DRIO: 2021 Results
NASDAQ:DRIO
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Fourth Quarter and Fiscal Year 2021 Financial and Operational Results
On March 22, 2022, DarioHealth Corp. (NASDAQ:DRIO) published its fourth quarter and fiscal year 2021 operational and financial results and filed its Form 10-K for the period ending December 31, 2021. Dario hosted a conference call and webcast to discuss results in further detail. Dario ended an impressive year with 54 new contracts added in a wide range of regional to global entities in the employer, network and health plan spaces. This success is expected to generate an annualized $36 million in revenues when the contracts are fully implemented. The momentum has continued into 2022 with nine new agreements announced that will even further drive the topline. Add to this the collaboration with Sanofi which includes upfront monies for services and leverages the Sanofi sales force to further commercialize Dario’s offering.
Highlights for 2021 and year to-date include:
➢ 54 new accounts signed in 2021
➢ Acquisition of Upright Technologies - January 2021
➢ Acquisition of wayForward - May 2021
➢ Dario Move unveiled at HLTH 2021 - October 2021
➢ Added to Virgin Pulse partner network - October 2021
➢ Jerrod Helms appointed Chief Commercial Officer - November 2021
➢ Navigating digital health trends webinar 2022 - January 2022
➢ Acquires Physimax, MSK computer vision services - January 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
➢ Eleven new contracts announced year to date 2022
Dario generated revenues of $20.5 million for the year ending December 31, 2021, producing a net loss attributable to common stockholders of ($78.8) million, or ($4.07) per share.1
For the year ending December 31, 2021 and versus the same ending December 31, 2020:
➢ Revenues totaled $20.5 million, increasing 171% from $7.6 million due to new product lines acquired during 2021 and expansion into the B2B market;
➢ Gross profit was $4.0 million, increasing 58% from $2.5 million;
➢ Gross profit margins were 19.3% vs 33.2% mainly due to amortization of expenses related to acquisition of Upright and wayForward. Excluding amortization, margins were 39.3% for 2021;
➢ Research & development expense totaled $17.2 million, rising 290% from $4.4 million, mainly due to increase in salaries and software development expenses;
➢ Sales and marketing expense totaled $39.7 million, rising 160% from $15.2 million, mainly due to increases in digital marketing, payroll related expenses and stock-based compensation;
➢ General and administrative expense totaled $23.5 million, expanding 85% from $12.8 million, mainly due to an increase in stock-based compensation, investor relations, insurance expenses and acquisition-related costs;
➢ Net loss attributable to holders of common stock was ($78.8) million, increasing 138% from ($33.1) million or ($4.07) and ($4.01) per common share, respectively, with the relatively even year over year EPS attributable to the substantial increase in shares outstanding.
As of December 31, 2021, cash and equivalents totaled $35.8 million, up from the $28.6 million at year end 2020. Dario executed a $40 million raise subsequent to the end of the reporting period, which should support operations through 2023. Dario holds no debt on its balance sheet. Cash burn for 2021 totaled ($58.1) million.
Contracts
Dario continued its momentum into 2022 in its B2B2C initiative, executing multiple contracts. In the fourth quarter alone, Dario won 14 contracts bringing the annual total to 54 in 2021. Eleven additional contracts have been added to date in 2022. Below we summarize the latest closed agreements, including two that were announced post the earnings release.
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.
Dario ended 2021 with $35.8 million in cash and equivalents. Adding first year cash flow from the Sanofi agreement increases this by another $8 million and the estimated net ~$38 million net from the recent financing places the company in a strong cash position which should support operations for the next two years. We estimate that Dario can achieve cash flow breakeven at an annual revenue run rate of $100 million.
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.3 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.
Acquisitions
Physimax Acquisition
In late January, Dario announced that it had entered into an agreement to acquire Physimax Technologies Ltd., and issued a press release providing detail. The acquisition aims to augment the features of Dario Move with computer vision capabilities. Physimax leverages computer vision Artificial Intelligence (AI) technology for automated musculoskeletal (MSK) functional screening and predictive risk of injury assessment. The platform has been validated by experts and generates output proven to be comparable to that of trained human professionals. Among Physimax’ customers are NBA and NFL teams, as well as US military and healthcare facilities specializing in orthopedic care. Through the agreement, Dario will acquire the right, title and interest in certain assets of Physimax. Consideration for Physimax’ assets will include 256,660 common shares (worth approximately $2.5 million), $500,000 in cash, and the assumption of up to $1.02 million in liabilities. Dario Move will gain computer vision capabilities as a result of the Physimax acquisition. Dario unveiled Dario Move at HLTH 2021 several months earlier in October of 2021 and emerged as a result of the integration process for Upright Technologies.
Upright Acquisition
As discussed in our February 2021 report, Dario acquired Upright Technologies. Dario announced its acquisition of Upright Technologies in a January 27th press release. Upright Technologies is a leader in the MSK space with over 90,000 users on its platform and almost $13 million in revenues. The company has been historically focused on the business to consumer market with almost all of its current members falling into this category. Upright’s device is a small, approximately 2” long by 1” wide instrument that adheres to the patient’s back. When the user fails to maintain proper posture, it sends a signal that can modify behavior and improve the user’s bearing. Users can also purchase accessories such as a lanyard and adhesive patches to hold the unit in place. An application is available to download on the user’s phone and a coaching service and membership are available.
wayForward Acquisition
We issued a report in May 2021 discussing the details of Dario’s wayForward acquisition. The target provides a platform that leverages AI-based screening to triage and navigate patients to suitable interventions. The platform offers digital Cognitive Behavioral Therapy (CBT), self-directed care, coaching, and access to in-person or telehealth provider visits. As of the deal date, wayForward had accumulated 20,000 members and 20 self-insured employers under its umbrella. The wayForward platform is unique in leveraging AI to screen users, as well as innovative in its implementation of digital tools and coaching, allowing a streamlined and efficient approach to serving patients’ varying degrees of psychological and psychiatric needs, in-network, filling a gap in appropriate access and driving clinical outcomes. In terms of strategy, acquisition of wayForward enables integration with existing in-person and telehealth-based solutions.
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 blood sugar level monitoring with Dario were provided for 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.
Summary
In its latest communications with investors, Dario announced its fourth quarter and fiscal year 2021 operational and financial results and filed its Form 10-K. It reported revenues of $20.5 million for 2021, a 171% increase over prior year levels aided by material contributions from acquisitions wayForward and Upright Technologies. Higher costs across the board related to acquisitions and research and development costs led to a net loss of ($78.8) million. As of year-end 2021, cash and equivalents totaled $35.8 million, an amount augmented by a $40 million raise in February that should be sufficient to see the firm through 2023. Cash consumed in 2021 totaled ($58.1)4 million, an amount expected to improve in 2022 as margins rise and fixed costs are levered.
Dario continues its momentum from 2021 adding nine contracts thus far in 2022. We look forward to a strong year of revenues in 2022 as numerous new agreements come online and contributions from the Sanofi arrangement flow through the income statement.
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1. Earnings per share as provided in the press release include adjustments that are not included in company filings. We use company-provided earnings per share in the discussion section to align with management discussion but use our calculated numbers on page 1 of this report and in our model.
2. Compiled by Zacks Analyst
3. Sanofi and Google to develop new healthcare Innovation Lab - Sanofi
4. Including the approximate $8 million in cash used for the wayForward and Upright acquisitions.
