After Anthem announced it would invest an undisclosed amount into digital health startup Sharecare, regulatory filings showed that the insurer is pouring $50 million into the startup. Anthem made the investment in a private placement on April 7, as Sharecare looks to go public through a merger with a special purpose acquisition company (SPAC), according to an updated prospectus filed with the Securities and Exchange Commission.
The two companies had been working together since 2016, when Sharecare acquired Healthways’ population health business. But it was Sharecare’s acquisition of Doc.AI, another startup that had been working closely with Anthem, that cinched the deal.
“We were getting ready to file for an IPO, and I was thinking similar to what we did with Blue Cross Blue Shield of Arizona, or Blue Cross Blue Shield of Maryland and others, that it would be great to see if we could get not only strategic alignment with Anthem, but also some financial alignment,” said co-founder and CEO Jeff Arnold, who previously founded WebMD.
After being introduced to Doc.AI at the end of the year, Sharecare closed the acquisition in January. As part of the deal, Anthem’s chief digital officer, Rajeev Ronanki, joined Sharecare’s board of directors.
Sharecare plans to extend Doc.AI’s current contract with Anthem, which includes licensing its Covid-19 evaluation tool and a mental health chatbot. A big part of why Sharecare was also interested in the company was its work with health plans around medical claims, such as reducing the cost of care by predicting medical events.
“We’re trying to build our version of the Facebook for health,” Arnold said. “We want to be the company that helps you get your vaccine, we want to be the company that helps you relieve your anxiety, gets you to see your doctor, helps you with the next best action.”
Revenue declined in 2020
The recent SEC filing also gave more insight into the startup’s financials. Sharecare’s revenue has been on the decline for the last three years, from $342 million in 2018 to $328 million in 2020.
Yet, the startup is projecting a reversal, with $396 million in revenue this year and $512 million next year.
Arnold chalked up last year’s numbers to a “Covid slowdown.” Since then, he said sales have stepped up, including bringing on Delta Air Lines as a client at the beginning of 2021.
The company also reported a net loss of $61 million last year, compared to a $39 million net loss in 2019 and a $55 million net loss in 2018.
Going public via SPAC
Sharecare plans to go public by merging with a blank-check company created by Alan Mnuchin, brother of former treasury secretary Steve Mnuchin. The deal would value the startup at $3.9 billion, or just short of $10 per share, including a total of $425 million in private investment in public equity (PIPE) funding. Both companies are still in the process of closing the merger.
After the deal closes, investors in the SPAC and private placement will own roughly 20% of the combined company.
Arnold said the process happened quickly. As the company began working with investment banks for a traditional IPO late last year, it started getting pursued by various SPACs.
“What I liked about them was that you had more time with investors so it wasn’t just a 20-minute roadshow, and that you could give forecasts,” he said.
Several other healthcare startups joined the so-called “SPAC boom” at the beginning of the year, including 23&Me, Talkspace, and Owlet. But interest has waned as the SEC made recent changes in how companies must account for warrants that are awarded to early investors, and takes a closer look at SPAC projections.
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