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Since Our Last Update
Since our last update, DarioHealth Corp. (NASDAQ:DRIO) has shared several new announcements with investors. These material events include adding seven new contracts in 2022, raising $40 million in proceeds from a direct offering and closing a $30 million agreement with Sanofi.
Highlights since our last update in late January include:
➢ Four new employer contracts - February 2022
➢ Publication for outcomes using single DTx platform for multiple conditions - February 2022
➢ Pricing of $40 million direct offer - March 2022
➢ Strategic agreement with Sanofi US - March 2022
Contracts
Dario has continued the momentum of its B2B2C initiative into 2022, entering into multiple employer contracts. In the fourth quarter alone, Dario won 14 contracts bringing the 2021 total to 54. Seven more have been added in 2022. Below we summarize the agreements that have been added since late January.
Strategic Agreement with Sanofi US
On March 1, 2022, Dario announced that it had entered into a multi-year, $30 million strategic agreement with Sanofi US. This agreement will support commercial adoption across Dario's full suite of offerings with Sanofi's US commercial clients leveraging the pharma company's sales force. It will extend reach in the health plan and employer markets. The agreement should also stimulate development of new enhanced solutions leveraging Dario's platform and generate robust evidence to support future commercialization in the health plan channel.
The agreement marks Sanofi's latest foray into the tech space since the announcement of its partnership with Google.2 Sanofi's agreement with Dario is a testament to its continued interest in the DTx space and its belief that the future of patient care will be data centric and highly personalized. As a first step in Sanofi's appearance in DTx, the agreement provides Dario additional exposure to health and employer plans and Dario will share its data and analysis with Sanofi. If the partnership is successful, Sanofi may increase its interest in the company. Sales exposure for Dario in terms of sales reps will expand more than fivefold with the addition of Sanofi's commercialization force which will include Dario's digital therapeutic in their portfolio of medicines.
Objectives of the agreement include development of services based on Dario's data and analytics. Sanofi's $30 million investment will be allocated toward the value of the data Dario has collected, its access to this data and its analysis. Sanofi has identified health plans that it will target with the digital offerings, avoiding overlapping sales efforts with Dario. Dario will in turn supply development data, analytics and expertise to support Sanofi's DTx sales. Cash flows from the agreement are expected to begin this year consisting of $8 million in year one, $7 million in years two and three and the remainder thereafter.
Pricing of $40 Million Direct Offer
On March 1st, Dario announced the pricing of its registered direct, at-the-market offering for gross proceeds of $40 million. Participants included institutional investors, leading Israeli insurance companies and existing shareholders. The offer issued 5,342,013 shares of common stock or pre-funded warrants at $7.49 per share. Pre-funded warrants may be exercised immediately at $0.001. Dario intends to use proceeds from this offer to accelerate commercial uptake of its platform in the US, for product development and for general corporate purposes. Cowen and Stifel served as global financial advisors to Dario. Rosario and LifeSci Capital Markets served as financial advisors for the offering. Equipped with this raise, Dario expects cash to amply sustain the firm for two years.
Dario ended the third quarter on September 30, 2021 with $51.5 million in cash and equivalents. Adding first year cash flow from the Sanofi agreement increases this by another $8 million and the net ~$38 million net from the recent financing places the company in a very strong cash position which should support the company's operations for the next two years. We estimate that Dario can achieve cash flow breakeven at an annual revenue run rate of $100 million, which we anticipate in 2024.
Publication for Single DTx Platform-Multiple Conditions Outcomes
On February 9th, Dario announced the publication of a retrospective study demonstrating Dario's DTx impact on managing both blood pressure and diabetes using a single platform in the Journal of Medical Internet Research. The study compared the results of two propensity-matched groups using Dario's digital therapeutic platform to monitor and manage blood sugar levels. Six months of monitoring blood sugar levels with Dario were included in the test group before and after adding blood pressure measurements, while the control group used Dario to manage blood sugar only. The study showed a significant improvement in average blood glucose levels during the first six months of using Dario to manage both blood glucose and blood pressure versus the control group whose average blood glucose levels did not change. Both systolic and diastolic blood pressure dropped during the first six months of monitoring, and 27% of users achieved systolic blood pressure reduction of more than 10mmHg, demonstrating the impact of managing both conditions using a single digital application.
Valuation
We adjust our target price to reflect additional revenues from the Sanofi deal of a modest $1.5 million in 2022 and reduce sales and marketing expense inflation in coming years to reflect the additional efforts the Sanofi sales force will make to advance Dario's DTx offering. Share balance increases by 5.3 million to reflect the $40 million capital raise, which reduces the magnitude of our positive EPS in 2025.
Summary
Since our last update, Dario has continued the momentum in growing the business from 2021 adding four contracts for a total of seven year to date in 2022. Dario also inked a deal with pharmaceutical giant Sanofi, where the latter will receive access to Dario's data and methods in return for $30 million over the next several years and marketing of Dario's digital solutions to health plans and employer mandates through Sanofi's sales force. Dario also completed a $40 million direct offer, proceeds from which are expected to help sustain the firm over the next several years.
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1. Compiled by Zacks Analysts
2. Sanofi and Google to develop new healthcare Innovation Lab - Sanofi
