Paragonix Technologies — a company that launched in 2010 as a response to the lack of innovation in the donor organ preservation and transport process — closed a Series B funding round on Tuesday. The $24 million round was led by Signet Healthcare Partners.
The Cambridge, Massachusetts-based company provides transplant centers and organ procurement organizations (OPOs) with medical devices designed for the preservation and transportation of donor organs.
The traditional method of preservation requires the organ to be transported in a cooler of crushed ice. Due to unstable temperatures, many facilities that receive organs preserved in this manner report that they arrive frozen and damaged, said Paragonix CEO Lisa Anderson.
“Paragonix determined there was an opportunity for a more scientifically reproducible, measurable and reliable solution to transporting an organ from a donor to recipient,” she said. “We set out to create a new standard for organ preservation and transport that would provide the care and quality of handling commensurate with transporting such a valuable gift and improve patient outcomes worldwide.”
Paragonix’s devices are made from a series of interconnected systems that work together to provide a cool and sterile environment within a consistent range of 4-8° Celsius. The company sells three devices, each designed for a different organ (heart, lung and liver). All have been cleared by the Food and Drug Administration.
Each device works slightly differently based on specific user needs related to the organ type, Anderson said. For example, the heart preservation device has pouches filled with proprietary cooling solutions that keep the organ at optimal temperatures during transport. The heart is contained within a nested canister and is then housed in a wheeled shipper container that works to protect and insulate the inner contents.
All of Paragonix’s devices display the organ’s temperature while it is being transported. They also use bluetooth monitoring and tracking technology to allow surgeons to track the organ’s exact location throughout its journey, even in flight, Anderson pointed out.
Paragonix markets and sells its devices to transplant centers and OPOs across the U.S. and Europe. Last year, over one in five thoracic donor organs transplanted in the U.S. were preserved using a Paragonix device, Anderson declared. She also said that 19 out of the 30 largest U.S. heart transplant programs rely on Paragonix devices to safely preserve, track and transport organs to their intended recipients.
There are a few other companies that make devices to preserve donor organs, such as Organ Recovery Systems and Bridge to Life. But Anderson contended Paragonix’s devices are easier to use.
“Most other organ preservation devices are extremely complicated, labor intensive and require special personal or extensive training, while Paragonix’s devices are lightweight, user friendly, and a user can be trained in less than an hour,” she declared.
Anderson explained that her company’s main competition is the legacy way of transporting organs, as many organizations still receive damaged organs that were transported using the over-ice method. The medical industry needs to move away from this method of organ preservation because devices like the ones that Paragonix sells are clinically proven to improve patient outcomes and reduce the risk of post-surgical complications, she declared.
Picture: Getty Images, ThomasVogel
The rift between hospitals and commercial insurers is age old. But a new survey shows the relationship isn’t going to improve any time soon.
The American Hospital Association (AHA) survey, released Wednesday, found that 78% of hospitals and health systems said their relationship with commercial insurers is getting worse. Less than 1% said their relationship is improving and the rest said it has stayed the same.
The survey included 304 respondents representing 772 hospitals. All of the respondents are members of AHA.
One of the main culprits behind the worsening relationship appears to be certain practices of commercial insurers, such as prior authorization. The report found that 95% of hospitals and health systems said staff time spent seeking prior authorization approval is increasing. Meanwhile, 62% of prior authorization denials are eventually overturned, the report found.
Aside from time spent on administrative procedures, costs may also be a factor in the relationship souring. A whopping 84% said the cost of complying with insurer policies is also increasing.
“Misuse of utilization management tools like prior authorization has several negative implications for patients and the health care system,” AHA said in the report. “Prior authorization denials can result in delays of necessary treatment for patients and ultimately lead to unexpected medical bills. The extensive approval process that doctors and nurses must go through adds wasted dollars to the health care system through overuse of prior authorization, inefficient submission processes, excessive requests for unnecessary documentation and the need to reprocess inappropriate payment and coverage denials.”
AHA also takes issue with claims denials, stating that commercial health insurers are “increasingly delaying and denying coverage of medically necessary care.” However, 50% of claims denials that are appealed are overturned, AHA said.
There are financial consequences to these delays and denials, AHA stated. The survey found that 50% of hospitals have more than $100 million in accounts receivable for claims that are older than six months, totaling $6.4 billion in delayed or potentially unpaid claims among the 772 hospitals in the survey. Another 35% of respondents said they’ve lost $50 million or more in revenue because of denied claims.
“These payment delays and denials for medically necessary care have serious implications for the financial stability of health care providers and compound fiscal challenges plaguing our health care system,” AHA said.
The report also provided several policy recommendations, including streamlining the prior authorization process and increasing oversight on insurers. Additionally, the organization sent a letter to the Department of Health and Human Services and the Department of Labor, calling for action against commercial payers.
“Health care coverage must work better for patients and the providers who care for them. We urge you to take additional steps to ensure adequate oversight of commercial health plans, including those offering Medicare Advantage plans, this open enrollment season,” the letter stated. “Individuals and families should feel assured that the plan they choose during open enrollment will actually be there for them when they need care.”
America’s Health Insurance Plans (AHIP) declined to comment publicly on AHA’s survey, but previously told MedCity News that commercial insurers’ practices are needed to reduce expenses for patients.
“Health insurance providers advocate for the people they serve by ensuring that the right care is delivered at the right time in the right setting — and covered at a cost that patients can afford. Prior authorization prevents waste and improves affordability for patients, consumers, and employers,” Kristine Grow, AHIP spokesperson, previously said. “Health insurance providers have a comprehensive view of the health care system and each patient’s medical claims history and work to ensure that medications or treatments prescribed by clinicians are safe, effective, and affordable for patients. This results in better outcomes and lower costs for patients.”
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Much like the media roadshow to promote it, Kate Bingham’s new book detailing her experience as the head of the UK’s Vaccine Task Force during the Covid-19 pandemic pulls no punches. The book’s biggest takeaway is Bingham’s assertion that the UK has failed to prepare for the next pandemic by missing the educational opportunities presented by the last one.
Chief among her concerns is that the value of vaccine development and pathogen-related R&D is not being realised – both from a public health and economic perspective. It’s a view that I am sympathetic to. At a time when we are focused on kick-starting the UK economy, connecting the dots between our commercial strengths in R&D and advanced manufacturing with the medical needs of the wider world is imperative.
It’s through this lens perhaps, that we should view the recent rapid growth in the number of pathogen-handling labs around the world. More than 40 new biosafety labs are currently planned, including 27 to the highest levels of containment, with nations like India leading the way. While these labs aren’t the be-all-and-end-all of pandemic preparedness, they point to the willingness of others to outstrip UK investment and overtake the seven labs we currently have here.
Building on Bingham’s argument, there are a number of factors that make pandemic preparedness something the UK is well-placed to capitalise on. The creation of The Pandemic Institute in Liverpool and Pandemic Sciences Institute in Oxford was a natural outcome of the Covid-19 crisis. These institutes both benefit from the conscious clustering of experts in regional life sciences hubs across the UK, including the North West, West Midlands and, of course, the ‘golden triangle’ to deliver world-leading research quickly and effectively.
But I would argue that we need to be doing more to support these regional hubs and, in particular, to bring high spec testing facilities closer to the commercially-minded organisations, campuses and innovation zones that shape their outputs for market.
The ability to do so though continues to be constrained by commercial practicalities. Biosafety labs, by their very nature, require the strictest containment and security standards, and are ultimately expensive to run at a time when the government is focussed on balancing the books. While it would take significant political will to underwrite and reduce the market barriers developers like my employer Bruntwood SciTech face when developing highly regulated labs, the long-term commercial benefits should not be discounted.
If we are to witness another pandemic in the future – which of course may not carry the same consequences as Covid-19 – it’s clear that we need to see science featuring higher up the government’s agenda. We also need that to be the case if the UK economy is to deliver growth and generate prosperity for all – something the government’s chief scientific adviser Sir Patrick Vallance has recently made a point of.
It’s with that in mind that I welcome the re-appointment of George Freeman as the UK’s science minister under Rishi Sunak. I have long called for the post to carry greater seniority within government and any initiative to increase its political heft needs to be progressed if we are to be taken seriously as a nation wanting to be viewed as a science superpower by 2030.
By embracing life sciences as an engine for growth, we can not only avoid the mistakes of the last pandemic but lead the preparation for the next.
When it comes to investment, including healthcare and biotech, companies in the Bay area, Boston and New York tend to get the lion’s share of venture capital. But in recent years there’s been greater attention to investment in companies beyond those regions. The Covid-19 pandemic also played a significant role as people were forced to limit travel and use Zoom to connect their In a panel discussion at INVEST Digital Health, healthcare and life science investors discussed investment strategies and why they are placing their funding bets in states like Texas, Indiana, Utah and Arkansas.
The panel, Investing between the coasts, moderated by Dr. Hubert Zajicek, CEO, partner and co-founder of Health Wildcatters, offered a window into how investors are finding companies that match their investment theses, even in states that are not thought of as startup hubs. The panel was sponsored by Lyda Hill Philanthropies.
“We were the most active investor in Arkansas last year,” said Ayush Jain, a senior associate with Revolution’s Rise of the Rest Seed Fund. The fund, which was started by Steve Case of AOL fame, has made investments in more than 200 companies in 40 states since 2017.
The video platform Zoom has made an indelible impact towards democratizing investment across the country, according to Ayse McCracken, a founder and board chair with Ignite Healthcare in Houston and president of eNNOVATE Health Ventures. Ignite focuses on women-led digital health and medical device startups, while eNNOVATE invests in a broad array of startups across the continent of Africa.
McCracken said it was one of the unintended consequences of the pandemic.
“[Zoom] has allowed us to connect with entrepreneurs all across the country and all across the world and match them with mentors across the U.S. All of a sudden, we were working with an expanded ecosystem coast to coast, and we were working with startups coming from all across the country. We have eight of the 22 companies [in our latest cohort] that are coming from the Texas market — San Antonio, Austin, Dallas and Houston, which is great. We’d love to see Texas continue to grow. Denver has been another location where we’re seeing a number of entrepreneurs come from, also Minneapolis.”
Max Rosett, a principal with Research Bridge Partners, conceded that Zoom has been useful for connecting with and keeping in touch with portfolio companies in areas that would have otherwise been costly to travel to from his offices in Salt Lake City.
“This is going to sound incredibly trite and yet it’s incredibly real. Now that it’s okay to have board meetings over Zoom, life is much easier,” Rosett said.
Research Bridge Partners, which focuses on life science companies, is trying to chip away at what it refers to on its website as the “geographic misalignment” of venture capital in the Bay area and Boston. It also calls attention to trends among larger venture capital firms of creating lab-to-market systems to advance ideas towards financial liquidity that make it tougher for midcontinent principal investigators to access, because these firms favor institutional brand and geographical proximity to their offices.
Although everyone is pleased that the worst of the pandemic appears to be over, Zajicek said that in the past two years the accelerator has received a record number of applications from all over the world, which has spurred the development of a hybrid program combining in-person and Zoom-based interactions with startups in its cohorts. It has added an international flavor to its startup portfolio. Add to that the accelerator’s advantageous base in Dallas, in close proximity to an airport with the most direct flights in the country.
“It has flattened the world in non-trivial ways,” Zajicek said.
Health Wildcatters recently moved its offices to Pegasus Park, a 13-floor building that offers lots of space for healthcare and life science startups to work and connect with investors and collaboration partners.
Jain agreed that Zoom can offer a useful complement to in-person meetings and has made it easier to foster relationships with startups. He emphasized the importance of regional startup incubator and accelerator spaces, which frequently host demo days and other events to bring investors and startups together. They can also prove useful for investors from out of town seeking to plug into the regional startup ecosystem.
“If there’s a city that you gravitate towards, whether it’s because of a particular industry strength, or a personal connection, those are factors to leverage when you build relationships in those cities and find deal flow there,” Jain said. “That’s something we lean on a lot. We’re not lead investors. So we rely on finding opportunities to invest in startups, mostly through local regional investors, accelerators, incubators, places like Pegasus Park, where there’s a ton of companies. There’s some institutions in other cities like this. I think finding those and really honing in on them and building relationships is important.”
After the dizzying pace of digital health investment in 2021, it’s helpful to assess what has happened so far this year and what activity this sector is likely to see for the rest of 2022.
According to this H1 2022 report from Rock Health, digital health funding activity has slowed, a trend that the industry is likely well aware of. Rock Health reports $10.3 billion was raised in the first half, which extrapolates to $21 billion for the year, a marked decline from last year’s total of $29.1 billion.
However, while a projected 27.6% drop in digital health funding is significant, we should be careful not to read too much into it. Activity in the first half of this year is disappointing only directly in reference to the unprecedented level of activity in 2021. This year’s total is very likely to surpass the 2020 total of $14.7 billion, which was higher than 2019’s figure. Looking at the longer trend, digital health funding has been on a strong upward growth trajectory over the past decade – driven by fundamental improvements in technology, an increasingly favorable regulatory environment, and actual realized value from digital health innovations. While 2022 will likely be a reset from the tremendous growth in digital health funding of 2021, this is a healthy correction and an opportunity to realign on core metrics.
Keeping that in mind, it’s worth examining some of the Rock Health findings.
While the decline in funding this year can be at least partially attributed to a return to normal, investment in digital health has been affected by macroeconomics as well. Though healthcare is relatively resilient compared to other sectors, it’s not immune to the larger forces at play, such as inflation, the risk of recession, and the uncertainty and supply chain disruption caused by war in Ukraine.
Some of the most impacted companies are those selling to large enterprises – including health systems and pharmaceutical companies – who are looking to prioritize their spending initiatives to only the top few with the strongest value proposition, greatest return on investment (ROI), and time to value. Within this environment, it is even more important for startups to be clear about their ROI – measuring and publishing this data when possible – and emphasizing this value to potential customers to ensure their solutions fall within that prioritized list of initiatives during this turbulent period.
Mental health startups
Digital health startups offering mental healthcare secured the top clinical funding spot in H1 2022, according to the research. However, that field is under some scrutiny.
While mental healthcare startups raised a combined $1.3 billion in H1 2022, only $300 million closed in Q2 2022. While there are many reasons for significant quarter-to-quarter variability, one can also look to the public markets where a number of companies in this sector have underperformed both the broader markets and their digital health peers (NASDAQ: PEAR, NASDAQ: LFST, NASDAQ: TALKW). While this sector holds tremendous potential, the fundamental question of how to effectively transform mental healthcare delivery – making it more accessible, personalized, and effective at scale – has yet to be solved.
As a result, as we go through 2022 and into 2023, I expect continued activity in this sector; however, we should also anticipate a step down from the peaks of 2021 and Q1 of 2022 as expectations moderate and valuations recalibrate, which may also lead to a wave of consolidation.
SPACs and M&As
The first half of the year saw a significant slowdown in digital health mergers and acquisitions (M&A), compared to 2021’s record activity. There also has been a steep decline in companies going public.
First, going public. We must acknowledge the relatively poor performance of some recent exits, particularly of firms that went public via special purpose acquisition companies (SPACs) that have affected the digital health sector, in some cases more severely than other sectors. To be clear, the vast majority of these companies are great businesses; however, in hindsight we were not seeing the same performance benchmark requirements for the average SPAC company compared to the average IPO company: namely, a strong, proven commercial business model, reliable quarterly forecasting, and well-established comparables, among other attributes. As a result, public investors were quicker to turn on these companies as the markets dropped and have cooled on SPACs more broadly.
The public market downturn has not spared companies that went public via the traditional IPO process, either. One sector that has received quite a bit of attention has been the tech-enabled services field, which includes major telehealth and hybrid-model care providers (NYSE:TDOC, NASDAQ:ONEM, NYSE:AMWL). During the market peak, many of these businesses saw market caps reflective of revenue multiples of high-growth, high-margin tech companies (20-30x P/S ratios); the recent correction has instead brought their multiples much closer to alignment with premium services businesses (2-4x). Which set of multiples is the more appropriate can be debated, but what’s clear is that this reset has changed how these companies are expected to spend and grow, their plans to go public, and also the thought process of M&A.
While we naturally expect a high-valuation environment to be a catalyst for M&A – acquirers can leverage high-value stock to transact a deal and acquirees are pleased by the attractive prices — we also can expect a wave of consolidation in the lower valuation environment. In particular, there are a large number of established enterprises with piles of cash who are eager to get into the healthcare space, but who mostly sat out earlier waves of acquisition due to high target prices. Just Thursday, we’ve seen the first major sign of this as Amazon (NASDAQ:AMZN) announced an agreement to acquire One Medical (NASDAQ:ONEM) for $18/share – a healthy premium to its recent trading price though below where it traded for much of 2021. As market prices continue to be attractive over the coming 12-18 months, I would expect to see significant waves of M&A ranging from large acquisitions to sector consolidations.
Looking forward to new opportunities
As with many investors, GSR Ventures had its most active investment year for digital health in 2021. 2022 and beyond will undoubtedly bring change as the macroenvironment shifts, valuations and multiples reset downward, and the mix of prominent and emerging digital health sectors undergoes rapid adjustment.
But most importantly, the need for the digital transformation of healthcare has not lessened; if anything, it’s become more pronounced. For as long as that need exists, there will be great opportunities to invest in companies driving that shift.
Disclaimer: Nothing presented within this article is intended to constitute investment advice or recommendation, and under no circumstances should any information provided herein be used or considered as an offer to sell or a solicitation of an offer to buy an interest in any investment fund managed by GSR Ventures (“GSR”). Any investment decisions shall exclusively vest based on his/her/its independent discretion and GSR will not be liable for any consequences thereof. Information provided reflects GSR’ s views as of a time, whereby such views are subject to change at any point and GSR shall not be obligated to provide notice of any change. Companies mentioned in this article are a representative sample of portfolio companies in which GSR has invested, which do not reflect all investments made by GSR. An alphabetical list of GSR’s investments is available here. No assumptions should be made that investments listed above were or will be profitable. Due to various risks and uncertainties, actual events, results or the actual experience may differ materially from those reflected or contemplated in these statements. Nothing contained in this article may be relied upon as a guarantee or assurance as to the future success of any particular company. Past performance is not indicative of future results.
With whopping $100M investment, UnitedHealth Group seeks to tackle workforce crisis and lack of diversity
Providers have sounded the alarm on healthcare’s workforce shortage in recent years, warning that the issue will have serious consequences for patient care and Americans’ collective health. The shortage has also recently gained the attention of national leaders — just two weeks ago, Surgeon General Dr. Vivek Murthy issued an advisory calling on the country to address health worker burnout, a key reason behind Americans’ decisions to abandon healthcare roles. Now, one of the country’s largest healthcare organizations has committed $100 million to addressing the crisis.
UnitedHealth Group will invest $100 million over 10 years in building the healthcare workforce, Patricia Lewis, the company’s chief sustainability officer, announced Wednesday at the Social Innovation Summit.
The U.S. could see a deficit of 200,000 to 450,000 registered nurses available to provide direct patient care by 2025, according to a McKinsey report released last month. Mercer research shows that the country also faces an estimated shortage of more than 3.2 million lower-wage healthcare workers, such as nursing assistants and home health aides, within the next five years.
UnitedHealth Group’s investment, made through United Health Foundation, seeks not only to address not only this shortage of employees, but also the healthcare workforce’s striking lack of diversity. Only 22% of Black patients and 23% of Hispanic patients have a provider of the same race, according to research from the Urban Institute.
The $100 million investment will sponsor 10,000 clinicians from underrepresented racial groups who are pursuing or advancing careers in healthcare. It is the single largest philanthropic commitment ever made by the United Health Foundation.
The foundation will provide funding to about 5,000 underrepresented students who are pursuing careers in primary care, Lewis said. Over four years, students will be able to get up to $20,000 for their education.
The rest of the funds will go to about 5,000 current healthcare professionals from underrepresented racial groups who want to advance their careers. The foundation will provide funding for physicians, nurses, medical assistants, mental health professionals and midwives who are seeking additional degrees, accreditation or certifications.
“When we think about diversity in the healthcare pipeline, we think about cultural competence,” Lewis said. “And that occurs when physicians are from similar backgrounds as their patients. We see data and evidence that suggests they have a better opportunity to build very strong relationships this way because they can relate to their patients’ experiences, and we see that there are better outcomes when that happens.”
Lewis noted that while $100 million may seem like a rather big number, it will not solve all of healthcare’s workforce problems, neither shortage-wise nor diversity-wise. She said her company made the investment to do its part in continuing to advance the healthcare worker pipeline so that 10 years down the road, the industry has more professionals and they look more like the patients they serve.
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