman

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Livongo executive chairman Glen Tullman
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Courtesy Livongo

According to the IPO filing, Livongo has been growing quickly, though its financial losses are deepening. The company generated $68.4 million in revenue in 2018, more than double the $30.8 million it made in 2017. Its net loss widened from $16 million in 2017 to $33 million in 2018.

Read more: Healthcare startup Livongo is gearing up to go public. Here are the execs and investors who stand to benefit the most.

As of March, the company had 164,000 members in its largest program, to treat diabetes. About 29 million Americans are known to have one of the two types of diabetes, of which most have Type 2, in which the body has a hard time breaking down sugar in the blood and which is often lifestyle-driven.

A wave of digital health IPOs ends a drought

Before this wave of public offerings, the most recent digital health IPO came in 2016, when the cardiac-monitoring company iRhythm went public. Private health-tech companies have racked up big valuations in recent years, but few have gone public.

The IPOs come at a critical time for the digital-health market. Startups looking to apply technology to the healthcare industry raised about $14 billion in 2017 and 2018 combined from investors, and that seems to be keeping up in 2019. According to figures compiled by Rock Health, $4.2 billion was invested in digital health in the first half of 2019, on track to potentially beat out 2018’s record-breaking funding year.

Never miss out on healthcare news. Subscribe to Dispensed, our weekly newsletter on pharma, biotech, and healthcare.

Much of the activity in the digital health space in the past 15 years has been centered around the electronic health record market, according to Hemant Taneja, a managing partner at General Catalyst and board member at Livongo. More recently, investors have been pouring money into companies that have business models like Livongo, in which technology is used to help patients manage their care more directly.

“Truly organizing healthcare online, which, we think of that as the internet moment of healthcare, that’s now just starting to happen,” Taneja said. To him, the internet moment of healthcare is having a product that makes you forget – as much as possible – that you’re taking care of your diabetes.

Wall Street’s tech transformation, a divide at Google, and the future of healthcare

Wall Street’s tech transformation, a divide at Google, and the future of healthcare

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Crains New York

Hello!

Wall Street’s tech transformation continues. Our finance team had a number of stories on these efforts this week, each in their own way showing the ways in which tech is impacting competition.

For some, investments in tech are helping drive additional revenue. Goldman Sachs for example for a long time struggled to win business with quant hedge funds, which require the most up-to-date technology for their trading. CEO David Solomon told us last month that “the picture is very different” now.

That progress showed up on Tuesday when the bank reported better than expected equities trading results.

For others, tech hires promise a fresh pair of eyes and new opportunities. Morgan Stanley Investment Management, for example, poached a Google machine learning expert for a newly-created role as head of data and analytics.

“This is a critical component to the future success of our business,” MSIM’s chief operating officer said in a memo announcing the hire.

Private equity giant KKR hired Emilia Sherifova, the top technology officer at Northwestern Mutual, to develop a data-driven approach she says will play a “central role” in KKR’s next stage of evolution. And Deutsche Bank hired AQR’s head of technology to help lead a $15 billion push into digital with a focus on the cloud.

For some newer players, the lack of legacy tech is proving a competitive advantage. Chris Randazzo, Rockefeller Capital’s private wealth head, highlighted the benefits of “having a blank piece of paper” when it comes to technology for example. Before he joined Rockefeller, Randazzo was chief information officer for global wealth and investment management at Morgan Stanley and at Bank of America Merrill Lynch

“The hardest thing with the massive legacy systems that were built over 10, 20, 30, 40 years, the challenge was trying to innovate at the same time while you’re running multi-billion dollar businesses supporting millions of clients and millions of accounts,” he told BI’s Meghan Morris.

And some appear to be taking inspiration from consumer tech success stories like Netflix and Spotify. Charles Schwab rolled out subscription pricing at the end of March for its robo-adviser’s premium service, replacing the traditional fee scale that charges a percentage of assets invested. The robo-adviser said it has added $1 billion in assets since making the pricing change, with a 25% increase in account openings.

As always, we’ll be keeping track of these trends and more.

Before I go, you can now let us know what you think of our BI Prime stories. Look out for box asking ‘How valuable was this story for you?’ at the bottom of our stories, and let us know how we’re doing. Or contact me directly.

— Matt

Quote of the week

“Most of the time, when we find tech people who are interested in healthcare, they spend on the order of three months before they realize how screwed up it is.” – Krishna Yeshwant, who coleads the life-science investment team at GV, on preparing tech entrepreneurs to jump into the healthcare industry.

In conversation

Finance and Investing

Goldman Sachs execs are jockeying for power in the firm’s big new private investing unit – and the stakes couldn’t be higher

Offering a big strategic vision isn’t for those without conviction.

‘A once in a decade’: JPMorgan breaks down how to take advantage of the largest bubble in modern history

As an investor, the last word you ever want to hear is “bubble.” Its mere utterance is cringeworthy.

Ray Dalio just unloaded on ‘worthless’ debt investments he sees headed for disaster – and revealed where you should put your money instead

Ray Dalio, the founder and cochief investment officer of Bridgewater Associates, has shared his thoughts on the late-stage US economy and why, in his view, markets are most likely inching closer to a “paradigm shift.”

Tech, Media, Telecoms

There’s a deepening divide among Google workers: those who get free meals and those who don’t

There’s no more free lunch at Google – at least if you’re among some of the unlucky engineers who belong to the company’s vast workforce of contractors and vendors.

Amazon is hiring for a ‘stealth advertising’ engineering team to disrupt the $100 billion gaming industry

Amazon has been building up its advertising business to compete with Amazon and Google, and now it wants to expand into the gaming industry.

Investors from Comcast Ventures, Lightspeed, and others name hot media companies they think will blow up this year

It’s been bleak for digital media. Headlines blare about fire sales of companies like Mic and Gawker, layoffs at companies like HuffPost and Vice, and consolidation rumors.

Healthcare

Using apps to treat diseases could be the future of healthcare. The first chief digital officer at pharma giant Sanofi told us his strategy for navigating the promises and pitfalls.

As French drugmaker Sanofi’s new chief digital officer, Ameet Nathwani thinks tech like AI could help solve some of the healthcare system’s biggest problems.

Inside Gilead’s unusual $5.1 billion partnership with a Belgian biotech, which was codenamed ‘Project Eagles’ and was sealed the night of a glitzy anniversary party

The night of a big party for the Belgian biotech Galapagos’ 20th anniversary, the Gilead exec Andrew Dickinson flew out to the celebration in Europe.

Dispensed: Oscar’s first moves in Medicare Advantage, uBiome’s new board members, and Novartis’ CEO’s commitment to wearing jeans

Dispensed: Oscar’s first moves in Medicare Advantage, uBiome’s new board members, and Novartis’ CEO’s commitment to wearing jeans

The microbiome testing company uBiome has come under scrutiny after an FBI raid.

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The microbiome testing company uBiome has come under scrutiny after an FBI raid.
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Hollis Johnson / Business Insider

Hello,

Welcome to a warm-weather edition of Dispensed, in which I am already plotting how I can spend as little time in the heat as possible this weekend.

Before we jump in, I wanted to first let you all know that our colleague Erin Brodwin is getting married this weekend, and we couldn’t be more excited for her! If you see her sometime in the next few months be sure to bring her cake and say congrats!

Are you new to our newsletter? You can sign up for Dispensed here.

Anyway, back to business. First up, a few updates on uBiome. If you recall, last week the company laid off half of its staff – including the lab director, which meant the company had to stop running its only test. Well, eight days later, the same lab director has been brought back on, and uBiome told customers that the tests are back to running.

Also-the company has hired two new board members, one a retired bankruptcy lawyer, the other a professional with a background in restructuring. It’ll be curious to see where the company goes from here, now that it has new management, a new board, and half the staff.

Just catching up on uBiome? You can find more of our coverage of the troubled startup here.

Elsewhere, Oscar Health revealed where it plans to set up Medicare Advantage plans in 2020. It’s starting with NYC through a partnership with Bronx-based Montefiore, as well as partnerships with doctor groups and hospitals in the Houston area.

Folks took to Twitter with some interesting reactions to the news, so I thought I’d share some of them here and here.

Emma Court took a look at the early work Sanofi’s recently appointed Chief Digital Officer Ameet Nathwani is working on.

Using apps to treat diseases could be the future of healthcare. The first chief digital officer at pharma giant Sanofi told us his strategy for navigating the promises and pitfalls.

  • French drugmaker Sanofi recently appointed Chief Medical Officer Ameet Nathwani as its chief digital officer.
  • The pharma industry is increasingly hiring chief digital officers as it seeks to make better use of technologies like artificial intelligence in its business.
  • But Nathwani says that the pharmaceutical industry also needs to be on high alert around issues of bias, privacy, and cybersecurity, “because this black box scenario isn’t going to be sustainable.”
  • Nathwani told Business Insider Sanofi has developed policies as part of that, including establishing oversight of the tech and putting checks in place.

Emma also spoke with Novartis CEO Vas Narasimhan after the company presented earnings on Thursday. Among the things they discussed: Narashimhan’s commitment to wearing jeans in the office. (see photo)

Novartis CEO Vas Narasimhan.

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Novartis CEO Vas Narasimhan.
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Novartis

Pharma giant Novartis has been on a tear. CEO Vas Narasimhan told us how wearing jeans to work is helping transform the Swiss company.

  • Vas Narasimhan took the reins at Novartis early last year and has pushed to transform the Swiss drug giant into a cutting-edge, tech-savvy company.
  • And it’s been working, Narasimhan told Business Insider in a Thursday interview, pointing to strong second-quarter financial results reported that day.
  • Culture has been a big push at Novartis, which the Swiss drug giant tracks via tech platforms and plenty of data.
  • “I’d like to believe over time we’ll keep showing that culture drives performance and culture drives innovation,” Narasimhan said. “And the cultural transformation of Novartis will keep us at the cutting edge for years to come.”

When it comes to Novartis’ strategy, (in particular its potential acquisitions going forward), one sentence in particular in Emma’s conversation with Narasimhan stuck out: “I aspire for us to target on the order of 5% of our market cap in M&A, focused in either building therapeutic area depth or building out new technology platforms.” Read more from the conversation.

Elsewhere in conversation with BI, Emma and I had some more dispatches from our conversation with GV.

Something to keep an eye out for going into the end of July – the Livongo IPO is upon us. On Monday, the company updated its IPO filing to say that it’s seeking to raise more than $200 million in its initial public offering. It’s looking for a valuation of $2.1 billion to $2.4 billion. Here’s a look at the investors who stand to benefit the most from the digital health company going public.

I’ll leave you with one more great read, from one of our reporters on the video team here. Benji Jones took a look at the cost of being transgender in the US. As you might imagine, there are a lot of hidden costs, especially when it comes to medical procedures. Watch more of the story here.

That’s all for this week! In the meantime, send thoughts, tips, and tricks to surviving a heat wave to the healthcare team at healthcare@businessinsider.com. You can reach me directly at lramsey@businessinsider.com.

– Lydia

Everything we know about uBiome, the startup that convinced Silicon Valley that testing poop was worth $600 million, and then saw its top leaders depart amid an FBI investigation

Everything we know about uBiome, the startup that convinced Silicon Valley that testing poop was worth $600 million, and then saw its top leaders depart amid an FBI investigation

A uBiome microbiome test kit.

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A uBiome microbiome test kit.
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Erin Brodwin
  • uBiome was founded in 2012 on the promise of helping ordinary people understand the bacteria living in and on them, known as their microbiome.
  • The company eventually raised $105 million from investors and reached a valuation of $600 million.
  • In late April, the FBI searched uBiome’s office as part of an investigation.
  • By the end of June, the company’s top leadership and many of its board members had departed.
  • Business Insider reports regularly on the latest developments at uBiome. You can read our stories by subscribing to BI Prime.

The Silicon Valley startup uBiome was founded in 2012, on the promise of helping ordinary people understand the bacteria living in and on them, known as their microbiome.

The company morphed from citizen science project to venture-backed startup, taking in $105 million from investors and reaching a valuation of $600 million.

Then the troubles began. The FBI raided the company in April, reportedly as part of an investigation into the startup’s billing practices. By the end of June, the company’s top leadership and many of its board members had departed.

Read more: uBiome convinced Silicon Valley that testing poop was worth $600 million. Then the FBI came knocking. Here’s the inside story.

Here’s everything we know about what’s going on at uBiome.

The inside story

  • uBiome convinced Silicon Valley that testing poop was worth $600 million. Then the FBI came knocking. Here’s the inside story.
  • Embattled $600 million poop-testing startup uBiome once partnered with Nurx, a birth control company at the center of a New York Times exposé
  • uBiome’s founder repeatedly presented herself as years younger than she was, in the latest sign of trouble at the embattled $600 million poop-testing startup
  • Here’s the letter the $600 million healthcare startup uBiome sent to reassure investors after it was raided by the FBI
  • Silicon Valley startup uBiome raised $105 million on the promise of exploring a ‘forgotten organ.’ After an FBI raid, ex-employees say it cut corners in its quest for growth.

Leadership exits

  • All of uBiome’s top execs are out at the embattled poop-testing startup that’s at the center of an FBI investigation
  • UBiome’s independent directors are ditching the healthcare startup following an FBI raid, and now there’s only 1 left
  • A microbiome-testing company that has raised $105 million has suspended its two main tests and put its co-CEOs on leave following an FBI raid

Science and poop tests

  • A renowned Harvard geneticist and MacArthur ‘genius’ were among the 75 scientist advisers for embattled $600 million poop-testing startup uBiome. But ‘they were pretty much there for show.’
  • I tried a test from troubled poop-testing startup uBiome that let me peek inside a ‘forgotten organ.’ Here’s what I learned.
  • A startup that’s helping us better understand the bugs that live in us just raised $83 million to start developing treatments for diseases like cancer

Complaints and probes

  • UBiome’s board just tapped a former federal prosecutor to run an internal investigation after the FBI raided the $600 million Silicon Valley startup
  • Customer complaints show $600 million health startup uBiome has been surprising patients and insurers with bills for years
  • The FBI reportedly just raided microbiome-testing startup uBiome as part of an investigation into improper billing

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