text: Day 3 Notes for the 39th Annual J.P. Morgan Healthcare Conference, 2021 | Healthcare Law Blog
  Telehealth and Mental Health:
  One area where telehealth is likely here to stay is in the behavioral health space. Look no further than the latest SPAC acquisition announcement today with the behavioral health-focused TalkSpace announcing its $1.4 billion go-public SPAC deal with Hudson Executive. TalkSpace, a pure-play virtual behavioral health platform that is subscription based and offers text-based asynchronous (i.e., not "live") therapy, has shown immense growth during 2020 and has demonstrated that increased access and lower costs for behavioral health services can drive better outcomes. You may have seen the company's advertising recently that features Olympic swimmer Michael Phelps or actress Demi Lovato. The company connects directly with consumers and through health plans and employee benefit plans to over 46,000 members. It has a network of over 2,650 providers and has 39 million commercial covered lives. Perhaps the most critical aspect of its offering is the ease of use. Connecting with a therapist or psychiatrist can take days, weeks or months to set up in a traditional in-person setting.
  With TalkSpace, members are typically matched through an algorithm with, and then connected to, a provider on the same day, dramatically reducing the time between the decision to seek care and the provision of actual care. The patient can change therapists as needed within the platform or consult with a psychiatrist, and patient progress is measured through machine learning/artificial intelligence with feedback to the therapists. Therapists also are mentored during the onboarding process and then as they work for TalkSpace. Therapists agree to respond to patients' texts within a specified time period and post their working and non-working hours. TalkSpace is growing nationally and works with both employers directly, with consumers/patients directly and with insurers. Public reports estimate TalkSpace's estimated 2021 net revenue at $125 million, up approximately 69% from 2020 estimated net revenue. If we apply a multiple of revenue to the transaction using 2021 numbers, that is more than a 10x revenue multiple, consistent with other behavioral health telehealth acquisitions in 2020 such as AbleTo, clearly showing the extreme strategic and investor interest in the sector.
  It will be interesting to see where telehealth lands in the healthcare ecosystem. As we saw from Rite Aid's presentation this week, Rite Aid believes that offering telehealth services within its retail stores – as opposed to offering customers the in-person experience that is best represented by CVS' Minute Clinics – is the more efficient and effective use of its retail space. Considering Rite Aid's strategy, it will be interesting to see whether the placement of a telehealth offering in the same retail space as the dispensing pharmacy will help with patients prescription refill compliance and timing.
  The Tests of the Pandemic:
  Seeing presentations from companies like OPKO Health, Inc. and Quidel Corporation got us thinking about the success stories that don't get much media coverage during this whole catastrophe. We have heard all about and lived through the utilization downturn in the healthcare services industry, but all of those tests and all of the lab work that needs to be done to read those tests has to be done by someone. Enter Quidel and OPKO. Quidel had over $1 billion in revenue in 2020 from its Sofia rapid point of care testing product (210% revenue growth) and has zero debt. They are producing 3 million tests a week right now. There are now over 65,000 Sofia Automated Analyzer FIA systems in the world. Quidel also is developing over the counter testing supplies, which include its less expensive QuickVue tests and its higher end Sofia Q tester that includes a stand-alone diagnostic reader that integrates with an AI system on your mobile phone will both be ready to buy in Q1 2021.
  So long as COVID-19 testing is necessary, we can expect leaders in the testing industry like Quidel to continue to see strong financial results. The question on my mind is what happens after the current COVID-19 public health emergency is over? For Quidel, the deployment of all of its testing equipment into the healthcare services space (think hospitals, urgent care facilities, physician offices, etc. and as discussed, soon in your own home) offers Quidel the opportunity for continued engagement with its customers. Those testers can be used to test for strep throat and other potential conditions. The hardware will be deployed and Quidel's challenge will be to find new and important applications for the hardware. It's the old razor and razor blade approach, which has proved successful over many decades.
  Then there is OPKO Health which, along with its pharma offerings, has the 3rd largest reference lab in the country and through its affiliate, BioReference Laboratories, Inc., has a major role in the processing of PCR tests for COVID-19. Year over year patients served has doubled, requisitions for tests have increased nearly 3x and staff has increased 3x in 2020. COVID-19 has become a major pillar in the Company's business plan and it has become the go-to provider for large scale screening programs in the country. You can thank BioReference Laboratories for the return of the NFL, NBA, MLS and now the NHL. It is responsible for processing the tests for all of those sports leagues. BioReference Laboratories is also leading the charge to get kids back to school as they managed the testing of over 220k public school students in the New York City public school system in an effort to re-open in-person learning.
  BioReference Laboratories expects COVID-19 testing to be a major focus through 2021 but again, what comes next? For BioReference Laboratories, they went live today with Scarlet Health™, a digital health platform facilitating in-home, on-demand lab services. With Scarlet, a patient can use an app on his/her phone to schedule an in-home lab visit – all while watching the Flyers and the Bruins mix it up on the ice! That's a double thank-you to BioReference Laboratories!
  Speaking of getting things done at home, why not figure out if you have cancer from the comfort of your own home? (I can't believe that I just wrote that sentence, but it's accurate) We listened with interest today to Exact Sciences, maker of the Cologuard home colorectal cancer test that we have been seeing regularly on television in 2020. You know, the fit looking middle-aged guy who foregoes the elevator to be escorted up the stairs by the animated Cologuard box? Who wouldn't want to do that?
  Cancer detection, and especially early cancer detection, is an area of growing interest and competition. In addition to Exact, other companies that have been independently operating in the sector last year included Thrive Earlier Detection with its early cancer detection blood test, which announced positive results in early 2020 from a 10,000 patient study. There's also Grail, which recently announced a large early detection study in the United Kingdom with the National Health Service. Thrive essentially focuses its test on finding DNA fragments and proteins in the blood that have been shed by early tumors, creating recognizable biomarkers, before those tumors grow large enough to become obvious. Grail, on the other hand, tracks a biological process called DNA methylation, which alters gene expression in cells. Grail was purchased for $8 billion by Illumina in a deal announced in September 2020. Rising to the challenge, Exact announced in October 2020 the purchase of Thrive for $2.15 billion and also moved into DNA methylation with the acquisition of Base Genomics, adding a full slate of technologies competitive with Grail to Exact's stool-based colorectal cancer test, which combine into a full spectrum testing approach. Exact also is focusing on other cancers beyond colorectal now.
  But wait, there's more! Exact outlined an intriguing market expansion opportunity for a "chronic" cancer patient, including their early detection approaches discussed above, but also the use of their test to search for minimal residual disease after completion of a therapeutic cycle (radiation oncology, chemotherapy, surgery) to determine the need for further treatment, the detection of recurrences and assisting with therapy selection. Each of those stages could offer earlier detection and/or treatment guidance with the Exact tests, creating a much greater frequency and use of testing than the once every few years testing prevalent in colorectal cancer. According to Exact's Chief Executive Officer Kevin Conroy, that change in approach could lead to at least 10 million tests per year being conducted. Exact also is focused on becoming essentially a distribution pipeline that can bring more solutions and products to its customers. Conroy recounted that Exact now has 650 sales people calling on primary care physicians, 100 sales people calling on oncologists and 40 sales people calling on health systems. Exact expects to see a material rise in orders, perhaps as much as 50%, resulting from its inclusion in the EPIC electronic health record platform, which now allows a physician to prescribe an Exact Cologuard test with a click in the EPIC system. Exact also believes that it can evolve into a big data company partnering with healthcare providers, pharmaceutical manufacturers and analytics providers.
  Putting together earlier detection, helpful guidance and convenience creates a powerful combination. We are excited to watch the rapid progress in the cancer detection sector in the year ahead and to hear the results at next year's J.P. Morgan Annual Healthcare Conference.