DRIO: Suite Solution
NASDAQ:DRIO
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Second Quarter 2022 Financial and Operational Results
On August 15, 2022, DarioHealth Corp. (NASDAQ:DRIO) published its second quarter 2022 operational and financial results in a press release and filed its Form 10-Q for the three-month period ending June 30, 2022. Dario hosted a conference call and webcast to discuss results in further detail. Dario announced 69 new accounts signed year to date. Since our last update, Dario has presented several studies that show the effectiveness of its DTx. At the American Diabetes Association’s (ADA) June meeting, Dario presented two studies that demonstrated the effectiveness of co-management of multiple conditions in a single solution. At the Association of Diabetes Care and Education Specialists (ADCES) conference in August, research showed the ability to effectively use the DTx solution in rural areas, which lack the health care structure found in urban areas. With respect to financial performance, revenues increased 18% over the prior year quarter, a slowdown over the previous quarter’s trend due to an implementation delay in the broadly telegraphed national health plan account and irregular recognition of Sanofi revenues. Dario announced that it will be exiting the business to consumer (B2C) segment more rapidly than it had previously anticipated given the higher margins and greater opportunity in the B2B2C business. The company will allocate resources away from consumer and towards the B2B2C efforts. Management highlighted contributions from partners related to customer access, including Sanofi, Solera and Virgin Pulse which are providing connections to new prospects.
Highlights for 2022 include:
➢ Webinar presentation: Navigating Digital Health Trends - January 2022
➢ Physimax acquisition: MSK computer vision services - January 2022
➢ Clinical outcomes study published in the Journal of Medical Internet Research - February 2022
➢ Equity direct offer: $40 million - March 2022
➢ Strategic agreement with Sanofi US - March 2022
➢ DTx success in multiple conditions presented at ADA – June 2022
➢ $50 million, non-dilutive credit facility with OrbiMed – June 2022
➢ DTx impact on depression & anxiety presented at APA convention – August 2022
➢ Association of Diabetes Care and Education Specialists (ADCES) Conference Presentation – August 2022
Dario generated revenues of $6.2 million for the quarter ending June 30, 2022, producing a net loss attributable to common stockholders of ($18.5) million, or ($0.82) per share.1
For the year ending June 30, 2022 and versus the same ending June 30, 2021:
➢ Revenues totaled $6.2 million, increasing 18% from $5.3 million due to sales growth in commercial revenues partially offset by declines in the consumer business;
➢ Gross profit was $1.1 million (18% gross margin), declining 25% from $1.5 million (27% gross margin) with the contraction attributable to higher costs related to the shipping of inventory and amortization of acquired technology;
➢ Research & development expense totaled $4.1 million, rising 11% from $3.7 million, on account of expanding activities into additional product offerings;
➢ Sales and marketing expense totaled $9.3 million, down 4% from $9.6 million, on changes in levels of stock-based compensation and payroll related expenses;
➢ General and administrative expense totaled $5.1 million, falling 17% from $6.1 million, mainly due to lower share-based compensation;
➢ Net loss attributable to holders of common stock was ($18.5) million compared to ($18.3) million or ($0.82) and ($1.16) per common share, respectively, with the improvement in net loss per share attributable to the substantial increase in shares outstanding.
As of June 30, 2022, cash and equivalents totaled $67.9 million, up from $35.8 million at year end 2021. Dario conducted a direct equity offering in March for $40 million and entered into a credit agreement with OrbiMed in June which provided $25 million in proceeds and another $25 million available when needed, subject to revenue requirements. Cash burn for 1H:22 and 2Q:22 totaled ($29.5) million and ($11.3) million respectively.
Contracts
Dario continued to add new clients in 2022 with press releases for six new entities since the beginning of 2Q:22. Dario reports 69 accounts signed year to date and is targeting at least 100 by year end. The larger agreements were dominated by behavioral health services, underlining the importance of last year’s acquisition of wayForward. Other contracts included multiple solutions, which provide high incremental margins, greater penetration into client populations and increased revenue per user.
Strategic Agreement with Sanofi US
In 1Q:22 Dario 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.
There are three revenue components to the Sanofi agreement: 1) market access, 2) development services for integration of Sanofi devices, and 3) revenue from Dario’s data set. While revenues from this agreement will vary widely from quarter to quarter, Dario is expecting $8 million in proceeds in the first year and $7 million in the second and third years.
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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 analysis but use our calculated numbers on page 1 of this report and in our model.
2. Source: DarioHealth 2Q:22 Earnings Release Presentation, August 2022
