Given the spotlight on digital health over the past year, we have been heavily focused on the outlook for telehealth, remote patient monitoring (RPM), digital therapeutics, and determining which solutions are necessities vs. “nice to have.” From this work, we became interested in the investment theme within "online coaching," pleasant experiences in disease management, and eventually, our newest Best Idea Long. DarioHealth (DRIO) is a digital therapeutics company, which engages in the research, development, and sale of pharmaceutical products. It offers a monitoring device, mobile application, and data services for diabetes management. The firm solutions include MyDario, Daro Engage, and Dario Intelligence, as well as Upright Go and Upright Go 2 through the recent acquisition of Upright Technologies.
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DRIO | Best Idea Long Please join us on Thursday, March 25, 2020 @ 2 PM ET Participating Dialing Instructions Toll Free: Toll: UK: 0 Confirmation Number: 13717452 Healthcare Subscribers: CLICK HERE for event details (includes video, dial-in and materials link) |
Overview
DarioHealth (DRIO) is a new Hedgeye Health Care Best Idea long. We will host a live presentation on Thursday, March 25, 2021, to review our outlook. We continue to work on this one because we believe employers, health plans, and providers will persist in their search for alternatives to save money on chronic members and patients. We believe the key to turning around this business is the shift in strategy from primarily B2C to a focus on "where the money is" within B2B2C. Given that "wellness" is not something an HR manager ever wants to discuss, we believe DRIO has a unique opportunity to position itself as a helpful, positive ROI solution for employers. A "great story if true," Dario's ability to close a subset of their pipeline this year is critical to beating what we view as conservative consensus estimates. Although recent comps, such as Livongo and Hinge indicate high multiples for this type of offering, we don't need to see multiples as high for this stock to work. Based on our estimates for the combined company, we can model 28.17MM for 2021 and 47.24MM for 2022.
Thesis
The key to the stock working will be forward estimates, which will be driven by pipeline conversion. News of wins should highlight the upside potential we see for revenue looking out to 2022. In their most recent conference appearance, Dario quoted the pipeline to be $600 million vs. the last update of $500 million. Regardless, until they close a deal, it's only a nice data point. In our interview with their management team, Rick Anderson stated that they expect to close 10% to 20% of the pipeline per year, which would equate to $60MM-$120MM in new business versus the current run rate of $10MM on the base business. We expect that RFPs in 1H21 will turn into announced contracts in 3Q21, followed by implementation in 2022. We are reassured by management's involvement in the selling process, as well as the slew of credible new hires and commentary that deals signed in 4Q20 are already generating revenue in 1Q21.
Total Adressable Market
Catalysts, Trackers, & Data
Valuation & Estimates
