Dive Brief:
- DarioHealth, which makes digital health products for chronic conditions, has acquired mental health app maker Twill for $10 million in cash and about 10 million shares of common stock, the company announced Wednesday.
- The deal will boost Dario’s revenue and accelerate its path to profitability, executives said in a press release.
- The purchase comes as digital health industry watchers have said merger and acquisition activity could pick up in the sector this year as venture funding declines and customers grow tired of managing a host of vendors.
Dive Insight:
More than $29 billion flowed into digital health startups in the wake of the COVID-19 pandemic in 2021, and a number of companies exited to the public markets, according to venture capital fund and consultancy Rock Health.
But investment faltered last year — marking the lowest funding level seen in the sector since 2019 — and no digital health companies went public.
Consolidation may be the next step for startups that are unable to raise more capital in a pared-down funding environment, experts say. Acquirers might also see opportunities to add to their product portfolios with cheaper assets, according to Rock Health.
Teladoc Health, which is undergoing its own operational review to cut expenses, told analysts on an earnings call this week the telehealth vendor would allocate funds toward M&A to add to its line-up of services.
Plus, consolidation could be welcomed by buyers of digital health products, like health plans and employers, who are overwhelmed by a glut of tools that manage a limited number of health conditions, experts told Healthcare Dive last year.
That’s one factor behind the Twill deal, Rick Anderson, president of Dario, said in a statement. The combined offering could allow the company to improve health outcomes across broader populations, and connect users with the right tools as they need them.
“The market is demanding more conditions from less vendors to reduce point solution fatigue and the high cost of managing multiple vendors,” Anderson said.
The purchase is also expected to nearly double Dario’s pro forma revenue for 2023, the company said in a press release.
Dario brought in $16.74 million in revenue for the nine months ended Sept. 30, a nearly 20% decrease from the prior-year period. The firm reported a net loss of $45.1 million during the nine months, compared with $49.6 million in 2022.
Alongside the Twill buy, Dario announced it had raised $22.4 million in a private stock placement.
