DRIO: 2022 Outlook, Physimax Acquisition

By John Vandermosten, CFA

NASDAQ:DRIO

READ THE FULL DRIO RESEARCH REPORT

Since Our Last Update

Since our last update, DarioHealth Corp. (NASDAQ:DRIO) had issued a number of press releases. Five employer contracts, a contract with a provider, a benefits brokerage, and a large regional health plan were signed since mid-November. Dario hosted an Investor Webinar on January 19, 2022 highlighting trends in the digital therapeutics space and disclosed that it had acquired Physimax. Additional details on stock option compensation were also provided regarding recently appointed Chief Commercial Officer (CCO), Jerrod Helms.

Contracts

When we last published, Dario had signed 47 clients year-to-date in 2021, including employers, benefit providers and health plans. Dario added five more contracts comprised of three employers, one provider and one benefits brokerage, reaching a total of 52 clients by the end of 2020. Dario continued this momentum in 2022 by adding two more employer contracts and one large regional health plan. Below we list Dario’s wins since our last update.

Investor Webinar

On January 19, 2022, Dario hosted an Investor Webinar to discuss digital health industry trends with guest Sari Kaganoff, commercial trends with Dr. David Kaplan, and Dario’s strategy, 2021 summary, and 2022 goals.

Digital Therapeutics Trends

Sari Kaganoff, General Manager; Consulting at Rock Health, provided an overview of the digital health space. US digital health funding and deal size almost doubled in 2021, year-over-year, reaching $29.1 billion in total investment over 729 deals, averaging $39.9 million per transaction. This compared to only $14.9 billion invested over a total of 484, averaging $30.8 million a transaction, in 2020. Platforms supporting multiple therapeutic areas were valued higher. Livongo, like Dario, features Mental Health, musculoskeletal (MSK), and Diabetes platform support and the core of these operations, was valued at $18.5 billion when it was acquired by Teladoc. The number of public exits was significant in 2021 as well, with 15 SPAC2 mergers and eight completed IPOs versus two and six in 2020, respectively. M&A activity also saw an increase, reaching a peak of 79 deals in 3Q:21 versus a low of 22 deals in 2Q:20. In terms of therapeutic areas, Mental Health received the most funding at $5.1 billion versus the next highest therapeutic area cardiovascular at $1.8 billion.

Employer Market Insights

Next, Dr. David Kaplan presented insights into the employer market. Dr. Kaplan summarized priorities for employers and human resource teams: returning to the office/COVID, retaining and recruiting talent, addressing equity issues and preparing for worsening of economic conditions. When considering programs, employers seek the ability to bill through medical budgets, demonstrable return on investment (ROI), simplicity and consolidation of solutions, addressing areas of rising cost, and programs that their employees enjoy. Dario’s CEO Erez Raphael and President and General Manager Rick Anderson then enumerated Dario’s 2021 highlights and 2022 goals.

2021 Highlights, 2022 Strategy

2021 was a pivotal year for Dario. Most noteworthy was the accumulation of B2B wins, rising from 5 to 51, with 70% of deals signed in the last 6 months of the year. Dario’s userbase also grew from 63k to 223k users, and this was reflected in growth of Dario’s estimated annual revenues, from $7.6 million to $20.4 million. Dario also acquired two solutions, wayForward and Upright Health. As of January 19, 2022, Dario had a total of 54 signed accounts. Dario provided revenue guidance for 4Q:21 of $5.9 million, representing 169% growth year-over-year.

Dario is now in the process of implementing solutions for its numerous wins, most of which are expected to generate revenues in the first quarter of 2022. Dario anticipates 4-8 weeks of implementation, 4 weeks of soft launch, and finally 6-12 weeks of user enrollment. Dario detailed the benefits of its multi-condition platform, which is expected to yield higher ARPU4, about $89 PEMPM5 versus $60 PEMPM for multi-condition and single-condition accounts, respectively. Coupled with higher employee eligibility, Dario will be able to generate revenues for its multi-condition accounts that are multiples higher (4.5x) than that of its single condition offerings.

Dario expects to double its wins by the end of 2022, bringing the total number of accounts to 100-120, which are should yield annual recurring revenues of up to $100 million by 2H:23. In 2022, management aims to increase clients launched, grow Dario’s client base, add another 3-5 health plans, achieve multi-condition accounts for 40% of its wins, and establish 1-3 strategic partnerships.

Physimax Acquisition

During the Investor Webinar, Dario announced that it had entered into an agreement to acquire Physimax Technologies Ltd., and issued a press release the following day providing additional detail. The acquisition aims to augment Dario Move with computer vision capabilities. Physimax leverages computer vision Artificial Intelligence (AI) technology for automated MSK functional screening and predictive risk of injury assessment. The platform has been validated by experts and proven to be comparable to trained human professionals. Among Physimax’s customers are NBA and NFL teams, as well as US military and healthcare facilities specializing in orthopedic care. Through the agreement, Dario will acquire the right, title and interest in certain assets of Physimax. In consideration of Physimax’s assets, Dario will issue up to 256,660 common shares (worth approximately $2.5 million) and include $500,000 in cash, and will assume up to $1.02 million in liabilities.

Dario Move

On October 18, 2021, Dario announced that it would unveil Dario Move at HLTH 2021. Dario Move is the result of integrating Dario’s recently acquired MSK solution, Upright Technologies. Integration of the solution is key as Dario’s mission is to provide a holistic, comprehensive digital therapeutics platform to business clients, which can then support employees in the crucial majority time between physician’s visits. Dario Move makes it easy for end users to improve their MSK health by combining adaptive software, technology and personal support and leverages the acquired technologies: single biofeedback sensor, personalized, evidenced based exercise programs designed by physical therapists, real-time feedback, real-time support from coaches and physical therapists, and a highly personalized experience driven by Dario’s AI engine. Dario Move will gain computer vision capabilities as a result of the Physimax acquisition.

Jerrod Helms Appointed Chief Commercial Officer

On November 15, 2021, Dario announced that Jerrod Helms had been appointed its Chief Commercial Officer, who will support Dario’s continued B2B2C initiative, driving rapid expansion across employer, payer, provider and partnership markets. His appointment comes at a time of accelerating growth in Dario’s customer and user base. Helms brings a wealth of sales leadership experience in the business-to-business health care markets, with a successful track record of selling to employers and health plans. He joins Dario after most recently serving as Head of Sales at the combined entity of Ginger and Headspace, and previously held sales leadership roles at Virgin Pulse and Humana. Mr. Helms is currently a member of the Board of Advisors at Gluconfidence. Helms received his Bachelor of Science degree from Texas Tech University.

Summary

Since our last update, Dario continued the momentum from the second half of 2021 adding eight contracts for a total of 52 in 2021 and three additional ones year to date 2022. Dario’s Investor Webinar highlighted trends in the digital therapeutics space, insight into employer purchasing drivers, 2021 highlights, and 2022 goals for the company. During the webinar, management also disclosed Dario’s agreement to acquire Physimax, a move that will augment the Dario Move platform. Further details on the acquisition were made available via press release on January 20th. Additional details on stock option compensation were also provided regarding recently appointed CCO, Jerrod Helms.

SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR. 

DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.

________________________

1. Compiled by Zacks Analyst

2. Special Purpose Acquisition Company

3. DarioHealth Investor Webinar, January 19, 2022, downloadFiling (quotemedia.com)

4. Average Revenue Per User

5. Per Engaged Member Per Month

COMMENTS

WORDPRESS: 0
DISQUS: