Happy Thursday and welcome to the latest version of Allstate 12 Hospitalogy. Seriously…if the Big 12 rebrands to the Allstate 12 Conference it'll be sickening. And that's coming from a Texas fan, where the Lamborghini NIL deals flow freely. Back to healthcare - today's send is about virtual MSK, Sword Health's journey and transformation into an AI Care company, and what's next. This took me a while to put together with the visual below, so if you enjoy it, I would love for you to share Hospitalogy with a coworker or friend! Thanks so much to Candor Health and NeuroFlow for sponsoring today's send! |
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Going deeper on an interesting topic, theme, or trend |
Sword Health's $3 Billion Journey to becoming an AI Care Company |
Pain sucks. Right now, billions of people globally deal with pain on a daily basis. I personally dealt with a ton of excruciating pain when I broke my tibia and fibula as a senior in high school (no, I won't show you the x-ray, orthopods). So it goes without saying pain management, physical therapy, chronic disease management, and more…hold massive whitespaces for companies to tackle, and digital health players have entered these spaces in droves, raising huge sums in the post-pandemic feeding frenzy: - "MSK funding grew six-fold between 2020 ($236M) and 2021 ($1.4B), as virtual MSK clinics Hinge Health ($300M and $400M) and Sword Health ($25M, $85M and $163M) each completed multiple raises across the year." (Rock Health)
But most recent was Sword Health's AI launch and fundraising announcement, and this one caught my eye for several reasons. The firm, led by Virgílio "V" Bento is on a journey to free 2 billion people from pain. |
"Outcomes reporting and funding momentum are paving the way for continued investor and market attention—MSK digital health solutions have raised $223M so far this year, already nearly double that of 2023's $125M." (Rock Health) I reached out to the Sword team this week and asked them a few questions around their team's vision, strategy, and even company culture. They were gracious enough to respond on a quick timeline and indulge my creator procrastination. Here were some of my more notable takeaways: Not just an MSK company. Sword really wants to differentiate itself and pull away from the idea it's more than MSK. They're focused on more than physical pain. So the plan from here is…let's continue to go deep vertically on MSK and related conditions, but also horizontally into other chronic conditions. They'll lean into AI to power care delivery at scale, self-describing their firm as the pioneer of AI Care (and has delivered 3 million+ 'AI sessions' to members to-date). A bit on the nose in 2024? Maybe, but I can appreciate the boldness. The team has learned from the digital health graveyard. Sword has been more thoughtful around growth, shying away from burning its cash irresponsibly, yet still growing impressively to 800 individuals and, as of August 2023, a $100M contracted ARR. Today after the June round, Sword has an extra $30M+ in the coffers for a rainy day, collecting interest and created some goodwill for its employees via a nice liquidity event. |
Sword has a comparable, if not superior product to traditional PT. Of all the tech-enabled services verticals, virtual MSK in particular arguably holds up the best from a clinical rigor standpoint. The Peterson Health Technology Institute more or less corroborates this in its recent virtual MSK solution evaluation. Adding to clinical evidence and good outcomes, adherence to a PT program tends to be higher with a virtual MSK solution (as compared to in-person), Sword's NPS is 74+, and also…interestingly…Sword contractually guarantees with employees the firm will save its clients money, attributing savings generally to the below categories (most notably surgery prevention) - ..."Since 2010, more than $4.2B of venture capital has been invested in companies in the MSK space, and the value of transactions in the space has totaled $38.2B"
- ..."Sword has the largest base of clinical evidence among any solution evaluated in this report."
- ..."Studies by Hinge and Sword compose the bulk of clinical information in the physical-therapist guided solution category, with only Sword providing prospective interventional trials within-person PT as the control."
- - Peterson Health Technology Institute Virtual MSK Health Technology Assessment
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Oh and finally…Sword will be profitable by the end of 2024. A private digital health company, launched during the pandemic, profitable by the end of the year. It's hard to believe. Over the course of 2024, Sword plans include continuing to innovate at scale, addressing pelvic health issues in women, and balancing growth with quality. As Sword often likes to say, they're only 5% done! |
This probably sounds a bit like a puff piece, and it is, to some extent. I'll be honest, hand up. I want better solutions for folks, and a better patient experience. As a millennial, I want more convenient, streamlined PT and pain management. And I want that for every facet of healthcare. I know - I sound like a naive optimist. But Sword Health was exciting to learn about and hear from, and it's delivering a good product for patients while catering to what employers and health plans want in a contractual relationship. As a result, Sword is benefiting financially. Love to see it. Here's my final burning question: will Sword Health overcome the digital health valuation conundrum? I can't help but bring up valuation as a former valuation guy. It's like a reflex for me. And I'm jaded from the Health Tech 1.0 companies. The companies that went public in the frothy public market environment and were crucified for their absurd multiples and inability to execute. My logic is as follows: Sword privately is worth $3B today…at or around $100M in annual recurring revenue (assuming this is still correct from that mid-2023 graphic). If you do the math, that's a hefty multiple, with quite a bit of forward growth baked in. For an imperfect comparison (I know, tech-enabled versus traditional, Sword is more than MSK, yadda yadda - I'm sure many a VC will still scoff at this comparison), U.S. Physical Therapy - a publicly traded, traditional provider of PT services - owns and/or operates 670 or so PT clinics and generated $605 million in revenue in 2023, growing at a 9% clip. As a mature PT player, USPT is worth $1.7B and trades at 2.7x forward revenue. The delta is significant. That's all I'm saying. Is this time different? Will Sword grow into that valuation, or is the virtual MSK space a commodity? Today, the firm is growing like the 15-year old basketball child prodigy of a couple of D1 athletes. Since inception over 3 years ago, the firm has grown at an overall, sexy 11,000% clip. The perceived growth runway from this point is incredibly long. Can Sword continue to deliver an AI-enabled, scalable virtual solution to 2B people globally? The promise of AI here delivers a hefty promise. If so, Sword is worth well over $3 billion. Sword has clearly attracted a ton of investor interest, even in a tough fundraising environment, and I'll take that as a market signal that its AI solution validates the valuation. I'm looking forward to following along Sword's AI-enabled Care journey, and hopefully one day soon we'll have another public digital health company to analyze. Here's hoping this upcoming batch of Health Tech 2.0 firms have learned well from their predecessors. |
Just keep in mind that private, VC-backed valuations (and most valuations, to be sure) are more art than science! Thoughts? Opinions? Hot takes? Hit me with them by replying to this email. |
The latest from inside my community of healthcare thinkers |
This week I published a robust analysis of health system financial performance, categorizing some of the largest organizations on revenue growth, operating margin, and dynamics affecting those variables. It's a deep data-driven dive into Q1 2024 finances including links to all source financials, my graphics straight from Powerpoint, and more. Upcoming events include: - A review and roundtable discussion of major healthcare events in the first half of 2024, and second half outlook hosted by yours truly and a couple other community members
- A summer catch-up including Hospitalogy quarterly guest posting opportunities for when I go on PTO or am traveling
- A fireside chat on ICHRA (timing tbd)
- A fireside chat with Board Room's David McCormick, COO at Carium (timing tbd)
Join my community below! |
How can healthcare organizations better support expectant parents facing mental health challenges? This issue is all too common, but NeuroFlow's upcoming webinar on June 18th at 2pm ET will be answering this question in detail. This crucial session will delve into effective strategies to support expectant parents, addressing the stark reality that 75% of women with perinatal mental health conditions go untreated. You'll hear from experts like Dr. Kristin Tugman from Prudential, Megan Moore of Presbyterian Healthcare Services, and Julia Kastner from NeuroFlow as they discuss proactive, tailored approaches to enhance care throughout pregnancy. Register below and let's fill the critical gaps in maternal health. Register here |
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The latest startup and funding news |
- Sword Health raises $130M, and its valuation soars to $3B.
- Alzheon raises $100 Million Series E to advance development and commercialization of its Alzheimer's treatment.
- CinRx Pharma corrals $73M to continue its 'Hub and Spoke' model of startup formation.
- Eko Health raises $41 Million to scale AI-driven heart and lung disease detection.
- Anterior secures $20 Million Series A to unlock administrative efficiencies for healthcare payers.
- SamaCare secures $17M Series B investment to scale specialty drug prior authorization platform.
- Plenful secures $17M Series A to streamline pharmacy operations with AI-powered workflow automation.
- Grayce collects a $10.4M Series A led by Maveron amid a caregiving crisis.
- Better Health raises $14M to deploy expanded payer partnerships.
- Stitch PEO announces $8.75M in seed funding to support independent medical practices.
- Posterity Health raises $6M to fund expansion and technology acceleration.
- Sware raises $6M to accelerate life sciences innovation by automating FDA-mandated software validation.
- Keragon raises $3M, as announced in Conno Christou's LinkedIn post.
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Here are some jobs that I'm curating for the healthcare industry. You can see the full list of jobs I've curated here. If you're looking to hire, use the promo code HOSPITALOGY to get your first job listing free on my curated job board. |
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Thanks for the read! Let me know what you thought by replying back to this email. — Blake |
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