Digital Health Startup Ro Enters Home-Based Care With First Acquisition

^Digital health startup Ro, which offers telehealth visits and includes an online pharmacy, is now venturing into home-based care delivery with its first acquisition. The three-year-old, New York-based company announced Tuesday it was acquiring Richmond, Virginia-based Workpath, a software platform that sends providers to draw blood at patients’ homes instead of in a doctor’s office. 

“The seamless integration of offline and online healthcare is what will allow Ro to really bring more of our vision into reality and to strengthen and expand our vertically integrated primary care platform,” says Zachariah Reitano, 29, cofounder and CEO of Ro and an alum of the 2020 Forbes 30 Under 30 Healthcare list. The end result? “Far fewer patients slip through the cracks,” he adds, meaning they’ll be more likely to get a needed prescription refill or do a follow-up laboratory test. (Disclosure: Forbes Media has a small investment in Ro.)

Ro, which began by offering discrete telehealth services aimed at men for treating issues like erectile dysfunction and hair loss through its subsidiary Roman, now has multiple business lines, including Rory for women, Zero for smoking cessation, Plenity for weight loss and a subscription-based generic pharmacy offering. The company, which has raised $376 million to date, was valued at $1.5 billion following a $200 million funding round in July. 

While the Covid-19 pandemic has greatly accelerated the adoption of telemedicine, it has also underscored the limitations of virtual care, argues Reitano. “You can’t draw blood via telemedicine, you can't administer a vaccine via telemedicine, you can't physically examine patients via telemedicine,” says Reitano. On the flip side, many of these services don’t necessarily need to be performed at a doctor’s office or pharmacy. 

That’s where Workpath comes in. Eddie Peloke, 48, was CTO of the first iteration of the company, known as Iggbo, in 2016, which was essentially a fleet of mobile phlebotomists (the technical term for the people who draw patients’ blood). His eureka moment came when he had the flu and had to drive 45 minutes away to pick up a prescription. “I can order a pizza and have it come to me,” he recalls thinking. “Why in healthcare are we not doing it?” 

Peloke and the team soon realized that what its clients really wanted wasn’t the army of phlebotomists, but rather the scheduling and dispatch platform the company used to manage them. In 2018, the company rebranded as Workpath with Peloke as CEO and pivoted to focus on the software that would match a patient with a nearby phlebotomist, who could then make a house call. This year, Workpath, which has 16 employees, has facilitated more than 100,000 in-person visits, and will expand its offering to include nurses in 2021. The companies declined to disclose the terms of the deal.

Even though it is becoming part of Ro, Workpath will continue to offer its software platform to other clients, such as clinical trial and digital health companies. “It's exciting to know the impact it will have,” says Peloke. “The ability to continue to build our platform, continue to grow, continue to add services and help Ro become the patient's first call and really change the healthcare landscape.” 

^Ro clinched the largest telehealth funding round so far this year at $200 million, according to an analysis by private capital market data company PitchBook. Amwell, which went public in September and had a market cap of $6.8 billion at Monday’s close, came in a close second with a $194 million funding round in May. There have been a total of 24 telehealth deals so far this year valued at nearly $1.5 billion, according to PitchBook. In 2019, there were only 12 deals valued at $384 million.

“With healthcare spending accounting for 17% of U.S. GDP and the virtual health space system currently representing $35 billion in market cap, we believe there is ample room for numerous players and continual industry growth,” Kaia Colban, an emerging technology analyst at PitchBook said in an email. “Though recent acquisition count has been minimal, the surge in demand for telehealth coupled with the large amount of recent later stage VC deals has left the market ripe for consolidation.” 

Teladoc, which had long reigned supreme as one of the only publicly traded virtual health companies, merged with Livongo in an $18.8 billion deal over the summer, and was trading at a $28.6 billion market cap at Monday’s close. Both Teladoc and Amwell have each made several acquisitions, including behavioral healthcare startups. 

Reitano said the Ro’s acquisition strategy going forward is to identify companies “who have built specific capabilities that can expand the complexity of the conditions that we can treat our patients for.” In the case of Workpath, its software gives Ro’s clinicians one more tool to help patients. “Providers are really only limited by diagnostic data,” says Reitano. “The more diagnostic data they have, the more they can treat.” 

Ro has also entered into a partnership with the clinical laboratory company Quest Diagnostics (2019 Revenues: $7.7 billion) to process lab tests. “We recognize that healthcare is becoming more and more consumer-driven,” Cathy Doherty, senior vice president at Quest said in a statement. "Ro has created a virtual care model that does what any good healthcare provider does but few health technology companies do well: foster intimacy and trust with each patient.” 

One of the main differentiators between Ro and other telehealth players is that the company is “cash pay,” meaning it does not accept insurance. It’s closest competitor in the cash pay business, Hims & Hers, has announced plans to go public via a blank check company, known as a SPAC, at a valuation of $1.6 billion.

Our ultimate goal is to build the largest, most impactful independent company.

Hims, which launched in 2017, estimated $138 million in gross revenue in 2020, a 66% increase over 2019 revenue of $83 million in its investor presentation. Reitano told Forbes that Ro estimates $230 million in gross revenue in 2020, a 55% increase over its 2019 gross revenue of $148 million. Reitano says there have been 5 million digital visits to Ro’s businesses since 2017, while Hims has reported 2 million visits. 

“They are different ways to put capital into the company and so we will constantly look at what the best way to fund the business is. But our ultimate goal is to build the largest, most impactful independent company,” Reitano says, when asked if an IPO or SPAC is in the cards. “So it is definitely on our roadmap, the exact timing will depend on, obviously, the circumstances and the environment.” 

Correction: This story has been corrected to reflect that Eddie Peloke was CTO of Iggbo.