DRIO: a torrent of new contracts

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By John Vandermosten, CFA

NASDAQ: DRIO

READ THE FULL DRIO RESEARCH REPORT

Update in progress

DarioHealth Corp. (NASDAQ:DRIO) has added a number of new customers since our last update, continuing its momentum with the B2B2C initiative. Recent victories include:

➢ RPM contract with Coastal Family Health Center – June 2021

➢ Three new employer contracts announced for wayForward – July 2021

➢ Selected to provide RPM for Alabama Regional Medical Services (ARMS) – July 2021

➢ Workplace Options adds Dario’s comprehensive behavioral health solution – July 2021

➢ National employer chooses Dario behavioral health solution – August 2021

➢ Chosen by PeopleOne Health as a digital behavioral health partner – August 2021

➢ Selected by the employer for behavioral health services – September 2021

➢ Chosen by the North-East regional employer – September 2021

➢ Agreement with Global Employer for Metabolic Health Solutions and MSK – October 2021

➢ Agreement with the main national health plan – October 2021

➢ Contract with the US national employer for a complete and multi-condition DTx suite – October 2021

➢ Join the Virgin Pulse partner network – October 2021

➢ Contracts with suppliers in Hawaii and the Atlanta metro – November 2021

Recent B2B2C victories

Dario continues to realize his B2B2C strategy and has announced many victories. The national health plan and multi-conditional agreements seem particularly attractive to us. Below, we provide a summary of the partnerships and contracts that Dario has publicly announced since the start of 2021.

Over the past few months, Dario has added many new clients in Remote Patient Monitoring (RPM), National Employer, Global Employer, Health Plan and other categories as he continues to do progress its B2B2C initiative. In his last update, Dario had a total of 39 clients,2 with an acceleration in numbers based on its recent acquisitions of Upright Technologies and wayForward. The number of users on Dario’s platform has grown significantly to over 197,000 members at the end of the second quarter. We expect this number to increase dramatically as the announced contracts begin to recruit patients.

Dario’s strategy

The numerous contracts announced bear witness to a successful evolution of Dario’s strategy to rely on the three pillars of growth:

➢ Transformation into a high margin Software as a Service (SaaS) business model;

➢ Transition to a business-to-business-to-consumer (B2B2C) digital therapy provider; and

➢ Expansion in the offer of services treating multiple chronic diseases.

Over the past two years, the implementation of this strategy has led to the acquisition of two synergistic platforms, Upright Technologies in musculoskeletal (MSK) and wayForward in the behavioral health space, complemented by organic growth in hypertension management and remote patient monitoring (RPM). A company study showed that around 35% of corporate clients want to offer digital therapy services under multiple conditions to their employees, with a strong preference for offerings recently acquired by Dario.

Dario’s marketing teams are aligned by customer type and channel rather than condition, allowing sales reps to deliver the entire platform. A prospect interested in any of the terms offered can be cross-sold, leveraging a strategy that will use the time and effort of the marketing team more effectively. This approach will fundamentally improve the opportunities for Dario in several ways. It can reach a:

➢ Improved success rate thanks to an expanded offer meeting a wider range of customer needs;

➢ Increase in the eligibility rate of insured persons from 20% to 40%; and

➢ Increase in average revenue per user (ARPU) from $ 60 to $ 80 per member per month.

Success on these three metrics will lead to better margins, greater revenue growth, and a better success rate compared to the previous iteration of Dario Health. The company is focused on developing its product capabilities internally and has amassed a more recently reported backlog of $ 900 million. Most prospects are on a normal schedule, with contracts starting in January 2022. This means that the announcements in Q4 2021 will give an indication of the long-term success of Dario’s efforts to convert the backlog of revenue-generating customers to next year.

Partnerships and initiatives

Virgin Pulse Network

On October 27, 2021, Dario announced that it has partnered with Virgin Pulse, the world’s leading provider of digital and live health and wellness solutions, making Dario’s DTx platform available to employers. and health plans around the world through Virgin Pulse, in particular, through Virgin Pulse’s Homebase for Health solution. Dario’s preconfigured benefits will be available to eligible employees and health plan members. Benefits will include management of diabetes, hypertension, weight management, musculoskeletal disorders and behavioral health, again, driven by Dario’s AI engine to personalize the management of each patient for the management of one or more chronic diseases.

Workplace options

On July 27, 2021, Dario announced its partnership with Workplace Options (WPO), the world’s largest independent provider of integrated employee wellness solutions, to deliver Dario’s digital behavioral health solutions. WPO services allow access to the platform in all languages. With wayForward recently acquired by Dario, Dario’s offering is now aimed at multinational customers who have employees across the world. These international employees will no longer know the language barrier and will be able to access Dario’s behavioral health platform. Likewise, Dario’s potential customer base may expand accordingly. Language support for WPO will be fully integrated with the Dario API.

Workplace Options is a wellness-focused employee support service that provides information, resources, referrals and consultations on a variety of issues, including dependent care and stress management. WPO has service centers in the United States, Canada, United Kingdom, Ireland, Portugal, France, Belgium, United Arab Emirates, Singapore, Japan, China, India and Indonesia that support more than 116,000 organizations and their 70 million employees in more than 200 countries and territories.

MediOrbis

Adding to a list of victories in Dario’s B2B2C initiative, the company announced on April 20, 2021 that it had entered into a partnership with MediOrbis, providing remote patient monitoring (RPM) services to MediOrbis for Medicare diabetic patients. MediOrbis is a telehealth provider specializing in chronic diseases. Covered members with Medicaid may benefit, as part of existing Medicare benefits, from telehealth support provided by MediOrbis and RPM provided by DarioHealth. The virtual care program will also be made available to some 75,000 diabetic members of Dario, 30% of whom are over 65 years of age. The virtual care program will also be marketed to qualified Medicare members who are not currently members of Dario, a population that the Centers for Medicare and Medicaid Services (CMS) estimates at 20% of its 62 million beneficiaries.

Dario Move

On October 18, 2021, Dario announced that it will unveil Dario Move at HLTH 2021. Dario Move is the result of the integration of the MSK solution recently acquired by Dario, Upright Technologies, marking approximately 9 months since the acquisition. Solution integration is critical as Dario’s mission is to provide a holistic and comprehensive digital therapy platform to corporate clients, who can then assist employees in the crucial majority of the time between doctor visits. Dario Move enables end users to easily improve their MSK health by combining adaptive software, technology and personal support and takes advantage of acquired technologies: unique biofeedback sensor, personalized and evidence-based exercise programs designed by physiotherapists, real-time feedback, temporal support from trainers and physiotherapists, and a highly personalized experience driven by Dario’s AI engine.

Summary

Dario has been active for the past two years implementing its new strategy with an accelerating pace of activity until 2021 with two acquisitions and several new transactions announced in the areas of behavioral health, surveillance away from patients and other critical areas. Since June, we have 15 new customer relationships and collaborations with multiple networks to reach even more users. The company has made progress in strengthening its growth pillars and improved its ability to improve win rates, eligibility and revenue per user. The efforts will consume substantial resources and we are increasing our operating costs accordingly. We anticipate new contracts that build on recent successes and the conversion of the backlog into long-term relationships.

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1. Compiled by Zacks Analyst from the public domain

2. With the new additions, this number is likely 10 or about 49 higher.

3. Dario corporate presentation, September 2021.


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