Author: ontheflyingbridge

Namaste, India…

What an enormously complicated time to have been in India, and to have been there alongside the recent G20 Summit made for an even more precarious environment. With a general election a year away, Prime Minister Modi assumed the role of global statesman with gigantic posters festooned throughout Delhi. Notwithstanding that the twenty foreign ministers were unable to agree on a joint Ukrainian statement, Secretary of State Blinken and Russian Foreign Minister Lavrov met in Delhi for the first time since the start of the war.

India must walk a fraught tightrope as the country appears to be pivoting more towards the West, as China becomes a greater adversary. Surprisingly, a series of editorials earlier this month in the Hindustan Times expressed deep sympathy toward Russia (citing NATO encroachment, etc.), hoping to ensure important economic ties, while also extolling Modi to “lead in Ukrainian talks.” Since the start of the war in February 2022, India’s purchase of Russian crude oil has increased a staggering 33-fold, and at a 30% discount to global oil benchmarks. India imports nearly 90% of its oil but has created a vast oil refinery industry, ironically now likely to serve as a potential refinery to European oil needs.

While unemployment spiked last month to 7.5%, up from 7.1% in January, the International Monetary Fund estimates that the Indian economy will grow by 6.1% in 2023 and 6.8% in 2024. According to the Centre for Monitoring the Indian Economy, the workforce is estimated to be 410 million (Read more...)

Maldives – Trouble in Paradise?

Go to the end of the earth, and when you get there, turn left and go another few hundred miles and you will be at the Maldives, an independent Muslim country of ~550k people nearly 500 miles off the southern coast of India. Straddling the equator and comprised of 26 atolls covering 35k square miles, the Maldives is the smallest of all Asian countries and is considered the world’s most geographically dispersed. And it faces a host of profound existential threats.

Being so remote does not insulate the Maldives from global issues. The two most obvious and troubling today involve the Covid pandemic and global warming – both issues exported from the rest of the world. Most immediate are public health risks, exacerbated by an inadequate healthcare infrastructure and caused by diseases brought in by tourists.

Early on in the pandemic, the Maldives was considered one of the world’s most active “Covid hot spots” registering the highest number of infections per million people, according to an analysis by Bloomberg. Fortunately, the total number of fatalities was quite modest with just over 300 to date, but it underscores the ever-present exposure to global health crises, especially for a country so dependent on tourism.

Perhaps reflecting a cultural ambivalence or concerns with raising anxiety among tourists, the public health messaging around Covid risks was effectively invisible. Tucked into the corner of the airport terminal was one lonely sign extolling the merits of responsible behavior. Vaccination requirements were waived years ago.

Notwithstanding (Read more...)

Food Crisis: Starving for Attention…

Yesterday just over 25k people died of starvation. The causes that contribute to that tragedy are numerous, and while the problems are often intractable, possible solutions to address this calamity are being developed in disparate settings such as the laboratory, in the capital markets, in restructuring the supply chains, and with fiscal and tax policies.

Many of our pedestrian concerns have likely been eclipsed by the ongoing devastation in Ukraine and the catastrophic earthquakes in Turkey and Syria. Hunger and issues of access to adequate food supplies stare us in the face constantly now. A recent United Nations report titled “State of Food Security and Nutrition in the World” concluded that 2.3 billion people in 2021 faced moderate or severe difficulty in obtaining food, well before these two emerging crises. It is believed that nearly 830 million people struggle with hunger today.

Obviously, the Ukrainian war drove dramatic food price inflation starting a year ago. In addition to supply chain disruptions, there was the dramatic spike in fertilizer prices given that Russia and Belarus account for 35% of global potash and nitrogen production, a critical component of fertilizer. Up until this year, the global agricultural sector experienced dramatic increases in productivity over the last several decades due to the abundance of hydrocarbons used for fuels and fertilizers. That is at risk of reversing.

As impactful, the spike in food export restrictions has significantly reduced the amount of food trade, which in addition to limiting food availability, also exacerbates food price (Read more...)

Making the RightMove…

Just over three months ago, along with our terrific partners at the Hospital for Special Surgery (HSS), we announced the formation of a new company called RightMove Health, which has as its goal to make high quality, patient-focused virtual musculoskeletal (MSK) physical therapy (PT) available to all Americans. HSS is hands down the preeminent leading academic medical center specializing in MSK health.

And like at the Academy Awards there simply are too many people at HSS to acknowledge but clearly a few need to be recognized for having built an extraordinary collection of physical therapy assets and for visionary thinking to partner to build a leading independent company serving the nearly 12 million people who annually utilize physical therapists: Lou Shapiro (CEO @ HSS), Bryan Kelly (incoming CEO @ HSS), Amy Fahrenkopf (President, HSS Health and SVP @ HSS), and David King (Interim Executive and Founding Team member @ RightMove).

Perhaps even more exciting, last week we announced the addition of a rock star CEO, my good friend Marcus Osborne, who is known to many from his extraordinary work for over 14 years at Walmart, most recently serving as SVP Walmart Health. There is not a corner of healthcare or an innovative solution that Marcus has not considered or purchased. And a tip of the hat to the team at Oxeon, led by Patrick Sullivan, who ran an exceptional recruiting process. Importantly, Marcus joins Employee #1, David Lim, who is an exceptional founding Chief Clinical (Read more...)

Digital Health in 2023: Envelope Please…

Obviously, the problems addressed by healthcare technology did not just get cut in half. So, what accounts for the rather dramatic decline in venture investment in digital health from $29.3 billion in 2021 to $15.3 billion in 2022, according to recently published Rock Health data. There has likely never been a more complicated and confounding time to be investing in healthcare than now. Against a backdrop of daunting macroeconomic issues, the problems confronting the healthcare industry requiring innovative solutions continue unabated.

This past week we learned that the U.S. has hit the debt ceiling of $31.4 trillion. The Wall Street Journal’s year-end survey of leading economists peg the likelihood of a recession in 2023 at 61% with a meager 0.2% annual GDP growth rate; fortunately, inflation is expected drop to 3.1% by the end of 2023. GDP growth over the past 12 months was only 1.4% while employment has increased by 3.0%, strongly indicating a rather dramatic decline in worker productivity, which is a leading indicator of recessions. Bank of America now forecasts a 1.1% decrease in GDP in 2023, which would be one of the mildest recessions in decades. Ominously, though, Deutsche Bank expects default rates on high yield bonds to be 5.6% in 2023 and a frightening 11.3% in 2024 – near historic highs.

Paramount to all of this is liquidity and fund flows to determine whether investors are seeking exposure to risk-based assets. Sharp declines in monetary growth inevitably lead to dramatic declines in asset values. Data (Read more...)

Chatterbox: ChatGPT – the Future is Here, Awkwardly…

Me: “Describe the most powerful, potentially disruptive technology to transform the business of healthcare.”

ChatGPT: “Me.”

What to many may look like a typo, ChatGPT is one of the most rapidly adopted technologies to capture the imaginations of the “Technorati.” It took a mere five days for ChatGPT to reach one million users. Three days ago, the Wall Street Journal broke news of talks that OpenAI, the non-profit artificial intelligence research laboratory which developed ChatGPT, is considering a secondary share tender offer for at least $300 million at a $29 billion valuation. This would nearly double the vauation from a financing completed in 2021. Microsoft invested $1 billion in 2019 and is a cornerstone strategic partner with OpenAI, which was founded by Sam Altman and Elon Musk in 2015.

So, what is it? The GPT stands for Generative Pre-trained Transformer and is a natural language processor model. Most chatbots are considered “stateless;” that is, each session starts from the beginning, there is no inherent continuity in the engagement. Not Generative AI which puts forth the “best guess” on what word comes next in the sequence based on the training and is not deterministic. In a sense, it has an ability to “remember” and can pick up where it left off creating a more persistent persona. ChatGPT is not overtly a search engine but can indirectly and powerfully inform and teach. Natural language tools such as ChatGPT inevitably will replace awkward existing graphical user interfaces (GUIs) to create (Read more...)

Israel 2022: Unrelenting Times…

Having spent three energizing yet exhausting days in Israel this past week, one struggles to neatly put the experience in a simple elegant context. Like many countries today, there is extraordinary and somewhat confounding political confusion. There are significant anxieties due to volatile economic conditions. And all of this against a public healthcare crisis that simply will not abate. Maybe one word to capture the zeitgeist of the moment is unrelenting.

Undoubtedly, Israel resides in a neighborhood fraught with conflict, although there are encouraging signs of geopolitical advancements anchored by the Abraham Accords. This framework seeks to (more) normalize relations with the United Arab Emirates (UAE), Bahrain, Morocco and Sudan, with other Arab countries expected to join the fold over the next few years. Since the initial signing, over 500k Israelis have traveled to the UAE in the past two years and there has been an estimated $192 million in trade deals according to an analysis by The Jewish Chronicle. The Israeli Minister of Defense can already point to $791 million in defense exports to the participating countries. Even with this progress, it was fascinating to watch the Morocco – France FIFA World Cup semi-final match at Ben Gurion Airport with several hundred highly partisan Israeli fans on Wednesday night.

But the current political discourse is solely locked now on the rise of the ultranationalist party in the emerging Netanyahu-led Likud party’s coalition, which won the national elections held last month to form the 37th government of (Read more...)

Inbound Health: Make Yourself @ Home…

In 2019, before the pandemic, the U.S. Census Department estimated that 611k people were treated at hospitals every day. In mid-January 2022, at the absolute height of the Omicron surge, there were ~150k daily hospital in-patient admissions recorded due to Covid. As there are 6,093 hospitals in the United States with approximately 921k staffed hospital beds, it is understandable how battered the healthcare delivery system was during that surge. In addition to the pressures to dramatically lower hospital operating costs, it became clear that innovative new care models had to quickly evolve in response.   

While many providers have piloted hospital-at-home (“H@H”) programs, often at sub-scale levels, market forces now make it quite clear that a robust tech-enabled H@H company could be successful. Last month the formation of Inbound Health, a partnership between Allina Health and Flare Capital, was announced with a $20 million Series A. To Allina’s great credit, at the pandemic’s outset its executive team developed a H@H program that has now managed over 4,400 admissions. This program replaced facility-based observation, both for acute and skilled nursing episodes. These cases covered patients across more than 180 diagnosis-related group (“DRG”) codes. In fact, nearly 60% of the episodes since May 2020 are for non-Covid cases. 

Inbound Health provides both the technology infrastructure and analytical capabilities, in addition to the care model, virtual workforce, supply chain, payment models, and a local staff presence as a turnkey solution for other providers to launch H@H programs. The Inbound Health service offers (Read more...)

Digital Health: The End of the Beginning…

Upon the conclusion of a very tough week for U.S. consumer internet and technology stocks that saw over $550 billion of market value evaporated at Alphabet, Amazon, Apple, Meta and Microsoft (combined market value now sits at $6.64 trillion), coupled with the news of the 70% decline upon the first anniversary of the largest bitcoin ETF (Proshares Bitcoin Strategy fund), it is a good time to take stock of the healthcare technology sector. While there has also been significant volatility with healthcare technology stocks, the resilience of top line revenues has been impressive. Admittedly a rather small sampling, the Flare Capital portfolio saw 12% 3Q22 over 2Q22 aggregate revenue growth and nearly a 60% increase 3Q22 over 3Q21. Overall, revenues are tracking ahead of plan for the year, even in spite of worsening economic conditions.

The pandemic obviously triggered a massive acceleration in technology adoption across the healthcare landscape which in turn let loose a wave of digital health investment activity. The healthcare system was forced to become virtual, real-time, on-demand, predictive, intelligent, distributed, empathetic, even more transparent – all capabilities ultimately enabled by novel healthcare technologies. Secondary issues have emerged such as labor force disruption and productivity which also demand robust solutions. McKinsey & Co. estimates that just the pandemic will burden the healthcare system with an additional $220 billion of costs by 2027, this to a system already struggling to be self-sustaining, much less being profitable.

Coming off a record year in 2021 of $29.2 billion invested in (Read more...)

3Q22 Venture Activity: Third Time Was Not a Charm…

Obviously, 3Q22 was a very difficult quarter in the capital markets. Of the 115 global stock, bond ETFs, currencies, and commodity indices tracked by the Wall Street Journal, only 13 of them showed gains, paced by the not surprising 24.7% gain in the New York Mercantile Exchange Natural Gas index. Sadly, the Ukrainian hryvnia declined by 20.0%, slightly out ahead of the oxymoronic Lean Hogs index which dropped by 18.2%. The S&P 500 Health Care index dropped by “only” 5.6%.

The venture capital industry was not insulated from this turbulence which underscores a general “risk-off” investor sentiment that has settled in as inflation and interest rates both continue to rise. The level of venture investment activity in 3Q22 totaled $43.0 billion invested (a nine-quarter low) in an estimated 4,074 companies (a seven-quarter low) according to Pitchbook. While activity slowed across all stages, it was particularly acute in the later stage rounds as crossover investors walked away. Late-stage investments declined to $24.9 billion in 3Q22 from $64.7 billion in 3Q21.

Notwithstanding a collapse in exit activity in 3Q22 to $14.0 billion (in 2021, exits totaled $781.5 billion), fundraising for U.S. venture capital funds has already set a new record with $150.9 billion raised by only 593 funds through 3Q22. Notably, the average fund size raised in 2022 is $254 million, dramatically larger than the average fund size of $129 million in 2021. And 2021 was the second greatest year for fundraising with $147.2 billion raised by 1,139 funds. Fewer firms (Read more...)