Other5/24/21

Ro acquires Modern Fertility: Segment-specific M&A another front in the platform wars

Written by Megan Zweig

COO

In another chapter of the platform wars, Ro announced this week that they are acquiring Modern Fertility. Big, recent moves have married navigation and telehealth, combining critical pieces of consumer care journeys from initial needs assessment seamlessly through fulfillment. The Ro-Modern Fertility deal represents the opportunity created when segment-specific consumer care journey services—in this case fertility—combine with wide-population focused virtual care platforms.

Here’s the deal: Ro, the D2C telehealth and pharmacy platform announced its intended acquisition of Modern Fertility for just over $225M. Founded in 2017, Modern Fertility offers in-home fertility tests, pregnancy tests, and prenatal vitamins—its flagship finger prick test bypasses traditional (and often expensive) testing to offer individuals a picture of their fertility. Together, Modern Fertility’s leaders will run Ro’s women’s health vertical. The announcement comes after Ro was the target of SPAC rumors before raising a $500M mega round in the first quarter of 2021.

An operator’s bet on women’s health1: The acquisition comes on the heels of $418M in 2020 funding for US-based digital health companies built to address women’s health—just 3% of overall digital health funding for the year. Conducting a more recent tally, we observed that despite a total of $6.7B in Q1 digital health funding, women’s health companies secured just $58M of that haul. Venture investment dollars aside, Ro’s acquisition signals a belief—one that we share at Rock Health—that segment-specific verticals represent a large and growing market opportunity, as well as a chance to vastly improve the care experience for focused (and oft-overlooked) populations and needs.

One proof point of the growth potential in these offerings is how women and female-identifying folks have already embraced telehealth, most tellingly around lifestyle medical services addressing pregnancy needs. Rock Health’s annual consumer adoption survey, deployed in fall of 2020, found that 73% of pregnant respondents (comprising 6% of all female respondents) reported prior use of live video telemedicine. Among all women respondents who used live video telemedicine, 87% reported being moderately or extremely satisfied with the experience.

Despite the high adoption rate by pregnant women—and high satisfaction rates overall among women—live video telemedicine use among all women respondents is lower (35%) relative to men respondents (51%). Perhaps the high rate of use among pregnant respondents is not surprising given the proliferation of solutions around pregnancy and fertility—but women’s health is far more complex than having a baby and it’s past time for entrepreneurs and investors to see the expansive nature of women’s health needs primed for innovation.

The platform wars keep heating up: Apart from signal of the potential in the women’s health market, this acquisition also represents how the platform wars continue to heat up on a number of fronts:

  • Virtual care, personalized. In a February newsletter, investor Christina Farr anticipated the rise of “verticalized navigation”—capabilities that offer specific patient journeys for groups that require a greater degree of specialization, whether around fertility needs for families, LGBTQ+ populations, high-cost areas such as MSK, children with special needs, etc. Virtual care programs for nearly any population or need that can benefit from them are being built. The Ro-Modern Fertility acquisition showcases that general telehealth platforms are going to build deep offerings and customer relationships tailored to specific groups, a move not only relevant in the D2C space but one that employers and plans will value as they seek more integrated solutions with offerings for their highest-cost, highest-need areas.
  • Enabling the home. This past December, Ro acquired Workpath to offer in-home diagnostic services. This ability to deliver services—blood draws, vaccinations, primary care—in the home offers a more seamless path from digital care to fulfillment in the home. With DispatchHealth recently acquiring in-home imaging services to build out its home-care offerings, it begs the question of how far companies like Ro—who have dipped a toe in the home space but could continue expanding capabilities—will go. Modern Fertility is an additional step in this direction.
  • Online to offline. With retailers and emerging tech-enabled providers getting into the “bricks and clicks” game—mastering the in-person to virtual (and back) dynamic is key. As Ro has secured consumer loyalty through its digital experience and convenience, they’ve earned the right to expand their strategy beyond sexual health, to offer experiences to new customer segments and in new spaces. Though Ro’s first expansion has focused on the home, the recent digital-to-physical moves of Babylon make us wonder if Ro will continue to expand its physical footprint (or pursue partnerships a la competitor Hims).

The bottom line: The Ro-Modern Fertility deal won’t be the last transaction where virtual care and navigation platforms snap up startups focused on segment-specific verticals. For additional insights on what we see ahead regarding platform consolidation, reach out to us.

Footnote:

1: We understand that many individuals accessing pregnancy and other traditional “women’s health” services and solutions do not identify as female. At times, we use the terms female and women to be consistent with prior survey methods. We’re actively learning and evolving our language and research methods around gender identity and expression.

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