Blood Money…


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Not sure if it was the penultimate episode of “Game of Thrones” or recent press coverage of Ambrosia LLC, which was marketing, and subsequently reprimanded by the FDA, “longevity” blood plasma transfusions for $8,000 that caused me to look more closely at the blood supply industry. And what a strange set of dynamics at work – a product with a relatively short shelf life, largely dependent on donors, and one that appears to have terrific gross margins. With advances in technology and business model innovation, the amount of blood required to meet current needs has dropped dramatically but unfortunately for an increasing number of individuals, their precise blood type has likely become very hard to find.

First, some context. Over 13.6 million units of whole blood are collected every year in the U.S. for the 4.5 million Americans who will require a transfusion which is nearly

blood

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Dazzling VC Activity in 1Q19…


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At the 2018 year-end holidays, venture capitalists celebrated an unprecedented year of investment activity, certain that it could not be repeated. Now that the books on 1Q19 are closed, the pace seems to have only modestly unabated from an historic 4Q19 with $32.6 billion invested in 1,853 companies. All of this was punctuated by the Lyft IPO in the second to last day of the quarter.

While the activity in 1Q19 was indeed down from the prior quarter, it was still the second highest month in nearly 20 years. Now that the S&P 500 Index is within a few percentage points of its all-time high set in September 2018, the anticipation of sustained unicorn IPO activity has bolstered investor confidence. All of this is further energized by the 3.2% GDP growth in 1Q19.

 

1Q19 VC

Evidence of continued concentration of capital, by company and by venture capital fund, persists. The top ten deals accounted

1Q19 A B Valuation
1Q19 C D Valuation
yield curve

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Quarterly Check-up On Healthcare…


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Notwithstanding the quite significant stock market turmoil for publicly traded healthcare companies in recent months, the level of private investment actitivty continued to be quite strong this past quarter. According to Rock Health, 1Q19 registered just under $1.0 billion of investments made in 61 healthcare technology companies, which while below the trailing two year quarterly average of $1.4 billion, still suggests an annual investment pace running toward $4.0 billion. StartUp Health, which reports global funding data and inlcudes non-software healthcare companies, tabulated $2.8 billion invested in the quarter.

Q1-Funding_Digital-Health-Funding-1200x720

It certainly appears that 2018 may well have been a high-water mark for digital health funding. Over the last five years, between 300 – 375 companies were funded annually in the healthcare technology sector. A more modest investment pace arguably will lead to a greater degree of consolidation, from which stronger companies should emerge. It also suggests that

Q1-Funding_Acquisitions-1200x760
Income vs HC Spend

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Colombia – Peace Dividend Boosts Healthcare…


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What a fascinating time to have traveled in Colombia. In addition to being scorching hot (it is bisected by the equator), the country recently settled a painful 55-year Marxist uprising, to say nothing of the extraordinary level of despair on its eastern border with Venezuela. Last week there were large street protests in the capital city of Bogota against proposed changes by President Duque to adjudicate the nearly one million pending cases from the half-century long conflict that claimed 250k lives.

Colombia measures over 440k square miles with a population of 50 million people, which is estimated to have just expanded by over one million Venezuelans fleeing the repressive and wholly incompetent regime of President Maduro. The last two decades saw dramatic GDP growth, which is estimated to be $345 billion in 2019 by Trading Economics (or approximately $7k per capita). Colombia is deemed to be one of only 18

colombia-gdp
Santa Cruz del Islote

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Flare Capital Team Expands – Yet Again…


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Today we are thrilled to welcome Parth Desai to the Flare Capital investment team as a Senior Associate. As a partnership we will make literally hundreds of decisions together every year but the decision to add to the team is a profoundly important one and one that is infrequently done. Parth’s background makes him almost uniquely prepared to help us right away.

Most recently, Parth was with the investment team at New York Presbyterian Hospital, focused on a wide array of innovative solutions to improve both the quality and the ability to access care while driving improved patient outcomes. Prior to his time there, he spent nearly five years at Deloitte Consulting advising provider systems as they re-architected their care models, often to arrange novel risk-bearing arrangements. Right after graduate school, Parth was a Health Policy Analyst for the Massachusetts House of Representatives, where he worked on critical oversight legislation Continue reading “Flare Capital Team Expands – Yet Again…”

Do Rich People Live Longer?


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Undoubtedly – by almost 15 years according to a landmark National Institutes of Health study which looked at over 1.4 billion de-identified U.S. tax records from 1999 – 2014, comparing them to associated death records from the Social Security Administration. According to the National Center for Health Statistics (May 2017), life expectancy at birth increased from 72.6 to 78.8 years between 1975 to 2015. This improvement has been attributed to dramatic advances in medical technologies as well as resources devoted to enhanced public health and education programs. As impressive as this is, whether you are rich or not actually appears to play a greater role in how long you will live.

This is obviously a very complicated analysis, compounded by almost innumerable variables such as local health behaviors (e.g., prevalence of smoking, access to quality food and housing), strength of local governmental assistance

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nihms783419f1 (3)
Income by County
Life Expectancy At Birth

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What a Freaking Crazy Year…


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Who thought that it could get any better? After nearly $83 billion of venture capital was invested in 2017, this past year clocked in at nearly $131 billion; in fact, 4Q18 registered $41.8 billion or nearly half of all of 2017 activity, according to National Venture Capital Association and PitchBook data. The level of activity was unprecedented and has left some industry observers somewhat befuddled as to the current state of the venture capital industry.

2018 VC

As always, the headlines risk obfuscating a number of significant trends and themes. Notwithstanding that the amount invested in 4Q18 was $10 billion more than just the immediate prior quarter, nearly 10% fewer companies were financed (2,071 in 4Q18 vs. 2,282 in 3Q18), further underscoring the recurring theme of capital concentration with fewer companies raising disproportionately larger rounds. Across the board, average deal size was markedly greater in 2018 than for any of the

2018 Round Size
2018 Valuations
2018 Funds Raised
Invested vs Raised

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Healthcare Bubble Concerns – Likely Overblown….


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By nearly every measure, 2018 was a banner year for the venture capital industry, particularly in the healthcare technology sector. Over $130 billion of venture capital was invested across all sectors, easily eclipsing the prior high-water mark in 2000 and nearly 4.8x of what was invested a decade ago. In the healthcare technology sector, according to Rock Health, $8.1 billion was invested in 368 companies which is notably greater than the $5.7 billion invested in 2017 (StartUp Health pegs 2018 at $14.8 billion globally).

But have we entered a healthcare technology bubble?

First, some context. Over the past five years, healthcare technology investors have funded consistently between 300 – 375 companies each year. Between 2014 – 2016, the amount of capital invested annually ranged between $4.1 – $4.7 billion. The average deal size spiked to $21.9 million in 2018 but otherwise

2018-year-end-funding-report_total-funding-1200x725
2019 ytd
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us debt

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“Pentafecta”


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I did not know that “pentafecta” was actually a word, and while it does not perfectly describe the background of Flare Capital’s Dan Gebremedhin, it is serviceable as it suggests the extraordinary range he has.

Dan joined the firm in April 2015, just as we were getting started, and today we celebrate his promotion to Partner. Someone of enormous talent and range, Dan and I first met nearly ten years ago when he was raising capital for his healthcare technology start-up (“fecta” #1). While I did not end up investing in that company, it was clear that he had extraordinary potential. He had earned his MD and trained at Massachusetts General Hospital (“fecta” #2), and when we first met, was studying to get his MBA at Harvard University (“fecta” #3).

After graduation from Harvard Business School, Dan joined Harvard Pilgrim Health Plan where he served as Associate Medical Director Continue reading ““Pentafecta””

Sugar High


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Between being stuffed at Thanksgiving and having visions of Christmas sugar plum fairies dancing in my head, thoughts of healthy eating are elusively far away. Given how pervasive sugar is in U.S. diets, it was striking to learn that the commodity price of sugar has declined so dramatically over the last two years. In fact, over this decade, save for a sugar “short squeeze” in 2016, the price has collapsed by nearly 65%.

Globally, there was a record 186 million metric tons of sugar produced last year, which was an 11% increase from the prior year. Of this amount, 178 million metric tons was for human consumption. According to the U.S. Department of Agriculture, domestic sugar consumption was 11.3 million metric tons. Nearly 80% of sugar is produced from sugar cane, which turns out to be a very important structural element of the sugar industry. Sugar cane is

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Krebs Cycle

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Heading For Home – 3Q18 Funding Environment…


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The Bureau of Economic Analysis recently announced that the real Gross Domestic Product increased at a 3.5% annual rate in 3Q18, which while lower than the 4.2% reading in 2Q18, continued a streak of six quarters above 2.0%. Notwithstanding strong economic fundamentals, there appears to be evidence that the sugar high provided by the corporate tax cut may wearing off as 35% of the S&P 500 companies missed 3Q18 Wall Street revenue estimates according to FactSet. Year-over-year revenue growth estimates for the S&P 500 is 7.3% although for fiscal 2019, revenue growth estimates have been lowered from 8.2% to 5.4%. According to Evercore ISI, 3Q18 year-over-year corporate earnings will have increased 24% but 13% of that is attributed to the tax cuts, while 11% is organic growth. This broad reset, alongside raising interest rates, are in large measure responsible for the marked increase in

3Q18 Growth
3Q18 deal value
Valuation A B
Valuation C D
Digital Health Landscape - October 2018

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Collison Course: Observations from Shanghai…


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Jet lag is a strange and mysterious thing. In the middle of the night a few weeks ago I found myself on a treadmill in my Shanghai hotel gym riveted to the Poland vs Iran men’s volleyball match on Chinese State Television. It was a welcome respite from CNN International and the battering ram of worsening news on U.S. – China relations. As many of you know, Twitter, Google, Facebook, etc are blocked in country and even certain CNN segments are blacked-out when covering awkward China-related stories. Whenever the recurring piece on the disappearance of Fan Bingbing played, my tv went dark as if someone pulled the plug from the wall.

The headlines in the U.S. are often at risk of masking some of the extraordinary advancements in the Chinese capital markets as well as the dramatic success stories in their innovation economy. While there certainly does appear

China Starbucks
China Collide
China Weather
China Plan

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Easy Rider: Circulation Case Study


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The sale of Circulation, which was a Flare Capital portfolio company, closed two weeks ago. The company successfully deployed a leading patient-centric transportation exchange for non-emergency medical rides (“NEMT”), leveraging a virtual national transportation provider network anchored by Lyft and Uber. This announcement was concurrent with CareMore Health’s announcement of the results from its two-month Lyft pilot, which were nothing less than startlingly positive. CareMore is an integrated health plan with over 100,000 members; the cost savings were so significant that they were able to offer 28,000 rides at no additional cost to the plan. Rides were 39% less expensive with meaningfully shorter wait times and much greater member satisfaction.

NEMT

It was a terrific outcome for the team and investors. Flare Capital was the largest investor, having seeded the company less than two years ago. Upon reflection, there were a handful of critical elements to the Circulation story which

Uber Cool

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Escape to Singapore…


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Having been chased out of Hong Kong by Super Typhoon Mangkhut on Friday, a few days in Singapore with investors and entrepreneurs offered a modest respite. Actually, no…it was the Singapore Formula One Grand Prix weekend at the sovereign city-state, which coincided with the Singapore Summit that convened global leaders (quite different from the notorious June 2018 summit with other leaders, Trump and Kim). Not surprisingly, Lewis Hamilton below in the silver “car” (more like a rocket with wheels) won the race.

Singapore 2018

This island country of less than 280 square miles, sitting on the southern tip of Malaysia balanced on the equator, has become a global powerhouse in commerce, finance, education and healthcare since securing independence in 1965 from said Malaysia. Home to 5.6 million people, 74% of whom are ethnic Chinese, Singapore ranks third in the world in GDP per capita and fourth in quality of healthcare.

Unfortunately, Continue reading “Escape to Singapore…”

Calm Before the Storm…in Hong Kong


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While in Hong Kong this past week, it appeared that there were only three stories that the newspapers wanted to cover. Quite clearly, the first and by far the most important was Super Typhoon Mangkhut which made landfall the day after I headed out. It was forecasted to be the worst storm to hit the colony in recorded history, graded a level T10 which is the highest possible level. And it did not disappoint.

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Growing up in Hong Kong, I had become somewhat accustom to significant tropical storms battering the island. In fact, Hong Kong has become quite resilient to these storms, and as devastating as Mangkhut was, there was very modest loss of life (initial counts point to less than five fatalities in Hong Kong, although there was significant carnage in the Philippines). All the focus on the typhoon underscored how impressive the Hong Kong healthcare system is but also Continue reading “Calm Before the Storm…in Hong Kong”

Twilight Zone…


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What a remarkable week, and not just because of the political “twilight zone” we are now dialed into, but the current S&P 500 bull run officially became the longest one over the past 70 years. Since this run started in March 2009, the index has increased 323% over the past 3,452 days. Unfortunately, over the past 20 years, U.S. public equity markets have returned only 6.5% per annum, which is well below longer term equity returns of 10%, per DataTrek Research. Inevitably this has caused many institutional investors to seek greater returns elsewhere. Against this backdrop, seemingly unrelated occurrences such as the crash of cryptocurrencies, performance of emerging market equities, repatriation of overseas cash, and the level of household debt start to make more sense. Mostly due to levels of unprecedented innovation, these fund flows have also contributed to what has been yet again another very strong quarter

Bull Run
2Q18
Exit no data
Venture Capital - Fund Index Summary - Horizon Pooled Return
Raised vs invested

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Art of Healthcare in Basel…


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What a remarkable time to have traveled to Switzerland and the United Kingdom. After a series of meetings with healthcare industry leaders in Switzerland and England last week, the trip put some of the raging healthcare policy debates into better context. Unfortunately, the current U.S. political situation was at times quite distracting with revelation upon revelation unfolding throughout the trip; but no less so than the debates raging around Brexit, bickering over tariffs, Europe’s own version of Russian meddling, and the “baby Trump balloon.” What a surprise to learn that the State Department had issued a travel advisory warning for Americans traveling in London of all places.

Mini Trump.jpeg

Often U.S. politicians opposed to the Affordable Care Act point to the “single payor system” in Europe which unfortunately ignores the fact that there is not one system in Europe and that while countries like Switzerland achieve universal coverage, they Continue reading “Art of Healthcare in Basel…”

Step on Through: Healthcare’s “Digital Doorway”


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Much of the significant recent merger activity in the healthcare sector is focusing renewed attention on the role of the pharmacy and the continued “retailization” of healthcare. Last month Flare Capital announced an investment in Aspen Health which will enable pharmacists to practice to their fullest potential. Now we are excited to announce Flare’s newest portfolio company higi, a company which will further position the pharmacy and other retail settings as the “front door” to one’s healthcare journey.

Higi has built a robust national network of over 11,000 smart health stations (as well as a host of robust mobile applications), which are within five miles of nearly 80% of all Americans, and capture a wide array of biometric data including blood pressure, pulse, weight as well as survey and demographic data. They are located across 14 retail partners (pharmacies, supermarkets covering more than 50 banners) as well

higi.pdf

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Plus One – Flare Team Expands…


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Investment partnerships make many decisions together – many are small and relatively inconsequently decisions while others are more profound and impactful. Together we will make dozens of investment decisions over the course of any given fund, but we will only make a few personnel decisions. So, with great anticipation, we are excited to announce that Sarah Sossong has joined Flare Capital Partner as a Principal.

For nearly two decades, Sarah has been in the middle of the transformation of healthcare, most recently as the Senior Director for the Center of Telehealth at Massachusetts General Hospital for the past six years, where she was in middle of launching several novel care delivery solutions. Previously, Sarah was managing a wide range of innovative healthcare technology projects at Kaiser Permanente for seven years. But it does not stop there: she is also super smart having graduated from Princeton University magna cum laude and Continue reading “Plus One – Flare Team Expands…”

A Pharmacist Working His Magic…


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A staggering $453 billion will be spent on pharmaceutical products in 2018 in the United States per Statista analyst estimates. Ten years ago, that amount was $291 billion. With 326 million Americans, that is nearly $1,400 per capita. Into this marketplace enters Aspen Health, our most recent “semi-stealth” investment which is focused on enabling pharmacists to practice to their fullest potential.

Much has been made about the devastating opioid crisis, and appropriately so. What has come to light in this current raging debate has been greater scrutiny of the various pharmaceutical distribution channels and whether the role of the pharmacist can be expanded to play a more meaningful patient-centric role. The increased complexity of the mix of therapeutics as increasingly more of them move to biologics and specialty drugs (now 42% of pharma revenues) necessitates the need for competent clinical pharmacy practices.

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Aspen Health is founded by David Medvedeff

pharmacy

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