Weekly Health Tech Reads | 2/9/25

Public Market Earnings Updates

• Oscar reported Q4 earnings, with its stock sliding ~10% despite financials that seemed pretty solid. Oscar achieved positive net income for the full year in 2024, generating $25.4 million. Oscar had a slightly higher MLR than expected despite utilization actually trending better than anticipated. MLR was higher because of the Q4 Wakely report, where Oscar saw risk scores going up in some markets faster than expected. The earnings call featured some interesting strategic points on the ACA markets, notably with Oscar mentioning that it is assuming that 9.1% of members won’t actually pay a premium this year, up from 4.1% in previous years due to the payment integrity efforts on the exchanges. Analysts were seemingly impressed by Oscar’s ability to reduce SG&A spend meaningfully, which seems in part due to Oscar’s adoption of AI.

• Centene reported Q4 earnings on Tuesday and its stock dropped 8% on the week despite it seemingly beating on key financial metrics and increasing revenue guidance by $4 billion for 2025 because of Medicare PDP and a Medicaid behavioral contract win. During the earnings call, Centene continued to project strength on the growth prospects for the business across Medicaid, Medicare, and the exchanges. Of note, when asked about M&A opportunities, Centene mentioned ICHRA infrastructure as a key opportunity for them. Centene called out Georgia as a good model for the future of the individual markets, both on- and off-exchange with ICHRA included there. There was little shared specifically about ICHRA growth beyond noting that Centene hired a leader during the quarter to oversee the ICHRA business.

• Molina shares sunk 10% on its Q4 earnings report on Thursday as it missed estimates for the quarter. During the earnings call, it referred to 2025 as a year of transition with “some early growing pains as the business transforms to serve the increasingly integrated and high-growth dual-eligible population.” Despite worries over the Medicaid program under the current administration, Molina shared its belief that any changes to the program will be marginal, noting that neither side of the political aisle wants to see more uninsured. Lots of analyst questions about Molina’s MLR miss during the quarter and some of the levers that caused that — it sounds like it was persistently high utilization across some of the same core levers it’s seen previously in LTSS, pharmacy, and behavioral health.

Chart of the Week

Novo Nordisk’s presentation accompanying its latest earnings results provides a good illustration of how the GLP-1 market has tripled globally over the last several years. Novo Nordisk and Eli Lilly have consistently held a combined market share around 97%, as Novo reports an increase in patient reach from 4 million to 12 million patients over that period.

This growth still has not been enough to satiate investors in recent months. The WSJ highlighted how investors have had growing concerns about slowing growth in the GLP-1 market.

Other Noteworthy News

• Elevance acquired Alphabet’s stop-loss insurance product, Granular Insurance. Alphabet initially launched the stop-loss product in 2020 in partnership with Swiss Re. By 2023, the stop-loss business was receiving press for being Alphabet’s fastest-growing line of business. But the writing on the wall appeared to be there at the time, as The Verge article noted that it was unclear what Alphabet was actually doing differently beyond pricing its product lower in an attempt to win business. For anyone who has followed along with the rise and fall of some insure tech businesses over the past few years, there is no surer way of growing quickly before flaming out than underpricing an insurance product. When you couple that with recent reporting on the profitability challenges the stop-loss market has been facing, it’s not hard to envision a scenario where Verily is jettisoning an asset deemed non-core as it attempts to raise capital and spin out in 2025.

• Rubicon Founders acquired a majority stake in ambulatory infusion center Horizon Infusions for ~$125 million from PE firm BroadOak. Horizon Infusions, which is reported to be generating ~$8 million of EBITDA annually, operates 21 infusion centers across Ohio. BroadOak originally acquired the business back in 2019. The infusion market has been seeing a lot of investment activity in recent years, and the general thesis seems pretty straightforward: as more high-cost drugs requiring infusions come down the pipe, it will be important to have low-cost infusion therapy sites to deliver those medicines. This market report from August 2024 does a nice job providing an overview of the state of the market, noting that the number of FDA-approved drugs requiring infusions grew from 9 in 2016 to 137 in 2024, with all of the top twelve drugs by Medicare Part B spend requiring infusions.

• Function Health is rumored to be raising a new $200 million round of funding at a $2 billion valuation. Per the reporting, Function has ~100,000 members paying $500 for 100 lab tests. Function also made waves earlier in 2024 for a partnership with Equinox to offer its lab tests as part of an Equinox training program.

• Teladoc acquired Catapult Health for $65 million plus a $5 million earn out. Catapult, which makes an at-home diagnostic exam, did $30 million of revenue in the trailing twelve months from Q3 2024. Catapult’s product will be integrated into Teladoc’s Integrated Care segment, used to identify members with chronic conditions and enroll them in Teladoc’s various offerings.

• The Financial Times reports that Cotiviti, an $11 billion healthcare data business, is close to acquiring rival Edifecs for a little over $3 billion after Edifecs turned down a $3.5 billion offer from UnitedHealth Group over antitrust concerns. PE firms TA Associates and Francisco Partners purchased a 51% stake in Edifecs in 2020 at a valuation of $1.4 billion.

• Virtual pediatric urgent care provider Summer Health acquired Caraway Health as Summer looks to start accepting insurance.

Funding Announcements

• Berry Street, a platform that helps dietitians operate independent practices, raised $50 million. The TechCrunch article notes that Berry Street and Fay are both seeing substantial growth as GLP-1 treatment plans often require patients to see dietitians.

• Fay, a platform that helps dietitians operate independent practices, raised $50 million.

• Lynx Health, a healthcare payments platform, raised $27 million. Lynx is serving multiple markets, including ICHRA, where it notes 10% of ICHRA plans created are via the Lynx platform.

• Zest Health, a virtual dermatology care model, raised $13 million.

• Little Otter, a virtual mental health model for children and families, raised $9.5 million.

• Affineon, an AI tool for provider inboxes, raised $5 million.

• SimpliFed, a virtual maternal health model, raised $4 million.

Good Reads

ICHRA Reality Check: Exploring the Good, the Bad, and the Road to Scale by Redesign Health
A good look at the ICHRA market, featuring a measured discussion of some of the opportunities in ICHRA, as well as the headwinds that might keep the market from achieving venture-scale returns. It seems that Centene and Oscar’s public positions are driving a good deal of excitement about the space, but there is good reason for caution, too. Read more

The population shifts behind America’s surging healthcare costs by Duncan Greenberg
An interesting perspective looking at what has been driving healthcare costs in America, noting that costs have risen across virtually all categories of healthcare spending. Definitely worth checking out if you’re interested in the topic. Read more

Health Tech’s Defining Decade A Sector Poised for Innovation, Transformation & Impact by Define Ventures
The Define Ventures team makes the case that health tech is a fertile ground for venture capital activity, suggesting that SaaS and hybrid (services + software) models are the most logical for venture investment. Read more

A Healthcare Investor’s Manifesto by Primary Venture Partners
Perspective from a VC suggesting VC hasn’t done much to disrupt the healthcare industry, offering an optimistic tone that consumerism and AI will drive more positive disruptive change moving forward. Read more

National Health Expenditures: Down the Rabbit Hole and Through the Looking Glass by Hal Andrews
A fascinating exploration of how the National Health Expenditure data is calculated as an estimate-of-estimates using non-healthcare data, coming to the conclusion that the number is basically made up. Read more

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