DRIO: Leading the way in a brand new industry called “Digital Therapeutics (DTx)”

Apr 26

DRIO: Leading the way in a brand new industry called “Digital Therapeutics (DTx)”


Dario, with a strong treasury of $20 million U.S. (Dec. 31) and no debt, has just 8.1 million shares outstanding and closed on the NASDAQ today at $6.32. Key breakout level is the 200-day SMA which is flattening out at $7.00 after being in decline since late 2016.

DarioHealth (DRIO, NASDAQ)

Leading the way in a brand new industry called “Digital Therapeutics (DTx)”, Dario has an excellent chance at becoming a standout stock like TDOC and thrive during the 2020sBusiness Insider Intelligence estimates DTx will be a rapid growth industry with a total addressable market of $9 billion and 110 million users in the United States (globally DTx could grow to become a $200billion industry by 2024) because it offers a novel means of treating, managing, and improving health outcomes for people with chronic diseases like diabetes, hypertension, and obesity.

At this moment in time DRIO is 1 of only a couple of ways to invest into publicly-traded DTx companies. The opportunity for Dario and its shareholders is massive, but before we dig into some key details I’d like to acknowledge the elephant in the room:

  • Continuous glucose monitoring (CGM)

Inevitably, when you talk to people/investors about what Dario is doing they’ll say, yeah, but such and such friend of mine wears a “patch” that monitors their blood sugar levels. The patch they speak of, or used themselves, is manufactured and distributed by DexCom (DXCM, NASDAQ).

DexCom is a behemoth (market cap $29 billion). DexCom basically invented the CGM. By far and away they’re the leader in real-time glucose data and monitoring. DexCom even works with Apple and Google, so what chance in the world could a tiny little player like Dario (sub $50 million market cap) have at competing successfully?

When you dig into this situation I think that’s really the big question. DexCom’s continuous glucose monitoring technology is really the elephant in the room.

Dario’s technology for checking blood sugar is “old school”, but it’s super cool and convenient!

Some users describe their Dario as “cute”, and “durable”. It makes testing your blood sugar almost fun, said another user.

About the size of 2 fingers, Dario’s device is the only product on the market that’s an all-in-one solution (no batteries required). Simply plug the meter into just about any smart phone and voila! Dario gets an A+ rating for accuracy. Plus with Dario there’s no need to write down and manually track glucose levels. Everything is saved automatically for easy monitoring and sharing. “It’s just what the doctor ordered, literally,” said another satisfied customer on Amazon, where Dario has a 4+ star rating out of 1,000+ reviews.

Dario’s blood sugar monitor has a 4.9 star rating out of 10,400+ reviews in the Apple App Store (it’s pretty much the most popular application for managing diabetes in Apple’s App Store).

So very fair to say Dario is already successful and incredibly popular.

Getting back to the elephant in the room (CGM) and DexCom, while putting on my investor hat, I think I’ve got the investment thesis for Dario boiled down to this:

  • For diabetics will a finger prick go the way of a handshake?
  • Is this a horse and buggy moment whereby CGM completely replaces the finger prick?

If you asked me, the answer to both questions is NO.

Therefore DRIO represents a compelling investment opportunity (market cap sub $50 million), having created an all-in-one 21st century solution for monitoring glucose. DexCom will continue dominating with its CGM technology, but Dario isn’t really competing in that space anyway. Worldwide an estimated 415 million people have diabetes and I just don’t see 100% of them wearing a CGM patch around the clock.

Dario’s developed a simple and sleek solution for testing and tracking blood sugar levels via smartphone. Coupled with Dario’s application, users can easily share their healthcare information with doctors and loved ones. They can even get signed up with a “coach” via text and video chat, which ultimately leads to better health (Dario has the data to prove engaged users have better outcomes). Insurance providers, employers, and health plans are willing to pay for “better outcomes”, creating a win-win for people with chronic health conditions like diabetes and Dario.

Compared to recent years the company’s business model is shifting from selling devices (hardware) and test strips to a monthly subscription model. The shift is well underway. Here’s what the model looks like right now:

  • $25 per month per person (subscriber), which includes unlimited test strips automatically delivered. Plus an upgrade option that includes coaching;
  • $60 per month per employee via an employer sponsored diabetes management program that includes coaching.

Dario already had 46,000 users. As per the most recent conference call they expect 70% of that user base to make the transition to Dario’s subscriber model, implying baseline revenues of approximately $9.6 million this year. Subscriber growth should start ramping via new employer and health plan related agreements. Dario also has an innovative “subscription-in-a-box” (SiB) program that’s already on grocery store shelves of many Albertson’s (2,000+ locations). Already sitting on digital shelves of BestBuy.com and Walmart.com, it shouldn’t be long until Dario’s SiB is being offered at brick and mortar stores at locations near you soon!

By the way, telehealth and DTx companies are currently receiving rich valuations of 5 to 10 x sales. Using those metrics DRIO could go from being a $6 stock to a $12+ stock based on its existing subscriber base.