Omada Health Closes $23 million Series B Financing Led by Andreessen Horowitz – April 25, 2014

Executive Highlights

  • Omada Health announced earlier this month the closing of $23 million in Series B financing led by highly regarded Silicon Valley venture capital firm Andreessen Horowitz. The round also included first time investor Kaiser Permanente Ventures.
  • Andreessen Horowitz General Partner, Dr. Balaji Srinivasan, will become the fourth member of Omada Health’s Board of Directors, joining CEO Sean Duffy, President Adrian James, and Dr. Jon Root (General Partner, US Ventures).
  • Results of Omada Health’s online diabetes prevention program were published on April 10 in the Diabetes Educator.

Omada Health recently announced the closing of $23 million in Series B financing led by highly regarded Silicon Valley venture capital firm Andreessen Horowitz. The round also included first time investor Kaiser Permanente Ventures and existing investors US Venture Partners, The Vertical Group, and others. As we understand it, Omada will use the funding to expand its sales and marketing teams; to build new programs; and to hire top talent in design and software development. This news represents Andreessen Horowitz’s first major digital health investment, a strong vote of confidence in Omada Health and its online version of the Diabetes Prevention Program, Prevent. The funding news is even weightier considering some of the Andreessen Horowitz’s landmark technology investments over the years: Facebook, Twitter, Skype, AirBnB, Box, Foursquare, Groupon, and Pinterest. As a reminder, Omada was incubated through the highly regarded startup accelerator, Rock Health. Said Andreessen partner Balaji Srinivasan in a recent conversation about the healthcare startup: "Omada's Prevent really does deserve the term 'digital therapeutic': it is a peer-reviewed, reproducible, clinically validated way to deliver sustainable weight loss over an internet connection."

In addition to the funding, Omada announced that Andreessen Horowitz general partner, Dr. Balaji Srinivasan, will become the fourth member of Omada Health’s Board of Directors. Dr. Srinivasan has an enthusiastic post (“Software Gets the World to Stop (Over) Eating”) about Omada on the VC firm’s website, calling the company’s results “impressive” and noting one of the program’s keys to success: blending the online with the offline. Though it “seems like a little thing,” Dr. Srinivasan believes it solves multiple problems that have “long bedeviled” previous attempts in the arena. Certainly, the combination of mobile and desktop apps, a wireless scale, an online social network of peers, milestone packages sent by mail, and a virtual health coach is a unique mix to tackle what is perhaps the fundamental behavior change conundrum of our time: weight loss. Key unanswered questions in our view include the ability to sustain engagement over time, particularly through the employer channel – this of course is the question with any prevention strategy that hasn’t yet been around for a significant number of years. Historically, employer-based wellness programs have not been widely adopted by patients, in part due to patient trust and privacy concerns. Indeed, RAND’s 2013 Workplace Wellness Report concluded, “Our findings suggest that uptake of worksite wellness programs remains limited.”

That said, we continue to be extremely intrigued by digital health approaches like Omada Health’s Prevent program and WellDoc’s BlueStar – both companies have built comprehensive product offerings, collected supportive clinical data, gotten it published in peer-reviewed journals, and built business models focused on payers and employers. In our view, this is how transformative digital health offerings will differentiate themselves from nice-to-have, connected gadgets. Ultimately, the promise of digital health will only be realized if products meaningfully improve clinical outcomes that matter, keep patients engaged over time, minimize burden to providers, and save the healthcare system money. The bar is certainly high, but so is the unmet need…

  • This funding news came just one day before results of Omada Health’s online diabetes prevention program were published in the Diabetes Educator on April 10. The renowned Dr. Anne Peters (USC, Los Angeles, CA) is one of three authors on the paper. In the study, participants previously diagnosed with prediabetes were recruited online and enrolled in Omada’s Prevent program. Those that met the inclusion criteria for the 16-week core program (n=187 out of 220 enrolled; details below) on average began the program with class two obesity, with a baseline BMI of  37 kg/m2 and weight of 222 lbs.
    • Core participants achieved an average of 5.0% weight loss at 16 weeks and 4.8% weight loss at 12 months. In addition, the 187 core participants experienced a 0.37% reduction in A1c levels at the final measurement (baseline: 6.0%).
    • We thought it was encouraging to see that weight loss was largely maintained at 12 months, and hope to see if this is continued out to two years, when many lifestyle intervention approaches see substantial weight regain. In addition, we’d note that Prevent’s 12-month results also came very close to meeting the challenging 5-7% average weight loss observed in the DPP – this was quite impressive considering the amount of in-person attention and consequent expense incurred in that landmark trial.
    • Data methods: Individuals that completed at least four lessons during the 16-week core intervention were considered “core participants” (85% of the original 220 participants). Post-core participants (65% of the original 220) completed at least four core lessons and also went on to complete one post-core lesson during the 12-month intervention. CDC standards specify that weight loss be analyzed at 16 weeks for core participants and at 12 months for post-core participants. For the sake of completeness, both 16-week and 12-month weight loss results were analyzed for core participants, post-core participants, and also all participants who started the intervention but dropped out of the program (last observation carried forward).
  • Omada is targeting a very challenging business, both from consumer and payer point of view. As a reminder, 90% of people with prediabetes aren’t aware they have the condition. This, of course, presents a major screening and marketing challenge, and shows the service Omada will be doing in educating people on their risk status and treatment options. In addition, the sales cycle for payers is quite a prolonged process, as reimbursement updates don’t happen that rapidly, tending to take effect on an annual basis.
  • For context, thousands have enrolled in Omada’s Prevent program to date, which is now covered by 10+ payers/employers, including Kaiser Permanente, Blue Cross Blue Shield Louisiana, and Stanford University Hospital.

--by Adam Brown and Kelly Close