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Digital health is one of the few sectors of the economy to develop during the coronavirus pandemic.
Omada Health, a company that sells virtual and in-person tools to manage chronic diseases, capitalizes on the sudden interest of investors.
The company has just withdrawn $ 57 million from the Perceptive Advisors investment fund, which focuses on health and life sciences, and used part of that money to buy a small digital health start-up called Physera , specializing in virtual physiotherapy. About $ 30 million of the total was used for the acquisition, a person familiar with the transaction told CNBC.
Omada started in 2011 to bring new digital tools, such as smartphone-based trainers and wireless scales, to the diabetes prevention program. DPP, led by the United States Centers for Disease Control and Prevention, is designed to help people at risk of diabetes – about 1 in 3 American adults – avoid contracting the disease by changing their lifestyle. Omada’s idea was to make the program as virtual as possible to help it grow and to raise enough funds along the way for clinical studies to work.
Omada has raised over $ 250 million, making it one of the most popular digital health businesses. When its previous cycle was lifted in 2019, the company was valued at $ 600 million. He is currently competing with Livongo, which went public in 2019 and records significant growth since the start of the pandemic.
The digital health sector is globally should be worth more than $ 500 billion by 2025.
Over the past five years, Omada has expanded its reach to offer more services tailored to people with behavioral health issues, as well as a range of cardiovascular diseases. Many patients treated with this disease have overlapping conditions called comorbidities – for example, they may have diabetes and suffer from depression.
By picking up Physera, Omada enters a new arena: virtually administered physiotherapy. When workers experience pain and don’t get the help they need, they miss work or are less productive. Some will opt for expensive and sometimes unnecessary surgeries.
It is a huge problem and a huge source of health care costs. Reports found that up to 1 in 2 American adults has a musculoskeletal disorder. Worse, the country experiences a national shortage of providers. By 2025, 27,000 additional physiotherapists will be required to meet the growing demand. Average annual direct cost of musculoskeletal care is estimated to more than $ 980 billion.
So for companies, services like Physera offer them a way to avoid downstream costs.
Omada and Physera sell to health plans and employers, who cover the total or partial cost of the service. Medicare and Medicaid have been slower to cover virtual care services, but Omada and Physera executives say they are seeing the regulatory landscape change in their favor. During the pandemic, the federal government agreed to pay for virtual tours and registrations to ensure that people at high risk for the virus – and who don’t want to leave their homes – can still receive medical care.
“Telehealth is here to stay,” said Omada CEO Sean Duffy. “It is more important than ever, and consumer expectations are changing now that more people have been brought in.”
Physera CEO Y. Dan Rubinstein, who previously managed products at Palantir and worked as director of product management at Facebook, said his company has seen “tremendous growth since the start of Covid-19” . Rubinstein said that some employers and health plans are rolling out the service faster now and skipping the limited release phase because there was such a need for online health options.
“People cancel their appointments and the clinics don’t see the patients, yet the need still exists for them to be treated,” he said.
Rubinstein said his start-up was starting to hear from outside investors before making the decision to sell.
“For us, we decided it was the right decision when we asked how to reach the most patients,” he said.