DarioHealth Corp. (DRIO) Earnings Call Transcript & Summary

Okay. Well, good morning, and welcome to the DarioHealth KOL call on digital therapeutics for the management of diabetes and other chronic conditions. [Operator Instructions] Additionally, today's call is being recorded and a replay will be made available on the Dario website at the conclusion of the event. And as a reminder, for all forward-looking statements, safe harbor will be presented on Slide 2. At this time, I'd like to turn the call over to your host, Erez Raphael, CEO at DarioHealth. Please go ahead, Erez.

Good morning, and thank you all for joining us on this webinar to discuss digital health for the management of diabetes and other chronic conditions. In addition to our guest speaker, Dr. David Simmons, I'm joined today by other members of Dario leadership team, including Dr. Omar Manejwala, our Chief Medical Officer; and Rick Anderson, who is our President and the General Manager of North America region. Both Rick and Omar recently joined our team from Catasys and bring decades of experience in support of our ongoing transition and long-term vision of the company. DarioHealth is emerging as a leading player in the digital therapeutics space that is estimated to be $9 billion by 2025. Based on the collective experience of tens of thousands of users who are currently utilizing our platform, many of whom pay out of pocket, we have significant and growing body of evidence demonstrating that our solution can engage people, a fact which is reflected in our very high user satisfaction score, 4.9 out of 5 on the App Store, and our Net Promoter Score that is 77 that is very high compared to our closest competitors. This excellent engagement drives improved long-term health for people suffering from chronic conditions while reducing cost for payers. As we continue to transition to a SaaS, Software as a Service business model, that generates recurring revenue and very high margins for our company, while leveraging our early learning as a direct-to-consumer company to move upstream and target large payers, benefit administrators and employers, otherwise known as business-to-business-to-consumer, that will provide us with access to a broad pool of users while significantly reducing our cost acquisition. I'm pleased to say that despite the lengthier sales cycle, we have already won some meaningful business-to-business-to consumer clients, including the Vitality Group that we announced this past March, and we have a robust sales pipeline that continue to grow. New CMS reimbursement codes have transformed RPM, remote patient monitoring, into a new revenue channel for us and also for the physician and this is a significant catalyst to more widespread adoption. On the product side, we also continue to expand beyond being a simply diabetes management company, and we now see ourselves as a multi-chronic condition management platform, enabling remote patient monitoring in between office visits. In addition to our legacy diabetes offering, our solution now covers hypertension with an integrated blood pressure monitoring. We recently announced a further expansion into behavioral health coaching for things like stress and anxiety. With this initiative well underway, we believe we are well positioned to be a leader in the rapidly maturing digital therapeutics industry. We are pleased to host Dr. Simmons. Dr. Simmons is a highly regarded diabetologist, whose career spans more than 4 decades as a researcher, professor, corporate executive and director. He recently served as the Principal of Metabolic Management Consultants. His past experience include senior position at Ascensia Diabetes Care, Bayer Diabetes Care and Pfizer. From 1983 until 1999, Dr. Simmons served as a Fellow, Assistant Professor and Associate Professor at the University of Pennsylvania School of Medicine. He's an Associate of the American Diabetes Association, and his research has been published in many peer-reviewed journals. Dr. Simmons will be available for questions at the conclusion of this event. Before turning the presentation over to Dr. Simmons, however, I would like to introduce our Chief Medical Officer, Dr. Omar Manejwala. Omar brings significant experience working with patients to achieve behavioral changes that results in health improvements. He recently joined our team from Catasys, where he also served as the Chief Medical Officer and focused on working with health plans and other payers to deliver value-added clinical programs that incorporate behavioral health as a key tool in the management of chronic conditions. Omar?

Thank you, Erez, and it's my pleasure to be here with you today. I'm really excited to hear from Dr. Simmons. But first, I'd like to take 2 or 3 minutes and share with you a bit about how behaviors really are the core of what we focus on at Dario and the core of what needs to change in chronic disease and to review exactly how we do that at DarioHealth. So next slide, please. So the chronic diseases drive the majority of morbidity, mortality and cost, but both directly through medical costs, but also indirectly, through absenteeism and presenteeism disability. You can see some of the data here on the screen and they're staggering, and really behaviors do play an outsized role in driving the outcomes for these chronic diseases, more than genetics, more than really any other factor. For example, genetics will double your risk for developing diabetes. Behaviors will increase your risk sixfold. Next slide, please. So the real problem when it comes to chronic disease is behavior, and Dario exists for one reason, one reason: to drive durable behavior change in chronic disease. Now we started with diabetes and the behaviors that underlie that, but we've moved on to other metabolic conditions as well, with the pace of innovation that I haven't seen anywhere else in my career: hypertension, prediabetes, more coming. Next slide, please. So it stands to reason that if we could change behavior, we could alter the trajectory of chronic disease. And with enough personalization and support, it turns out that the vast majority of behavior can change for the better. But the problem, the problem is that the support that's required in traditional health care and even outside the health care system is too costly, not accessible to most people. And so you can't really scale and personalize today. You can get one or the other, but not both. Now this is where Dario comes in. And if you'll go to the next slide, please. And so you can see an animation here. Dario leverages analytics, digital applications, devices and coaching to drive personalized care journeys at scale. So that allows for a complete remote care solution that nudges, anticipates, it guides, care journeys that drive and alter chronic disease outcomes. So by making behavior change the path of blues resistance, it can improve health, reduce costs in a way that are -- that's highly appealing to health plans, to employers, to providers and to the users of the system. So now I'd like to turn the floor over to one of the world's experts on the topic of diabetes and cardiometabolic risk, our key opinion leader for today, Dr. David Simmons. Dr. Simmons?

Thank you, Dr. Omar, and I'd also like to take a moment to thank Erez and to thank the LifeSci team and to thank you, the participants, for giving me the opportunity to hold forth today on an area that is -- has been the focus of my career for the 45 years that I've been in diabetes and other metabolic disorders. So just quickly, my -- Erez was kind of reviewing my career, so divide it equally into about 4 parts: bench research and academia, clinical care and clinical research and academia; then in industry on the pharma side, including large clinical trial programs in Lipitor and then [ adult ] insulin at Pfizer; and then the last 10 years of my full-time employment before forming up my Consulting LLC were specifically as the Chief Medical Officer in 1 of the Big 4 blood glucose measuring and monitoring companies. And I was in the C-suite there, so I had the opportunity to work with marketing, with sales, with product supply, with R&D to see the global and the U.S. market and to get a view on the global diabetes device business from a wide array. And this has given me the opportunity over a significant time span to see the evolution of approaches to the management of diabetes and cardiometabolic diseases as well as the trends in product development and in the market evolution in the area. So first, I'd like to take a moment to provide full disclosure of personal interest. I have no equity interest in Dario, rather a paid consultant to Dario. Erez and I spoke a few weeks ago, and as he laid out the direction that he is taking the company and the team that he has put together, the conversation absolutely resonated for me. I saw the value that Dario is bringing and can bring to the digital therapeutic space in diabetes and, more broadly, to the chronic management of chronic cardiometabolic disease and its risks. And it also resonated for me that Dario was moving away from earlier approaches to device development in the space and moving in the exact same direction as many of the trends that I was pushing in while I was still employed with Bayer and Ascensia and, more importantly, the trends for patients, health care providers and payers. And I will apologize in advance, if I feel overly enthusiastic, it's because I'm pretty enthusiastic about the approach that Dario was taking because it resonates for me. So if we can move to the next slide, this is an obligate slide about how massive the problem of diabetes is. And these are data that are actually lifted from the CDC website. They are lifted by the ADA, actually. And the point of this slide is quite simple, diabetes is a common disorder in the U.S. and it should be noted worldwide. And it is a prevalence that is increasing as a consequence of increasing incidents, fueled in no small part by the obesity epidemic, by the fact that it is a chronic disorder lifelong, and the problem is it really is getting worse and it's growing at a staggering rate. The numbers here absolutely do not lie. And furthermore, diabetes is outweighed in its importance to health care systems. Just look at any of the chronic disease management programs that any of the payers have had for decades, diabetes is always, always on the list. And the resources devoted to care include the cost of ongoing daily care for the prevention of loss of productivity, emergency room visits for hyper and hypoglycemia. And furthermore, for the prevention of downstream complications that include heart attack, heart failure, stroke, amputation, kidney failure, blindness and neuropathy and the exceedingly high cost of these complications should they occur and the forestalling of these complications. So let's go to the next slide. Since this is an investor meeting, we should take a moment to look at some money numbers. And these numbers are from the ADA, a publication, we'll talk about it a little bit in a moment. The important thing for us to look at is the bottom line numbers, nearly 1/3 of $1 trillion spent in 2017. And this is -- I don't care, you can call it $300 billion or you can call it $0.5 trillion. The numbers are staggering. The numbers are not going down. And this is despite the remarkable evolution of therapeutic and diagnostic tools that are at the disposal of the individual, the provider, the payers in the system. And patients are not achieving the target goals for A1c, blood pressure, lipids. And the prevalence is, as noted above, only increasing. So if we go to the next slide, the publication from which the last slide and this slide was listed, the cover is noted on the right. And it was the day after Erez and I spoke, this -- the printed copy of this came to me in the mail and I was absolutely thrilled. It's a white paper, 2020 entitled Person-Centered, Outcomes-Driven Treatment: A New Paradigm for Type 2 Diabetes in Primary Care. And I think the folks at Dario and the folks on this call should hear this. Their ears should perk up. It's about primary care. It's about diabetes, but it's about chronic management and individual people and what needs to be done to drive the outcomes. So with that, I'd like to take a moment and discuss history, not for history's sake, but because it's instructive in developing an understanding of where the field and the market are going, and in order to maybe know some of the places that it's been and avoid some of those pitfalls. So when I started in the field, I'm revealing my superannuation here, there was no home glucose monitoring. There was no A1c. The only way one might follow sugars was by checking urine sugars, which is really just not a very good way to manage one's diabetes. Also, the only available treatments were diet and exercise and insulin. And therefore, when self-monitoring of blood glucose came along in the early '80s -- late '70s, early '80s, it was a godsend, and everyone who had diabetes was given meters and essentially unlimited strips, and they were told to check their sugars, whether or not anybody ever looked at those sugars or use them. And around that time as well in the disease state understanding, a major bifurcation occurred in the field. And it became apparent that nearly all diabetes fell into 1 of 2 different forms, what are conveniently called these days, type 1 and type 2 diabetes, and it became known that they were essentially different disorders. Type 1 diabetes is a disorder of nearly complete insulin deficiency. As a consequence, people who have type 1 diabetes need to inject insulin on a daily basis, multiple times a day, essentially to prevent acute metabolic catastrophe and death. The technology for management of insulin therapy exploded with a nuclear arms race in blood glucose monitors, the emergence of pumps, continuous glucose monitoring, CGM, linking the 2 together in an automated fashion for the rigorous control of sugar, of flash monitoring. All of these are tailored to patients taking complex insulin regimens. And much of the attention in the space is in that -- those bright, shiny high-tech objects designed around the tailoring of complex insulin regimens. Type 2 diabetes is a very different disorder. It represents the lion's share of diabetes, however. You can look at population after population, it's right around 90% of people with diabetes, plus or minus a few percent, depending in the northern countries of Scandinavia, it's maybe slightly less. In the countries of the Mediterranean, it's significantly more. And not only are 90% of people with diabetes suffering from type 2 diabetes, all of the prediabetes population in the continuum of risk is in this side of the equation. And it became apparent that people with this form of diabetes have a close association with other metabolic abnormalities. And these other metabolic abnormalities are a risk cluster that include obesity; sedentary lifestyle; type 2 diabetes; hypertension; lipid abnormalities; and along with that, the remarkable increase for heart attack, stroke and other morbidities that result from the chronic core control of blood pressure sugar and lipids. And of note, the majority of these patients are not cared for by the health care professionals with intense disease state expertise, hence, the pamphlet that was published for the primary care provider. Now in the time sense, a wide array of new medications has risen, and we can go to the next slide. If you look on the left, and for the first 35 years, it was only diet, exercise and insulin. And then sulfonylureas came around, another 35 years went by, and there was an explosion in the array of new medications, classes and medications coming along every couple of years. And these are great tools that have an array of nonglucose effects in the new categories. But to come back to what Dr. Omar had said, overall, we have a lot of great tools but we still have an explosion in epidemic of diabetes, and we still have an issue that the majority of patients do not reach their goals in control of their sugar or their pressure, their weight or their lipids and as a consequence, the risk for the downstream complications remains unaddressed. So if we go to the next slide, this is a -- I'm sorry, I mean, 2 major issues have emerged. Let's go back a slide. I'm sorry, it moved too quickly. 2 major issues have emerged. One is the type 2 diabetes is not seen as just a "sugar disease" but part of an array of conditions related to cardiovascular risk and largely driven by behavior. And as opposed to in type 1 diabetes, where frequent monitoring of blood glucose is critically important, frequent monitoring of blood glucose is not part of the paradigm and therapeutic decision-making in diabetes. Each of these drugs, you make the decision on what to do with the drug at a 3-month, 6-month, 9-month, 12-month visit based on A1c. And there was, therefore, a lot of disused wastes and abuse in the blood glucose monitoring space. And as a result, the commoditization and withdrawal of the benefit for blood glucose monitoring occur over the same period of time that these treatments emerged. And this is where I think one of the big misses occurred because despite all of the advances in therapeutics, there was not an adequate appreciation of the value of blood glucose monitoring in behavior change in getting people to do the right thing. Every drug in every category on this slide has a label that includes the comment, in combination with diet and exercise. They all do. Go look in the BDR. In combination with diet and exercise, this drug will X, Y and Z. And in a clinical trial setting, they produce excellent results in lowering A1c and sugars. But the problem is that's in the clinical trial setting. So what we really need to do is provide tools where patients actually engage, understand the importance of their choices and use the tools available to them. Then monitoring makes sense because it impacts quality of life, cost and outcomes and the value of monitoring significantly outstrips the cost of monitoring for payers and providers in the health care ecosystem. Now behavior is not new to this space. We can go back 15 years to the Diabetes Prevention Program, where people in a clinical trial setting were able to prevent the progression from prediabetes to diabetes much more effectively with diet and exercise than they were with drugs. Behavior is at the core of the need and the problem with recreating the DPP effect is it has been, as Omar pointed out, incredibly expensive. So the question is, how do you personalize at scale? And that's where the approach of the Dario folks comes into play. Now if we go to the next slide, data slide, this is a summary of the published data from Dario, and it's really pretty straightforward. The patients here had access to the same array of therapeutic options at the time the system was applied as when the study was finished, but by using coaching to provide engagement, information and behavioral change and support, there was a beneficial effect measured in whatever array, we measured by A1c, measured by average sugar, measured by the number of highs, measured by the number of lows and events. People actually used the data generated from the BGM, and were able to get the benefit of all of these miraculous new tools that we have. But it really came down to engaging patients, giving the information that they need and providing the support to use those tools to get that effect. So if we go to the next slide, this is really a critical point in that it's a new approach for a new era, but it's not really new. The tools have come along. They're there. The blood glucose monitoring is there. It is the focus on the things that we know needed to be focused on brought to bear. So here we are at the PCPs. If you were to take a moment to go on the ADA website and look at the pamphlet that we were just discussing, there are complicated paradigms for the many complicated choices. And these are primary care providers who are dealing with strep throats, with COVID, with pneumonia, with all, an array they don't really have the disease state expertise. And so the utilization of technology to leverage the expertise in the disease state experts to the people who are actually needing it, the patient, the individual patient and the primary care providers, is critically important. And that's another area where my own experience has resonated with this. It has become completely apparent that the health care personnel with expertise in diabetes are not adequate to manage the problem currently. In fact, it's pretty much overused just managing type 1 diabetes. And that shortage of personnel is -- it's worsening. There are not many people going into this space, so the ability to use technology to leverage that expertise is critically important. And as in a conversation I have with Omar, the other part of this is that people spend 99.99% of their time not in a doctor's office, not on a telephone with a doctor. They spend that time living outside. And so they make choices and decisions in life on a regular basis that require engagement, information and behavioral support. So a remote care, person-centered approach, providing an array of coaching and support that meets the specific needs of the individual, deliver where they are and where it is needed, is consistent with the recommendations of the ADA as laid out on this slide, and this is the real key to the success of the Dario approach. Payers are happy because they are not spending money on fungible goods that may or may not be used, but on patient outcomes. Primary care providers are happy because their people are engaged in changing behaviors and a primary care provider, who only has 8 minutes for every 3, 6 or 12 months, cannot bring that impact, but they're thrilled when their patients are engaged. And there's nothing more frustrating as a health care provider than to hit your head against the wall and get nowhere. There's nothing more rewarding than caring for an engaged patient who actually has the self-awareness to realize that making the behavioral changes are in their own self-interest and proceeding in that direction. And this is an approach that's sensitive to both primary and specialty providers because it doesn't intrude on the realm of expertise, it is a -- it support a tool of supporting health care provider in decision making. And most important, patients are happy because they finally have the support they need in day-to-day life to get proactive and care for their conditions. So again, leveraging expertise through technology into a space where complex diseases are managed by primary care providers is, in my opinion, a necessary way to get to the chronic management and outcomes that we want to; and again, look at the FDA label on any drug in the space, in combination with diet and exercise. So the sooner you intervene, the better you intervene, the more you focus on behaviors, the better the outcomes, and that's what's exciting here. One other point is that the paradigm has shifted from devices to applications and data, and this approach becomes incredibly powerful, not only for the outcome of the individual patient, but for population and that is important in creating commercial demand because, ultimately, you can use all that data to personalize at scale and those capabilities become portable across disease states -- as Erez and Omar have already pointed out, you can bolt in blood pressure control. Now if you can get sugar control and blood pressure control, the lipids part has turned out to be the easy part. And now you can really make a dent in the prevention of atherosclerotic cardiovascular disease manifested in stroke, heart attack and heart failure. So the other piece is that you can -- if you're using your data to modify your course, rather than to create a clinical trial piece that compares a one offering with another offering for the purposes of commercial advantage, but rather, actually use your data to modify the individual's behavior and, therefore, to modify the behavior of populations, I guarantee you that's what the payers want to see because at the end of the day, instead of paying for strips, they're paying for disease prevention. They're paying to prevent ER visits. They're paying to prevent loss of productivity. So my last slide, next one is another example of serendipity because when I opened the virtual site for the first day's session of this year's ADA Annual Scientific Congress, this quote from the National President of Health Care at the ADA was highlighted. And it really says, "It's a summary of the last few minutes that you've been kind enough to give me, that behavioral sciences is the catalyst to make diabetes treatments work." And that is what I have to say. And with that, I'll turn it over, I think, to Rick.

Thank you, Dr. Simmons. As we've just seen, Dario has developed an engaging member-centric solution that is improving clinical outcomes. So the question becomes, how do we get that in people's hands? Well, as Erez alluded to at the beginning of the presentation, we are pursuing 4 different market segments in the B2B space. The first is retail. We have several relationships in this market segment already, including Walmart and Best Buy and others. Historically, we have primarily worked through these partners' online platforms. However, we are currently pursuing deals with 2 retail partners that would, if successful, increase our in-store and strategic opportunities and could be a significant impact in the second half of 2020 in terms of revenue. Second, we launched our remote patient monitoring solution in the first quarter of 2020 in response to the new CMS codes for Medicare members, which provide reimbursement for digital remote patient monitoring, or as we refer to it, RPM. In this market segment, we are focusing primarily on large provider practices, integrated health systems and existing chronic care management companies. The RPM codes enable us to sell a top line revenue opportunity to providers as they can increase the revenue by approximately $1,500 per patient per year in addition to improving the clinical care between visits. As we announced recently, we have already signed 2 contracts for RPM and have agreements with large providers in contract negotiation. We expect these RPM contracts will also contribute to revenue in the second half of 2020. Third, we are pursuing self-insured employers directly with our sales force and also in conjunction with partners, like Vitality, who has several hundred employers and approximately 700,000 employees on their platform. We are excited by this relationship and have begun actively selling to Vitality partners. We are getting traction in this market segment, and I am pleased to let you know that we already have employers in late-stage contract negotiations. And lastly, one of the largest market segments is health plans. We are also seeing fantastic market response to our solution, despite the fact that we have only recently started focused sales efforts with our new team. We are pleased to see that we have been able to substantially increase our pipeline in a short period of time, and we have a large health plan in late-stage contract negotiations currently. Given our traction in these market segments, we've been able to increase our sales pipeline substantially in the last quarter and based where we are today, with health plan employer contracts in late-stage negotiations, we would expect that both employers and health plans would contribute to revenue in the second half of 2020. This is significantly ahead of what we would expect, given the typical sales cycles for this market segment. Next slide, if you will? Based on the market feedback, as you can see on this slide, there's a lot of detail associated with it, but there are several competitive advantages that are resonating with our potential customers. First, we have a best-in-class user application that is built on an open AI-enabled platform that allows for hyper-personalized member journeys. We have significant outcomes data, now over 13 studies, with some of these studies encompassing more than 40,000 members and real-world data showing results over more than 2 years. Very importantly, we have best-in-class engagement and user satisfaction. We have a 77 Net Promoter Score, 4.9 stars out of 5 on the Apple App Store, with over 11,000 reviews. But I think most importantly, more than 50,000 members are paying for the solution out of their pocket every month. I can't think of anything that speaks more to engagement than somebody paying for this solution themselves. And lastly, but not the least, is certainly the fact that our pricing is very competitive. Oftentimes, we're 1/3 to 60% less than our closest competitors, which obviously, in addition to the outcomes that we're getting from a clinical perspective which drive cost savings, leads to an overall greater ROI. In summary, we are basically being able to provide our customers with twice the product at half the price. And I think that's really what's resonating with our customers. With that, I'm going to turn it back over.

Okay. At this point, I believe we can open up for Q&A for Dr. Simmons and the rest of the Dario team. [Operator Instructions] A few questions that were sent in, I'll be happy to provide.

So maybe this one is for Dr. Simmons to start. Who are the ideal patients to offer a digital solution like MyDario?

So the population that -- I think the last slide that Rick had really lays it out because the engaged individual who's going to reach out and take this, well, those are people that are probably doing well. They can probably use Dario very well as well but virtually, any patient with type 2 diabetes could benefit from a better understanding of their disease and what they need to do to control it. You don't even necessarily have to have type 2 diabetes if you're in that cluster of individuals, who as their age goes up and as they get heavier and as they get -- they move from an outside job to a desk job and they get the accumulation of risk factors that over time will result in the kind of disease that results in heart attack and stroke or other complications of diabetes, those folks have an array of decisions that they need to make about their behavior, about their everyday choices, that would absolutely benefit from coaching and support, and that would, therefore, benefit from Dario. So I think the health care providers and the plans are going to be able to find those patients better than walking in off the street. Now that's not to downplay the individual patient and the out-of-pocket pay. Those are things that we craved when I was working for Ascensia. You definitely want those, but the power here is in wide arrays of populations that are being cared for, but not necessarily adequately cared for, and not because of a lack of desire, but because of a lack of commitment to and resources for engaging and involving the behaviors of the individual patients.

Okay. And before I open it up to the bottom sort of questions below, another question that was e-mailed in is, why do you feel it's taken so long for the users to come around to using a platform technology like Dario?

I think that I'd love the Dario people to explain why it is that they had the insight and other people don't. But my answer to that is that the insights have been there and I think that there is the term, expand us to scale at a reasonable cost. Again, the Diabetes Prevention Program clearly showed that aggressive diet and exercise were better than the 3 drugs available at that time at preventing people from going from prediabetes to diabetes, but it required a lot. The way it was administered required an awful lot of effort, of hands-on expensive personnel cost and Dario has figured out how to minimize that. When I was a Chief Medical Officer at Bayer Diabetes Care and then Ascensia, we actually hired a world-known behavior expert and we laid out, because that was a time when payers were starting to withdraw the entitlement of payment for their strips because they thought the strips were just being wasted and sitting in drawers and weren't being used and that was true. And we want to understand what that was about. And we understood that there were clearly definable behavioral issues that were not being addressed. It was information, motivation and behavior, all of which can be brought to the table. Now if you can bring that to scale, you can do wonderful things, but people have been afraid. I think part of that, this is a doctor talking about corporate practices, but I think corporate practices have always been that personnel costs are the way to cut costs. And these seem to be personnel cost intensive, so people didn't want to invest in that. And then there was also the traditional view that the way to gather data was in the clinical trial setting, which was very expensive and really didn't yield much and the technological advances that have improved the availability of remote practice and that have improved the ability to collect data in a HIPAA-consistent way and to use the data to move the needle are advances that have occurred. And maybe the best answer to the question is, now is the time.

Okay. And this is for the Dario team, from the outside. Are you partnering with any pharma companies? And if so, what do you think those partnerships will look like? And is there a plan for that in your future growth?

Erez, do you want to take that one?

Yes. Sure. So we have a deal that we signed last year with Dance Biopharm. And I think that this is an example for how we can operate with a pharma or other devices companies. The idea is that once we are getting closer to user through the application, through the devices, through the coaching, we are building relationships with the users and we have a very frequent access and interactions that is helping us understand exactly the routine of the users and also to impact the behavior change and medication is a portion of changing behavior. It's not just about lifestyle, it's also about taking medication and other elements. And we think that moving forward, building relationships with the pharma company and leveraging the platform to get pharma closest to users is something that we might do in the future. We are talking with few of them, and we feel that it might be a path for the future in order to integrate all the solutions around the user. And that's the idea behind a user-centric solution that is surrounding the user. Medication is part of it, and pharma should be part of the solution as well. So moving forward, it's part of our…

May I make a comment to that question, if I might, because that may be another place where -- and now is the time. During the decade when there was such an explosion of mechanism of action drugs in diabetes from 2005 to 2015, a lot of the pharma companies touted their new drugs as being non-hypoglycemic and, therefore, not requiring sugar to be checked as part of it because that was seen as an opportunity to get the payers to adopt their drug because from the payer point of view, monitoring sugar was nothing but an expense. If you can now provide the evidence that the expense is not monitoring the sugar, but failing to act, an inertia, the adoption of their drugs could be aided by a process like the Dario process as opposed to a competitor for the payers' dollars, and the opportunity, I believe, will open up.

So given your new B2B relationships, how many new users do you have access to sell to and how many potential users are under some of the insurer of health care provider program? And is the entire universe diabetic or prediabetic?

So from the -- in terms of the folks that have diabetes in the U.S., you've got roughly 120 million, let's say, round numbers. About 80% of those are going to be covered by insurance. So that gives you an idea of the insurance covered market as it's associated with that. As we continue to announce deals in the space, I think we will be talking about the number of lives that we have eligible to enroll in the program going forward. We haven't discussed that at this point. But I mean, to give you an indication, while it's not necessarily people that we have direct access to yet, Vitality, as I mentioned, has about 700,000 employees on their platform, and that is one of the partners that we are selling through. So on an overall basis, you're going to have more than 80 million people that are covered by insurance that have diabetes. So we're just scratching the surface, and I'm looking forward to talking about how many of those members we can cover as we go forward.

And what has the initial receptivity been on the part of the larger payers and employers? What are the areas of pushback and what do they need to see sell them on the solution?

So I think there's a few different things that are here. The primary thing for employers is being able to demonstrate that they can have an impact on their employees and that their employees are satisfied with the solution that you have here. And I think that, that's one of the places where Dario shines, as we've talked about, as evidenced by the ratings that we have, the NPS scores, the number of stars in the Apple App Store, et cetera, the solution is very well liked. And when you look at the detail of how people are responding to it on a consumer basis, the actual device itself, the way that it integrates with the software platform, the encouragement and information that they get through that platform is really well liked. And Dario is, at its core, a consumer company. And I think that's really served us well as we've gone into the space in terms of demonstrating that we have a solution that their employees will like. The data is showing that it actually has a significant impact. I mean, we're seeing about a 1.4% reduction in A1c versus some of our closest competitors, like a Livongo is showing a 0.9. So we're able to demonstrate to the payers that we have good clinical results, good engagement, good satisfaction levels. And also we're very transparent in terms of how we will work with the health plans, both in terms of ability to share data, allow them to coach on our platform if they want to, which is unique to us as well as the ability to say, "Look, we're only going to bill you for patients that are actually engaged in the program," and I'll just say that's different than what our competitors are doing. And that is one of the things that we are hearing from the market over and over again is that those are the things that Dario shines on versus our competitors.

So following up on a competitor question that was asked in the queue below. How do you win in the B2B channel versus companies that have been -- already have traction there, like a Livongo and an Omada?

So I think one of the advantages to being a fast follower in this space is we can position against our competitors' challenges that they have and understanding what the market is looking for. So like I just mentioned, our data looks better than others. Our engagement is better. Our satisfaction scores are better. All of those things resonate, and then we're able to, because of our cost structure, deliver a solution at a significantly lower price. So you're able to position the product against their weaknesses. The other thing is that -- and this is not atypical in a space like this, is the competitors have been in the space, some of their customers have 3 to 4 years of experience at this point with the product. And so they start to ask questions like, "Well, what am I really paying for? Why am I paying so much? Are the people that I'm paying for really engaged in the solution?" And as we positioned ourselves against those along the lines of what I just talked to a minute ago, we've got a very favorable response. And in some cases, we've already displaced incumbents as part of RFP process on exactly those kinds of metrics and features.

So following up there, do patients need to be persuaded to try the MyDario? And if so, what data and information does help -- do you offer to help them decide?

So in terms of once we enter into an agreement with a health plan or an employer, in that market segment, RPM is a little bit different, then we run a multichannel enrollment campaign to bring people into MyDario. And that really focuses on what the members are looking for as part of that process. But we have all the clinical data that we can share as well as results that others have gotten. And I think that, that's the advantage to being a consumer company to start with is we have the data coming from more than 50,000 people that are paying for the solution out of their pocket, and that really enables us to understand what people respond to in order to convince them to come on board.

Got it. A longer one for Dr. Simmons here. Perhaps we can explore the intersection of prevalence, the behavioral changes of the Dario platform. Have behavioral changes been shown to manage chronic disease and diabetes? And have they shown to reverse? What are the metrics in evaluating patient outcomes? And finally, are these metrics used in the training of the AI platform?

Yes, thank you. So part of that question is absolutely in my space. And you can search the literature, and there are -- there's a wide array of studies that have shown that when you take the coaching approach and provide coaching and support to patients, you get good response. It's a support issue. So another serendipity. I was reviewing again the ADA proceedings from their annual scientific meetings about 10 days ago, and the lead article in the review today was an intensive telehealth intervention leverages the existing veteran affairs home telehealth infrastructure that helps rural patients with uncontrolled type 2 diabetes obtain better control and understanding of their condition. The parameters used are -- and they essentially got patients who were essentially recalcitrant. They were not controlled in the VA system and they got remarkable improvements in fasting blood sugar, mean blood sugar, hemoglobin A1c. So you don't need to invent new parameters to measure behaviors in this space. You can measure by whatever parameters you are currently using to measure for control. I think that A1c will be very hard to unseat as a single number parameter for control. But then you can go past that into, again, time in range, glucose variability, prevalence of hypoglycemic events. You can use blood pressure control, and we didn't even go into blood pressure. I think it's interesting, the blood pressure pharmacopoeia expanded in the '80s and '90s and has essentially been still since then. But the measurement of blood pressure control is still very 20th century, in the third decade of the 21st century, where you go to the doctor's office and get a single blood pressure taken, despite the fact that there are excellent devices available that could be used in a system, just like Dario, to provide the kind of data that you need for feedback on the value and capability of your interventions, behavioral and pharmacological, to achieve blood pressure control. So you don't need to embed new parameter. You can use the same parameters, and you can use individual response and population response to gauge and to adjust course in what you're doing.

And on the second half of that question related to personalization and AI, it turns out that personalization is just absolutely critical for behavior change. You have to do it. Like -- so for example, my mother has diabetes, and she's from India. And if you made a recommendation to her for steamed broccoli, well, she would never accept that. So personalization is critical to driving change in behavior. And for personalization at scale, you need member segmentation. You need to derive insights from billions of data points across a variety of domains so you can deliver, like Rick talked about, a personalized care journey. That's exactly the approach that we use here. So the second half of that question, I think, is insightful impression in the sense that at the end of the day, it's the data and the ability to segment members and then translate that into personalized care journeys, that really forms the engine of much of the power of this approach. Thanks for the question.

And what's linked into what you said, Omar, so personalization is almost the opposite of tailored outcomes. The behaviors will express themselves in improvement of the parameters of the chronic disorders and in reduction of risk.

Yes.

And as we know and many have learned today, Dario's current main focus is diabetes. What other indications do you envision expanding upon? And what can it currently work on today?

Sure. So I'll start by saying that I think a key point here is that the insights we've derived by beginning in the direct-to-consumer space about the choices people make, the things that accelerate behavior change, the things that slow them down and how those are different, depending on which members are segmented into. Those insights are, as Dr. Simmons noted in his talk, portable across chronic conditions. So it made perfect sense for us to go to hypertension, which we have, and we recently shared some outcome data at the ADA on hypertension and really dramatic improvements in blood pressure, including for many of the users, dropping them an entire stage, which reduces the end point risk, things like heart attacks and stroke. So all of that is portable to other conditions. And then prediabetes, we went to behavioral health conditions, and there'll be many other chronic conditions because the insights regarding how to change behavior are portable across those conditions. And so that allows us to increase the value that we deliver to customers within the populations and then expanding the populations we serve as well. Great question.

Thank you. Remote monitoring has really become the new standard of care. What needs to happen to make this a more integral part of the primary care workflow coming out of the COVID pandemic? Rick?

Okay. I think Omar can give some insights as well as Dr. Simmons here from a clinical perspective. I think there's a -- there are a couple of things. The RPM codes were a second attempt by CMS and really relate to Medicare patients. And usually, what you see in terms of adoption of payment is things that come out of CMS that are adopted in the private insurance companies over a period of time as well. But they're the second attempt. The first attempt was really chronic care management codes. One of the challenges with those chronic care management codes in short was they required the doctors to put forth the effort. The idea was, hey, these people need to be monitored in between. We want to compensate doctors for the work that they either are doing or that we want them to do in order to better treat these patients. But because of the fact that -- I think Dr. Simmons mentioned, 8 minutes per patient that they're spending, they don't really have the time to utilize these codes and get paid for them. Under the RPM codes, those can be actually used to leverage other folks to deliver that. And I think that, that is a key element to doing it. And I think that it is also a matter of the logistics of implementing the RPM codes to be -- in order to be paid for it. That's why we are, right now, focused mostly on large provider groups because they generally have the infrastructure to implement these programs and to bill for them. In order for this to work at scale to every individual physician, it will need to get to be more and more simplified and I think we'll see that over time. I mean we're 6 months into these new codes. If they prove to be successful and if there's uptake, especially in the large providers, then you'll see that going downstream. But I'll leave it to Omar and Dr. Simmons to talk about that from a clinical practice perspective.

Sure. So I'll start. And just -- I'll point to the fact that Dr. Simmons did mention in the talk how this approach is attractive to physicians because after all, we want to take care of patients who are engaged in taking care of their conditions. It's kind of like the dream state. And so from my perspective, and I'd love to hear Dr. Simmons as well, what this is really about is solving for all the problems or many of the problems that practitioners have been trying to solve for so long, but just can't be done not only in the time frame, as Rick mentioned, of 7 or 8 minutes and Dr. Simmons as well, but also the tools at our disposal. We just didn't have the tools to help people change their behavior. Dr. Simmons?

Yes. So I would endorse what's already been said and add, this pandemic has accelerated a trend that was already existent. For the most part, doctors don't want people in their offices who are acutely ill. If you're acutely ill, you go to an urgent center or you go to an emergency room. An office visit is kind of a well-baby visit. And if you can get the data that you need for an office visit, a telehealth visit is more efficient for everybody, and that has become completely apparent in all of the health care systems with which I have interacted during the 6 months of the pandemic, they're all moving that way. I'll point out that another abstract from the ADA scientific sessions pointed out that for inpatient diabetes care at the University of North Carolina Hospitals, they have a diabetes care team. That team has gone entirely telehealth during the pandemic and see no decay in the advice they've been able to provide to the inpatient managers of people with diabetes because the time has come. And I had a telehealth visit with one of my doctors the other day, and it was every bit as gratifying as any office visit I've had and I didn't have to drive into town. I didn't have to park. I didn't have to expose myself to coronavirus.

Yes. So just squeeze in a few more questions before we get to the half hour. Just to learn a little bit more about Dario. What is the cost advantage? And is the coaching in the app or by people? What are the key changes driving such a big drop in A1c? A change in meds, food, exercise?

Sure. I'll take this briefly and say that on the back half of that, the value of reduced HbA1c has been demonstrated in a variety of studies that show reductions in total paid claims as well as the absenteeism, presenteeism, et cetera. So there's a well-established value associated with that. In terms of what's driving the cost reductions themselves, it's a variety of things. So the application and the sort of intuitive approach that guides coaching enables coaches to manage a larger number of folks and to manage folks more efficiently and so it's a guided experience. The coaching is an app. It is digital. It is through asynchronous messaging as well as when necessary, telephone calls or voice as well. So the idea is many people -- people vary in terms of what they do best. But it's really the efficiency there that drives it. And then in terms of the third part of the question, just very quickly, the question was about diet, exercise, meds. What really drives the reductions? And that question gets at the heart of why solutions like this are necessary. The answer is different for different people. Some people will do better with one versus another. And rather than just brute force trial and error or very expensive sequential approaches, the ability to anticipate, nudge and deliver personalized care journeys that are most likely to work for that individual drives a superior kind of experience and more efficient from a cost perspective. I don't know, Rick or Erez, if you would add anything to that as well.

In the interest of time, unless Erez wants to add something.

Yes. I think you covered everything. So to go on, I see that we have a long list of questions. So let's get to those.

Erez, I'd like to -- I think we're going to ask 1 or 2 more, but I'd really like to focus this on you, Erez. Now you've really seem to put the right people and team around you in the last few quarters. What is the formula for growing revenues? Is it going to be expanding the number of users or the revenue? How is it going to -- please talk on your mission and your goals there.

Yes. So the way that I'm moving on the revenue growth is by looking into 3 different verticals. Number one is the transformation to business-to-business, which is getting payers and employers on the platform that will accelerate the growth of the number of members that we have on the platform. In addition to that, we still have the direct-to-consumer business that is also growing and we do plan to keep growing it through this channel as well. And we also have more than 50,000 users that are operating on the platform that will keep generating revenue. So in between new users that will come from the B2B, plus the users that we have already on the platform, these are the 2 pillars. And the third pillar that will get us high revenue is the expansion of the additional chronic conditions that we are having on the platform that result in a higher ARPU, average revenue per user, that is growing over time. And part of what we were showing in our last financial results is that we managed to improve the overall margins due to the fact that we are adding more elements on the platform and we are charging more per user as we are integrating more solutions and anticipate that in the next 2 or 3 years, we're going to have around 5, 6 conditions, different conditions, and more and more users would be able to handle more than 1 condition on the platform, which will result in a higher average revenue that we're extracting per user. So more B2B, more users that are coming from the direct-to-consumer and more chronic conditions, extract more dollars per users, this is how we're going to see the sales extrapolating over the next couple of years.

Great. Thank you, Erez. And this question is for Dr. Simmons, then I want to position back over the Dario team because I think it's very important for Erez's last question. What type of studies are important in order to get payers and providers on board? And how should they be structured?

So I touched on that. This is not a drug. So there's not a simple question, is the drug safe and effective? Clinical studies are expensive ways to answer and the best clinical trials ask a single question, and then you have additional information. And I don't really think the clinical trial approach for Dario to go out and do a clinical trial to prove is the way to go. I think they have data in their pocket to have discussions with right-minded payers and the right clinical trial would be a pilot trial at a payer who has a population that they need to get under control and that they do not feel they have the tools to control because they understand the behavioral piece, then you choose the array of things that you want to study and you do a pilot. In fact, I would point out that the previously cited VA study that I quoted before started with a single pilot at a single site. It expanded into a state-wide study, actually it went out of the state because it was a VA visit. And that is how I went -- 10 years ago, I was trying to pitch this when I was still working full time. Get out and get somebody who has a question they want to answer, work with them, answer the question as a pilot and then expand. Then you're actually providing answers that have meaning to the people that are paying for the study, and you're not parsing some small competitive advantage against a competitor for a publication. No, you're actually creating an outcome.

Yes. And one comment with regards to that, and I agree with whatever Dr. Simmons just stated. I saw 2 comments. Number one is that we are living in a digital world. All of us are holding smartphones and iPhones and Android, and all of us are downloading application and there is a huge competition on the attention of the user. So once we are providing a digital solution, although it's health care, we still need to fight for the attention of the user when we want to change the behavior. So our application is one of many applications on the App Store and eventually, the only way to know that users are really using it is by having real evidence, and to Dr. Simmons' point, is to have a pilot because even if you're going to get a study that will tell 1,000 users to use our application, it's a controlled environment. It's not the real environment under which we are operating. How people are responding to the enrollment efforts that we are having as a health plan, how users are spending on the platform, and we keep getting their attention when they are basically with the day-to-day through our application and our coaching sessions, all of these parameters can be measured only with real users and real data on a real environment, and that's the approach. And we have 13 different papers that we did on real data. And by the way, if I may speak on behalf of the Digital Therapeutics Alliance, and we are part of the alliance, this is 1 of the 10 points that are being promoted by the alliance. They are saying something like, we want to make sure that whatever claims we are putting out there is being backed by real data from real users, and that's an extremely important part. And I think that this is something that also creates a barrier because in the home medical device environment, you had to build a medical device to run a clinical study to get it regulated by the FDA and that you can sell. I think that in the digital therapeutics environment and digital solution, you have the fourth step, which is collecting enough data that will prove that whatever you say that your technology does, it is really doing. And to -- and this is, in fact, the slide that was presented by Dr. Omar showing how this software and AI was involved from real users and real data that came to the platform. So that's how I would summarize the need for data in studies.

Okay. Great. Now I know we're over the hour time limit, but it seems that there are a bunch of people still on. So maybe we want to run through 2 or 3 more, and then we'll end. So maybe on that, Erez, for coaching, can you comment on how motivational interviewing impacts diabetes management? A number of studies have recently been published related to this. Many coaching platforms and systems are based on this.

Yes. I'll take that, which is -- and Dr. Simmons, of course, chime in, but this is a behavioral science. This is a behavioral intervention. Motivational interviewing is an evidence-based practice that's designed to impact decisions. It's part of decision science, the choices we make. And of course, it's a part of our intervention. It's also a part, much of what our customers and others are doing. It in itself is not a primary differentiator since it's being used in so many ways. The real challenge here is marrying motivational interviewing with consumer and personalization insights. So for example, if I don't want to do something, understanding why, understanding what I might be interested in, what motivates me, what drives me, what gets in the way, what I might be willing to test and try, what I absolutely never would be willing to test and try, all of that is really -- one could say it supercharges or empowers decision science and decisional approaches, like motivational interviewing or motivation enhancement therapy and that's the real value. I think that motivational interviewing is very commoditized and widely deployed across a number of instruments and approaches, customers and health care systems. It's not -- it's great, but it's not enough. It requires more. And that's our approach.

Got it. Appreciate it. And just one last one here. What part of the health care systems would you like to see adapt Dario's platform next?

So I mean, I think from our point of view, we picked the market segments that we are pursuing, specifically because I think that gets the largest benefit in the largest number of members or consumers' hands quickly. So not only are we pursuing health plans and employers, but we will continue to pursue the direct-to-consumer as well as the retail approach because if you look at the overall population of people that can benefit from this, it's a broad-based population that receives its health care from multiple different places. But I think that in terms of priority-wise, the largest pockets of users is going to come from employers and health plans. So in terms of if I had to prioritize, that would be the next place that we want to see it. As the market continues to evolve and you start to see options for reimbursement in this space, potentially, as we go forward, then the providers and the RPM-type solutions are going to become critically important as well because there, who's paying for it will shift from the employers and the health plans in terms of looking at it on a cost reduction basis to looking at it more on a traditional remote basis or reimbursement basis.

Okay. Well, I think that just about wraps it up. I know we're almost at the end of our time. And Dr. Simmons and everyone from the Dario team, I really appreciate you getting on. We had a great participation today, and thank you so much.

Thanks.

Thank you.

Thank you.

Thank you, everyone.