Digital health player UpHealth swells with three-way merger

A merger involving two US digital health specialists and a blank cheque company has created a telemedicine player, called UpHealth, that is valued at more than $1.3 billion.

The three-way deal combines UpHealth – which provides patient care management, telemedicine and digital pharmacy services and gives its name to the new group – with CloudBreak, which provides a video consultation platform for doctors and patients.

The blank cheque company or ‘special purpose acquisition company’ (SPAC) that provides funding is GigCapital2, which raised $150 million in its public offering in June 2019.

The merger is expected to be completed in the first quarter of 2021, subject to the usual closing conditions. Once completed, UpHealth will continue to be listed on the NYSE but with a new ticker symbol (UPH).

The combined company will cover a broad swathe of the digital health landscape, bringing together population health software, telehealth services, digital pharmacy delivering compounded and manufactured medicines, and tech enabled behavioural health services for people with mental health and substance abuse issues.

It will have pro forma 2020 revenues of around $115 million, rising to $194 million next year, coming from established contracts with health providers, insurers and payors from all 50 states in the US as well as nine international markets, according to the prospectus for the merger.

The new UpHealth will have two co-chief executives – Al Gatmaitan and Ramesh Balakrishnan – with Chirinjeev Kathuria of UpHealth and Avi Katz of GigCapital2 serving as co-chairman.

The elements of its digital health portfolio included integrated care management unit Thrasys – whose SyntraNet health information exchange platform is used to organise patient health records and workflows.

Telehealth will be split into a US division – consisting mainly of CloudBreak – and an international division centred on Glocal Healthcare Systems that is operating in India, Southeast Asia, and Africa.

The digital pharmacy business will be provided by MedQuest, which is licensed in all 50 states and pre-packages and ships medicines direct to patients, serving a network of 13,000 providers.

Finally, behavioural health will be provided by two subsidiaries – TTC Healthcare and Behavioural Health Services – which provide both onsite and telehealth services.

The increased reliance on telemedicine services during the coronavirus pandemic has sparked a flurry of M&A and fundraising activity among providers trying to broaden and expand their businesses.

The largest by far was the $18.5 billion merger between Teladoc and Livongo to create a digital health giant with pro forma sales of $1.3 billion, which came shortly after Teladoc bought InTRouch Health for $600 million.

Other sizeable deals include Veritas Capital’s acquisition of the health and human services assets of DXC Technology for $5 billion, Align Technology’s buyout of digital dentistry specialist exocad for $417 million, and Google’s $100 million investment in telehealth player Amwell on the same day the Boston-based company announced its IPO.

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