Item 1. Business
Item 1.
Business
Overview
We are a leading global
Digital Therapeutics (“DTx”) company revolutionizing the way people manage their health across the chronic condition
spectrum to live a better and healthier life. Our mission is to transform how affected individuals manage their health and chronic
conditions by empowering our customers to easily manage their conditions and take steps to improve their overall health. Most chronic
conditions are driven by personal behaviors and the individual actions that are or are not taken. We believe that changing these
behaviors can dramatically improve our customers’ overall health and substantially reduce unnecessary health spending. However,
behavioral change and habit formation are difficult, especially in managing chronic disease and related conditions. Our digital
therapeutics endeavor to produce lasting behavior changes in our customers by applying a novel combination of artificial intelligence
(“AI”)-driven dynamic personalization and behavioral science at scale. This allows us to engage and support our customers,
and offer them a complete virtual care solution, ideally resulting in improved health outcomes and reduced total cost of care.
Our
principal operating subsidiary, LabStyle Innovation Ltd., is an Israeli company with its headquarters in
Caesarea, Israel. We were formed on August 11, 2011, as a Delaware corporation with the name LabStyle Innovations
Corp. On July 28, 2016, we changed our name to DarioHealth Corp. We began our sales in the direct-to-consumer space,
solving first for what we deemed the most difficult problems: how to engage users and support behavior change to improve
clinical outcomes in diabetes. Our most developed AI tools leverage the direct-to-consumer experience from over 150,000
members to drive superior engagement and outcomes. In early 2020, we broadened our solutions to include other medical
conditions in addition to diabetes, and to serve business customers who seek to improve the health of their stakeholders.
Presently, we have deployed solutions for diabetes, hypertension, and pre-diabetes, and through our acquisition of Upright
Technologies Ltd. (“Upright”), we now offer solutions for musculoskeletal (“MSK”) conditions. We are currently
delivering B2B2C solutions for providers, employers, and pharmaceutical companies, and we plan to develop a full-risk health
plan business, which we expect will provide our AI driven, remote patient monitoring (“RPM”) and coaching
for a variety of chronic conditions, across a range of customer product lines in 2021.
Upright Technologies
Ltd., which we acquired in February 2021, is a leading digital MSK health company focused on preventing and treating the most
common MSK conditions through behavioral science, biofeedback, coaching, and wearable tech. Upright has over 90,000 active users
and its clinically validated solution is recommended by more than 500 clinics worldwide.
In-market first-generation
digital health solutions offer static or nominal personalization at best, integrating signals to customize nudges or personalize
communications in a manner that does not significantly adapt to changing user needs over time, while user journey’s, or experiences,
remain fairly static. First generation solutions generally lack user experience benefit of insight from tens of thousands of direct-to-consumer
engagements over years that adaptively personalize user journeys for high engagement and outcomes. These solutions are often described
as “fingerprinted,” but while fingerprints don’t change over time, users do. As a result, any static or minimally
dynamic approaches are not sufficiently customized to address user needs.
Market intelligence
confirms that enterprise customers are frustrated by existing solutions with static user journeys, limited transparency, inability
to integrate with existing technologies and workflows, low engagement and retention and challenges with flexible deployments. Some
customers want a single solution for most-major chronic conditions, others wish to deploy piecemeal solutions or may have already
invested in solutions for a portion of their populations. Health systems and health plans have invested significantly in their
technology and digital strategy and require solutions that interoperate with their existing and planned deployments. First generation
digital health solutions that have piloted with complex customers such as health plans have been forced to pivot their business
strategies to employers and others owing to enrollment, integration, return on investment and reporting challenges. Our solutions
are designed from the ground-up for integration, can be deployed for single or multiple conditions, deliver behavioral-science
informed dynamically personalized and integrated user journeys, deliver clear returns on investment in required time horizons and
allow for real-time granulated customer reporting.
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Unlike other digital
health solutions, we also personalize user experience beyond nudges. Healthcare journeys and pathways must be individualized, informed
by behavioral science, and dynamically responsive to drive engagement and outcomes. Customized, dynamic user journeys are delivered
by our AI-driven journey engine, the “Dario Loop” (formerly called Dario Intelligence), which personalizes user experience
across a range of factors including timing, tone, channel, content, frequency, and intervention. We believe that our dynamic personalized
approach ensures superior engagement and retention, reduced costs, and ultimately, improved user health. This is reflected in our
user experience feedback, with an unparalleled 4.9 out of 5 stars across more than 15 thousand reviews in the Apple App Store,
a best-in-class net promoter score of 76, and industry-leading, published improvements in clinical metrics such as estimated glucose
monitoring (“HbA1c”), hypertension (“HTN”), pain and health-related quality of life.
Our Solutions
We offer a customized,
user-centric, modular platform integrating digital therapeutics, coaching, devices, and care providers. Our suite of offerings
includes Dario Tools, which are devices that integrate with applications on a user’s smartphone, DarioEngage, a population
health management platform (“DarioEngage”), and the Dario Loop, our AI-driven journey engine.
Dario Tools
Our platform is designed
for integration across a range of devices including partner devices. Our digital architecture and user experience can easily integrate
with partnered devices such as continuous glucose monitor (“CGM”) and other remote patient monitoring devices. For
example, we recently partnered with one of the “big 4” diabetes companies to integrate their meter as well in certain
commercial deployments. Our native devices include:
• All-in-one smart glucose meter
• Bluetooth connected blood pressure cuff
• Digital Scale
• Upright MSK training device
Because of the widespread
and growing use of smartphones and the evolution of user preferences, our primary device is the user’s smartphone. Our connected
device strategy has been to develop or acquire devices when existing market requirements are not adequately met (for example, our
smart glucometer and Upright’s MSK device), and to partner with best-in-class devices for the remaining applications (including,
for example, our digital scale, blood pressure cuff, and CGM).
DarioEngage
Dario targets conditions
for which behaviors drive a significant portion of the outcomes, and which conditions bear a substantial cost burden to our users.
We combine our “Dario Tools” with our software, by which we offer RPM of their conditions and progress. Dario divides
its solutions into metabolic and non-metabolic categories:
• Metabolic conditions currently deployed include diabetes
(primarily type I and type II), hypertension and obesity/pre-diabetes.
• Non-Metabolic conditions currently deployed include MSK
conditions.
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We present our users
with a digital center of excellence - a low friction integrated experience from contracting through onboarding, data exchange,
enrollment, outcomes, and reporting. Regardless of which conditions or populations our customers select, and independent of whether
they choose to deploy portions of their strategy through other partners, we present a unified application experience that simplifies
deployments, creates market-leading transparency, and accelerates and broadens user engagement.
The Dario Loop
Users vary significantly
in their interests and preferences, and unique user preferences also vary over time, insofar as optimal timing, tone, content,
channel, frequency, and intervention required to produce sustained behavior change. Users interactions with devices, smartphones,
coaches, providers, and third-party solutions must be personalized along these axes to ensure optimal engagement, retention, and
outcomes. To engage and sustain user interest and participation, and to drive outcomes, platforms must be dynamically responsive.
Because of a lack of responsiveness to these types of variances, many digital health platforms that achieve high initial engagement
often fail to retain users over time.
Key to our ability
to accommodate user behavioral changes is our mature AI-driven user journey engine, the “Dario Loop.” While several
in-market solutions now integrate health signals across a range of categories to apply limited, nominal personalization, primarily
in the form of nudges, our solution is informed by years of user experience data from over 150,000 users, enabling us to continually
personalize and adapt user journeys over time. The Dario Loop journey engine drives our multichannel targeted outreach and enrollment
campaigns, informs specific recommendations around a range of categories such as diet, physical activity, self-care, coaching interventions,
and provider engagement, and evolves in real time in response to the data exhaust from a user’s interaction with the care
ecosystem.
The Dario Loop combines
complex behavioral science insights with data from tens of thousands of users over several years to recommend AI-driven initial
and updated care journeys in response to a user’s engagement with the platform. Most digital health solutions consist primarily
of tracking, content, and nudges. These are often perceived by users as non-rewarding work, and often do not feel relevant to their
concerns, particularly as they evolve over time. We believe that current in-market solutions trivialize within person changes over
time and do not appropriately respond to dynamically evolving interests of users. This results in reduced engagement and impaired
outcomes. The Dario Loop adapts user journeys’ to drive engagement, retention, and clinical outcomes by optimizing timing,
tone, channel, content, frequency and intervention to deliver dynamically personalized user journeys that are more likely to result
in the behavior changes needed to drive improved outcomes across a range of conditions. As we partner with solutions in additional
conditions or categories, we “loop them in” to our solution, enhancing the engagement and efficacy of these partnered
solutions to deliver additional value to our users. The engine is designed for integration and scale; as we add populations and
conditions for which behaviors are primary drivers of outcomes, our engine becomes more adept at customizing a user’s preferences
and needs.
Our Growth Strategies
Add
customers across a range of channels . Due to our unique ability to deploy flexibly and interoperability, and since we
cover the range of chronic conditions of common concern to health plans, providers and employers, we are experiencing increased
interest in our behavior change platform for chronic diseases. We have already engaged with several large providers and one fortune
500 company subsidiary, and are in late stage negotiations to enter contracts with several health plans on their fully insured
businesses. We anticipate continued growth and demand in these channels as we acquire customers. Each additional contract not only
increases revenues, but also the likelihood of attracting additional new customers as they recognize our solutions being adopted
and trusted by peers and competitors.
Increase
the eligible populations within customers . Initially, Dario’s solutions were deployed for type I and type II diabetes.
Since that time, we have added HTN, MSK. Each new condition added increases our ability to cover larger portions of our customers’
populations, thereby reducing the need for our customers to engage multiple vendors, and reducing their costs as compared to the
alternative of partnering with multiple solutions to cover the conditions and categories that we cover on one single platform.
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Drive
Engagement . Our business model is predominantly a subscription model, where we charge per user engaged on the platform.
As our AI matures and as we deploy increasingly dynamic and adaptive personalization, we intend to engage a large portion of eligible
populations, potentially driving increased revenue. A user is considered as an engaged user if (i) the user is measuring high
blood glucose and/or blood pressure using our app and our connected devices, (ii) a user is interacting with our coach via
one of the communication channels such as chat, SMS, email or phone call, or (iii) a user who is performing one of the following
activities on his application such as: reading messages of articles sent to him over the app, setting or updating goal on his application,
updating his profile, tagging meals, recording intake of drugs and other activities available on our application.
Optimize
solutions for value . Our customers primarily engage for 3 key reasons: (1) the opportunity for cost savings; (2) our
competitive advantage in breadth of conditions serviced and our AI technology; and (3) revenue opportunities from our digital
center of excellence. Our pricing strategy is designed to deliver return on investment to our customers soon after engagement,
and steadily over time. As we evolve our solutions to deliver increased value to our users, we can offer customers value-based
pricing models that can lead to greater revenue.
Acquisitions
and Partnerships . In early 2021, as part of our plan to expand our suite of offerings to provide a wider range of solutions
to our potential customers, we acquired Upright, and we are now planning to deploy a comprehensive MSK virtual
clinic in the second half of 2021.
Post-COVID
Rebalancing: The COVID-19 pandemic has had a major impact on health. Our members and eligible members were disproportionately
affected as researched showed that chronic condition comorbidities increased the risk of hospitalization and death from COVID-19.
In 2020, telehealth and digital care spiked significantly, as health plans and providers sought to deliver solutions virtually.
Across the industry, telehealth use spiked in 2020 and has since withdrawn some, albeit to still more than 50x pre-pandemic levels.
However, telehealth as delivered today is not appreciably different from how it was delivered 30 years ago, with largely telephone
only visits, and even where video is present, remote monitoring, real-time data and device integration remain mostly absent. Our
customers and potential customers recognize the tremendous potential of building on the shift to telehealth with the evolution
of more complete virtual care models as they see the limitations of pure telehealth-based care for chronic conditions.
Sales and Marketing
Our initial marketing
efforts in the United States were focused on the early adopter users who have diabetes and who are paying out of pocket for their
monitoring tools to manage their chronic condition, and we have concentrated our efforts in gaining market share and brand awareness
through direct-to-consumer marketing efforts.
In 2018, we began to
expand our marketing efforts to the insured population by offering our DarioEngage platform to a variety of healthcare providers
who are supporting and coaching individuals with diabetes. We believe this will help us to diversify our revenues, from only selling
our Dario Blood Glucose Monitoring System and its consumables to revenues generated from providing online real-time monitoring,
supervising and coaching capabilities to all relevant healthcare providers who support individuals with diabetes and hypertension,
and in the longer terms also other chronic conditions. As part of these efforts, during 2019 we announced our planned cooperation
with Attain Health, Giant Eagle, BestBuy, and Better Living Now (BLN).
On the marketing side,
we primarily utilize online marketing in order to create awareness of Dario. Rather than solely rely on an online advertisement,
we will also consider revenue sharing with affiliate networks and a variety of other pay-for-performance methods commonly used
in online commerce.
We also expect to collaborate
with the medical community to showcase what we expect will be the Dario Smart Diabetes Management Solution’s clinical equivalence
and usability superiority through DarioEngage and Dario Loop.
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As part of transforming
our offering from the direct-to-consumer market to the (B2B2C and payors market, in the beginning of 2020, we hired a President
and General Manager for North America who is leading our sales and marketing organization in the United States aimed to offer
our digital solution to health plans, employers, hospital, clinics, and remote patient monitoring centers. We expect this organization
to grow as we enter into service agreements with such payors. In that regard, in 2020, we announced a variety of agreements expanding
our sales in the B2B2C market including: (i) in January 2021, our announcement that we entered into an agreement to
provide its digital therapeutics solution to eligible employees of a subsidiary of a U.S. based Fortune 500 technology and engineering
company, which was obtained through our partnership with the Vitality Group (“Vitality”); (ii) in December 2020,
we announced that we entered into an agreement to provide our RPM solution to Presbyterian
Medical Services, one of the largest integrated healthcare systems in the State of New Mexico, effective January 1,
2021; (iii) in November 2020, we announced that we entered into an agreement to provide our digital therapeutics solution
to eligible employees of a U.S.-based Fortune 500 technology company; (iv) in October 2020, we announced our
inclusion in Vitality’s Gateway Flex offering, allowing our digital therapeutics platform to be marketed to Vitality's vast
employer base that provides benefits solutions to 20 million people, (v) in September 2020, we announced our partnership
with HMC Healthworks, that extends our reach into HMC's vast multi-employer client base through which HMC is currently managing
more than one million members; (vi) in July 2020, we announced that we entered the U.K. RPM market through an agreement
with Williams Medical, making our platform available to healthcare professionals throughout the U.K. and Ireland; and (vii) in
June 2020, we announced two RPM agreements in the U.S., allowing healthcare providers to monitor patients between office
visits while utilizing new CMS reimbursement codes, an added source of revenue.
Manufacturing
As we do not directly
manufacture our products ourselves, we have supply agreements with manufacturers for the Dario Blood Glucose Monitoring System,
glucose test strips, lancing devices, lancets, blood pressure monitor and weight scale. We have arrangements in place
with commercial-scale manufacturers for both the Dario Blood Glucose Monitoring System, for our test strips and the other
devices. As a result of investments, we have made over the past several years, we own the specialized equipment used to manufacture Dario
Blood Glucose Monitoring System.
During 2015, we commenced
the manufacturing of our Dario Blood Glucose Monitoring System with a Chinese manufacturer as part of our efforts to further reduce
manufacturing cost. At the beginning of 2016, we transitioned our manufacturing to a new Chinese manufacturer as part of our effort
to increase our manufacturing capacity and improve cost savings.
Our primary
product offering is primarily subscription based software and services which do not require manufacturing, and which are
developed by us.
Clinical Studies and Outcomes
Our platform is planned
to target different chronic conditions. Our initial focus has been on diabetes because that is a condition in which we believe
there is the biggest opportunity to make a meaningful impact and improve healthcare outcomes and lower costs. It is also a condition
that is associated with multiple different comorbidities, each of which represents a significant health and economic burden. The
majority of our end-users are individuals with type 2 diabetes. Most people with type 2 diabetes are diagnosed after age 45 and
have at least two co-existing chronic conditions. The most common chronic condition in people living with type 2 diabetes include
hypertension (73.6%), overweight/obesity (87.5%), hyperlipidemia (75.2%), chronic kidney disease (36.5%), and cardiovascular disease
(32.2%). Typically, the health of people with type 2 diabetes is managed by a primary care physician, although few may also be
seen by an endocrinologist.
On average, people
with type 2 diabetes see a physician more than five times per year. While there are a number of metrics that physicians use to
track the health of these patients, the most common is hemoglobin A1c, or HbA1c, which measures the average 90-day glycemic (blood
glucose) level in red blood cells. Clinical guidelines published by the ADA suggest that a reasonable HbA1c target for many non-pregnant
adults is less than 7%, or 154 milligrams per deciliter. A higher HbA1c has been associated with increased health risk and associated
costs. The ADA estimates that annual healthcare costs for a person with diabetes cost an average of $16,750 compared to $7,151
for a healthy individual. Research published by Oxford University in the United Kingdom suggests that a 1% reduction in HbA1c levels
leads to a 21% reduction in death from diabetes, a 14% reduction in heart attacks and a 43% reduction in peripheral vascular disease.
Monitoring HbA1c levels is typically done through routine blood work in a clinical laboratory with a physician order. Treatment
can involve a range of therapies, the most common of which is lifestyle management such as nutrition, physical activity and medication.
Physicians will also employ various strategies to manage diabetes-associated comorbidities.
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We believe that patients
using a digital diabetes management platform have the potential to promote behavioral modification and sustain adherence to diabetes
management, demonstrating better glycemic control. Our sophisticated customer-focused solutions provide significant, meaningful
improvements in the measurable clinical outcomes of our members.
Clinical Studies
The system accuracy and user performance
of our product has been evaluated in several studies that we have performed, in over 1,300 diabetic patients from 2015 through
2017, and was found compliant with the most stringent current requirements of FDA guidelines and international standards then in
effect.
Clinical validation
of our product was performed with 350 diabetic patients for each product type, namely the meter with the audio jack and the meter
with the lightning connector, and the results that were achieved were as follows:
·
Dario BGMS (Android): For all subject's samples 96.6% within ±15% and 100% within ±20% of the medical laboratory values at the entire glucose concentrations range
·
Dario LC BGMS (iPhone, Lightning connector): For all subject’s samples 96.3% within ±15% and 99.4% within ±20% of the medical laboratory values at the entire glucose concentrations range.
Published Clinical Data
Since 2017, we have
conducted numerous real-world-data studies through analyzing the clinical data of our user’s utilizing the rapidly increasing
database that is stored on our data cloud.
Several scientific
studies were published by us between 2017 and through 2020 in leading diabetes conferences such as the ADA, AADE and ATTD.
Main Highlights
In all of the below
studies, we believe that the results show a trend of continued improvement, demonstrating a direct correlation between using the
Dario Blood Glucose Monitoring System and app and improving clinical parameters. The combination of Dario’s Blood Glucose
Monitoring System and app may promote behavioral modification and enhanced adherence to diabetes management, demonstrating improvement
in glycemic outcomes and sustainment for a long period of time.
Dario reported
an Average Reduction in Estimated HbA1C of 1.4% for High-Risk type 2 Diabetes Users.
Dario presented at
the 77 th ADA session a study that was titled “Reducing A1C Levels in Individuals with High-Risk Diabetes Using
the Mobile Glucose Meter Technology.” In the study Dario reported an average reduction in estimated HbA1C of 1.4% for high-risk
type 2 Diabetes users.
At the ADA 2018 session, Dario presented
three real-world-data analysis studies, as detailed below.
Type 2 Diabetes Users
of Dario Digital Diabetes Management System Experience a Shift from Greater than 180 mg/dL to Normal Glucose Levels with Sustainable
Results
·
Reduction of 19.3% in high glucose readings within 12 months
·
Increase of 11.3% in in-range readings within 12 months
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Method :
A retrospective data evaluation study was performed on the Dario TM cloud database. A population of all active Type 2
Diabetic (T2D) users that took measurements with Dario TM BGMS on average of 20 measurements per month during 2017. The
study assessed the ratio of all high blood glucose readings (180-400 mg/dL) and the ratio of all normal blood glucose readings
(80-120 mg/dL) in their first month of use to their last month of use during 2017 as recorded in the database.
Results :
For 17,156 T2D users activated during 2017 the average ratio of high events (180-400 mg/dL) was reduced by 19.3% (from 28.4% to
22.9% of the entire measurements). While at the same time, the ratio of normal range readings (80-120 mg/dL) was increased by 11.3%
(from 25.6% to 28.5% of the entire measurements). The most significant shift occurred after one month of usage (14% decrease) and
maintained stability over the following months throughout the full year. |
Updated
Analysis combining 2017 and 2018 data totals 38,838 Type 2 Diabetes active users and 3,318,014 measurements show
14.3% decrease in high readings (180-400 mg/dL) and 9.2 % increase in In-range (80-120 mg/dL) readings
A decrease in High Readings
and Severe Hyperglycemic Events for People with T2D over the Full Year of 2017 in Users Monitoring with Dario Digital Diabetes
Management System
·
Reduction of 20% of High events (180-400 mg/dL) in T2D sustained within 12 months
·
Reduction of 58% of Hyper events (>400mg/dL) in T2D within 12 months
Method:
A retrospective data evaluation study was performed on the Dario TM cloud database. A population of active Type 2 Diabetic
(T2D) users that continuously measured their blood glucose using Dario TM BGMS during the full year of 2017 was evaluated.
The study assessed the ratio of high (180-400 mg/dL) and hyperglycemic (>400mg/dL) blood glucose readings during full year of
2017 as recorded in the database. The average of high and hyperglycemic glucose readings were calculated in periods of 30-60, 60-90,
90-120, 120-150, 150-180, 180-210, 210-240, 240-270, 270-300, 300-330, 330-360 days and compared to first 30 days as a starting
point of analysis.
Results:
For 225 T2D active users the ratio of high events (180-400 mg/dL) was reduced gradually in 19.6% (from 23.4% to 18.8% of the entire
measurements) from baseline compared to the 12 th month of the year. Moreover, the ratio of severe hyperglycemia events
(>400 mg/dL) was decreased in 57.8% (from 0.90% to 0.38% of the entire measurements) at the same period.
Continuous Reduction of
Blood Glucose Average during One Year of Glucose Monitoring Using Dario Digital Monitoring System in a High-Risk Population
·
Reduction of 14% Blood Glucose average was observed in T2D within 12 months
·
76% of the population showed 24% improvement in Blood glucose average within 12 months
Methods :
An exploratory data analysis study reviewed a population of high risk active type 2 Diabetic users with initial 30 days glucose
average above 180 mg/dL during a full calendar year. The study assessed the average blood glucose readings along a year of usage.
The average of glucose readings was calculated per user in periods of 30 days intervals from 30-60 to 330-360 days and compared
to the first 30 days as the starting point baseline of analysis.
Results:
Overall of 238 highly engaged T2D users (more than one daily measurement in average) whose average blood glucose
level was above 180mg/dL in the first 30 days of measurements (225±45 mg/dL) showed continuous reduction in glucose level
average vs. baseline. Reduction in blood glucose average level was demonstrated gradually, in the succeeding 3, 6 and 12 months
showing average decrease of 7%, 11% and 14% vs. baseline, respectively. Furthermore, 76% of the entire population (180 out of 238
users) improved their average blood glucose level over a year. Those 180 users (average blood glucose 228±46) showed an
average decrease of 10%, 16% and 24% in their glucose average following 3, 6 and 12 months, respectively.
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At the American Association
of Diabetes Educators (AADE) 2018 Dario presented a study titled “Decrease in Estimated A1C for people in High-risk over
a full year of users monitoring with a digital Diabetes management system.”
A reduction of 1.4%
in estimated HbA1C in Type 2 Diabetes high risk users from baseline after one year of the Dario system use.
Method :
A retrospective data evaluation study was performed on the Dario TM cloud database. A population of high-risk (with baseline
A1C > 7.5 percent), active users that continuously measured their blood glucose using Dario TM BGMS during a full
year was evaluated. The study assessed estimated A1C values based on blood glucose readings during a full year as recorded in the
database. The estimated A1C values were calculated in periods of 3, 6, 9 and 12 months and compared to first 30 days as a starting
point of analysis.
Results :
A group of 363 high-risk Dario BGMS users (A1C>7.5) with greater than two blood glucose measurements taken per day in the first
30 days and in the 12 th month of the year was selected. Estimated A1C was improved by -0.7, -0.8 and -1 percent from
baseline to 3, 6 and 9 months respectively, and remained -1 percent lower following 12 months of usage (8.65±0.96 vs.7.65±1.0).
Moreover, subgroup analyses by diabetes type revealed substantial estimated A1C improvement among people with T2D showing improvement
of -1 percent from baseline to 3, 6 months and 1.4 percent following 12 months (8.5 ± 0.91% vs. 7.14% ±
0.98%).
An additional study
evaluated on the potential improvement in glycemic variability in Type 2 diabetes over six months in patients monitoring with Dario
Digital Diabetes Management System. Dario presented the study results at the Advance Technologies and Treatment for Diabetes (ATTD)
conference in February 2019 in Berlin. We presented two additional studies outcomes at ADA 2019 conference.
Decrease in Glycemic Variability
for T2D over Six Months in Patients Monitoring with Dario Digital Diabetes Management System
·
Reduction of 14%-18% in measurements variability was observed in T2D within 6 months
·
Hypo events (<70 mg/dL) remained <1 event on average
Method:
A retrospective data evaluation study was performed on the Dario TM database. A population of T2D high-risk
patients (blood glucose measurements average (GM avg ) >180 mg/dL) measuring more than 20 times in the first 30 days
(analysis baseline) was evaluated on days 60-90 (3 months) and 150-180 days (6 months). Standard deviation (SD) and GM avg
were calculated and compared to the baseline.
Results:
A group of 698 T2D high-risk Dario TM users was selected. GV was reduced by 10% and 14% from baseline through 3 and 6
months, respectively (SD of 55.7, 58.4 vs.65.0). GM avg was reduced by 8% and 12% from baseline through 3 and 6 months,
respectively (201.1±25.57, 192.8±54.3 vs. 219.5±38.5) while patient’s hypoglycemic event (<70mg/dL)
was in average, less than one (<1) during this period. Subgroup analyses (355 patients) revealed substantial GV improvement
among non-Insulin T2D patients. The GV was reduced by 14% and 18% from baseline through 3 and 6 months, respectively (SD of 52.8,
50.7 vs.61.7).
T2D Users of Dario Digital
Diabetes Management System Experience an Increase of in-range Glucose Levels Linked to App Engagement
Relative Increase
of 10 % In-range linked to App engagement
Method :
A retrospective data evaluation study was performed on the Dario TM cloud database. A population of active Type 2 Diabetic
(T2D) users (>15 measurements per month on average) was evaluated. The study assessed the ratio of in-range blood glucose readings
(70-140 mg/dL) as a function of App engagement level for 6 months as recorded in the database compared to first 30 days as a starting
point of analysis.
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Results :
A population of 4917 T2D non-insulin users measuring more than 15 times per month on average during 6 months in a row was evaluated.
The ratio of in-range (70-140 mg/dL) readings was increased following 3 months in correlation to the level of tagging meal reference/carbs/physical
activity occurrences (4.0%, 9.1% and 11.9% for tagging 0-1, 1-2 and >2 times per day on average, respectively) and sustained
for 6 months (3.1%, 7.0% and 12.2%, respectively). In subgroup analysis focusing on users entering their meal reference, high correlation
was observed following 3 months with an increase of in-range measurements in 4.6%, 8.4% and 12.0% for 0-1, 1-2 and >2 meal reference
tagging per day on average, respectively, and maintained stability over 6 months period (3.2%, 7.4%, and 12.5%, respectively).
Reduction of Blood Glucose
Average Less than 140mg/dL in People with Type2 Diabetes Using Dario Digital Diabetes Management System
30-40% of T2D Dario
users experienced Reduction of Blood Glucose Average below 140 mg/dL
Method:
A retrospective data evaluation study was performed on the Dario TM cloud database. A population of
active T2D users that continuously measured for 6 months was evaluated. The study assessed their BG avg and estimated A1C (eA1C)
values based on blood glucose readings as recorded in the database. Values were calculated in periods of 3 and 6 months and compared
to their first 30 days as a starting point analysis.
Results:
A group of 1248 Dario BGMS T2D active users (1.98 measurements per day on average during 6 months in a row) with
BG avg >140mg/dL (eA1C>6.5) was evaluated.100% reduced their BG avg along 6 months on average.
A group of 31% (387)
achieved BG avg of <140 mg/dL (eA1C<6.5) following 3 months showing 19% reduction on average from baseline (132.38±13.36
vs.162.79±25.41 mg/dL and eA1C 6.24±0.46 vs 7.3±0.88) and sustained their glycemic control during a 6 months
period (131.57±13.86 mg/dL and eA1C 6.21±0.48).
Subgroup analyses
of 568 non-insulin users revealed that 40% (226) achieved a BG avg <140 mg/dL following 3 months (131.95±13.21 vs.161.67±24.18
mg/dL and eA1C 6.22±0.46 vs 7.26±0.84) and sustained for 6 months period (131.03±13.70 mg/dL and eA1C 6.19±0.47).
Along the 6 months period, hypo events (<50mg/dL) per user per month on average remained stable.
In August 2019
another study was presented at the AADE 2019 in Atlanta. The study evaluated the “Impact of Digital Intervention on In-range
Glucose Levels in Users with Diabetes.” The study results showed 6% improvement in average blood glucose levels over 3 months
intervention program for a group of 162 users. A 39% increase in the in-range measurements was observed in a subgroup of 101 patients
who started with average blood glucose levels of over 140mg/dL.
In February 2020,
we presented an additional clinical study at the Advanced Technologies & Treatments for Diabetes (“ATTD”)
conference in Madrid, Spain. The presented data shows the Dario digital therapeutics platform successfully assists insulin dependent
patients with diabetes in reducing hypoglycemic events.
Decrease in Hypoglycemia Events Over Two Years
in Patients Monitoring with Dario’s Digital Diabetes Management System
Method:
A retrospective data analysis was performed on the Dario real-world database. Insulin dependent of users with type 1
or type 2 diabetes population was evaluated for two year of continuous system use. Average numbers of level 1 hypoglycemia (<70mg/dL)
and level 2 hypoglycemia (<54 mg/dL) events were calculated monthly and compared to baseline (first month).
Results:
For 1481 type 1 and type 2 insulin dependent users, average of level 1 hypoglycemia events and level 2 were reduced
by 24% and by 17% after 6 months and by 50% and 57% after 2 years vs. baseline respectively. Users with type 1 diabetes (N=363)
reduced level 1 hypoglycemia events by 50% and Level 2 by 55% after 2 years. Moreover, a 40% reduction in high blood glucose readings
was observed as well after 2 years.
In November 2020,
we presented additional clinical study data at the Virtual Diabetes Technology Society (DTS) meeting. The presented data indicated
the potential for a digital diabetes management solution to effect and sustain glycemic control improvements and demonstrated long
term reduction of blood glucose average (eA1c) and glycemic variability in type 2 diabetes over two years. The system assists users
through a variety of mechanisms including behavior modification in diabetes self-management and in long-term routines for self-care.
11
The Effect of a Digital Therapeutic Platform on Glycemic Control in Adults above Age 65 with Type 2 Diabetes.
Reduction of 13% blood glucose average in age group ≥65 (N=298) at six months by 13% sustained for 12 months.
Reduction of 38.1% in high readings ratio (>250 mg/dL) in the ≥65 age group at six months and by 41.5% at 12 months.
Method:
A retrospective study of high-risk users (BG avg >180 mg/dL equivalent to e A1c 8.0) 2 with type 2 diabetes that measured their
blood glucose using the Dario® platform database over two consecutive years was performed. The minimum engagement level for
inclusion was at least two blood glucose measurements per day on average taken in Month 1 and Month 24. Actual blood glucose readings
were taken by the Dario meter and loaded into the cloud database. These were evaluated for the blood glucose average (BGavg), estimated
A1c (eA1c)values and glycemic variability (by Standard Deviation; SD) following 24 months compared to the first month (baseline).
Results:
368 high-risk, T2D active and engaged users for at least consecutive 2 years were identified and assessed for their risk-level
and insulin usage. A group of 148 T2D, non-Insulin users that started with a blood glucose average (BG avg) >180 mg/dl (equivalent
to eA1c>8.0) consistently reduced their BG avg by 18% on average and sustained these values (179±45 vs. 219±56
mg/dL) following 2 years on the Dario platform. Glycemic variability was reduced over two years by 20% on average (SD:45 vs. 56)
. Substantial reductions were observed for higher risk groups (insulin and non-insulin treated). The subset that started with average
BG levels > 212 mg/dL (eA1c >9.0) and average BG levels >240 mg/dL (eA1c>10) reduced their average BG by 22.5% and
25.7% respectively on average over two years. The equivalent reductions in eA1c were 1.95% and 2.42%
In August 2020, we
presented an additional clinical study at the Virtual Association of Diabetes Care & Education Specialists (ADCES) conference.
The presented observational study data demonstrated better glycemic and blood pressure control. Patients using an integrated chronic
disease management digital platform have the potential to improve user activation which may assist to better manage their blood
glucose and blood pressure levels and sustain behavioral change.
Impact of Digital Management on Clinical Outcome in Patients with Chronic Conditions: Diabetes and
Hypertension.
Hypertension: Increase in normal level % measurements from 6% to 12% while hypertension stage
2 measurements decreased from 53% to 45%. 70% of the users (243 out of 345) improved their blood pressure levels by 8.4 mmHg Systolic
and 6.2 mmHg on average.
Glucose levels: A reduction of 33% in
high readings (>250 mg/dL) and 67% in severe events (>400 mg/dL) was observed over six months .
Methods:
A retrospective data evaluation study was performed on the Dario TM cloud database. A population of active
users that measured both blood pressure and blood glucose for at least 3 months was observed. Blood pressure and blood glucose
levels were evaluated. First month measuring on Dario platform was used as study baseline. Clinical outcomes examined were blood
pressure values, percentage of blood pressure categories, average blood glucose (BGavg) and high blood glucose readings (>250
mg/dL, >400 mg/dL) ratios.
Results:
A group of 345 active users started at baseline with Hypertension stage 1, 2 or hypertensive crisis levels and measured
following 3 months was evaluated.
· Blood pressure:
o Normal levels increased from 6% to 12% and percentage of users with hypertension stage 2 decreased
from 53% to 45%
o 70% of the users (243 out of 345) improved their blood pressure levels in 8.4 mmHg Systolic and
6.2 mmHg on average (Systolic 134.2±12 vs.142.6±14; Diastolic 89.9 ±11 vs.83.7 ±8.7)
· Blood Glucose:
o A group of 345 users measured with Dario their blood glucose in addition to blood pressure, 89%
are type 2 and pre-diabetes - average age is 60.4.
o For the group of 345 users a reduction of 33% (5.4% vs.8.0%) in high readings ratio (>250 mg/dL)
and 67% (0.3%vs.0.9%) in severe events ratio (>400 mg/dL) was observed following six months on average.
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A subset of 114 users
with diabetes in higher risk started with BG average >160 mg/dL improved their average blood glucose by 14% (207±47 vs.177±50
mg/dL) following six months.
In June 2020, we presented
two clinical studies at the ADA Virtual conference. The presented data from these studies showed:
· The use of a digital diabetes platform resulted in a large population are consistent with previous
studies and show the potential to promote behavior modification in users with T2D. The study demonstrated that digital management
platforms may assist user to better control their blood glucose levels and sustain behavioral change. This observational data presented
an improvement in high glycemia readings ratios, and an increase in prediabetes fasting blood glucose levels sustained over one
year.
· The additional study confirmed the potential of digital diabetes solutions to sustain glycemic
achievements in users with type 2 diabetes over two years. The system may assist the users to experience an actual behavior modification
in their diabetes self-management as well as in their long-term routine for self-care.
Users with type 2 diabetes using a digital platform experienced
sustained improvement in blood glucose levels.
Method:
A retrospective data evaluation (Q1:2018-2019) was performed on the Dario ® data base. A population of active
users (18 measurements per month with the Dario ® System on average) with T2D, non-Insulin treated was evaluated
over a full year. High blood glucose readings (180-400 mg/dL, >250 mg/dL), fasting readings (<126 mg/dL) and post-meal readings
(<180mg/dL) ratios were assessed in their first month of use until the 12 th month.
Results:
For 9,200 users with T2D, non-Insulin users, the average ratio of high glycemia events (180-400 mg/dL) from entire set of measurements
was reduced by 26% (18.62% vs. 23.43%) while readings of >250mg/dL were reduced by 33% (4.65% vs. 6.93%) over a year. Fasting
measurements analysis revealed an increase of 16% in ratios of readings <126 mg/dL per entire set of fasting measurements (40.59%
vs. 34.92%) on average. Post-meal readings ratio of <180 mg/dL per entire post-meal measurements increased by 5% (73.75% vs.
70.42%) on average over a year.
Estimated A1C Reduction in High-Risk Patients over Two
Years of Using a Digital Diabetes Management Platform
Method:
A retrospective data evaluation study was performed on high-risk users with type 2 diabetes that measured their blood glucose using
Dario ® platform database for two consecutive years. The study assessed BGavg, estimated A1c (eA1c) values and
glycemic variability following 24 months compared to the first month (baseline).
Results:
A group of 148 high-risk users with type 2 diabetes, non-Insulin treated was evaluated. Their BGavg was of >180mg/dL (eA1c>8.0)
for users taking ∼ 2 blood glucose measurements per day in the
first month and in the 24 th month on average. Their BGavg was consistently reduced by 18% and sustained (179±45
vs. 219±56 mg/dL) and eA1c was reduced by 1.5 percentage points (9.26±1.3 vs. 7.86±1.8). Glycemic variability
was reduced by 20% (SD: 45 vs. 56) at the end of 2 years. Additional analysis of 220 users with type 2 diabetes,147 started with
eA1c >9.0% and 73 started with eA1c >10%, revealed substantial eA1c reduction of 2.0 percentage points (10.31 ± 1.8%
vs. 8.36 ± 1.2%) and 2.4 percentage points (11.15 ± 1.2% vs. 8.73% ± 2.1%) from baseline after 2 years, respectively.
Glycemic variability was reduced by 20% for both (SD: 55 vs. 69 and 59 vs. 74, respectively).
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Government Regulation
The principal markets
that we have initially targeted for Dario are the United States, Canada, the European Union, Australia, and New Zealand. The
following is an overview of the regulatory regimes in these jurisdictions.
United States Regulation
Generally
In the United States,
devices are subject to varying levels of regulatory control, the most comprehensive of which requires that a clinical evaluation
is conducted before a device receives clearance for commercial distribution. Under Section 201(h) of the Food,
Drug, and Cosmetic Act, a medical device is an article, which, among other things, is intended for use in the diagnosis of disease
or other conditions, or in the cure, mitigation, treatment or prevention of disease, in man or other animals. The Dario
Blood Glucose Monitoring System is classified as a medical device and subject to regulation by numerous agencies and legislative
bodies, including the FDA and its foreign counterparts. FDA regulations govern product design and development, pre-clinical
and clinical testing, manufacturing, labeling, storage, pre-market clearance or approval, advertising and promotion, and sales
and distribution. Specifically, the FDA classifies medical devices into one of three classes. Class I devices
are relatively simple and can be manufactured and distributed with general controls. Class II devices are somewhat
more complex and require greater scrutiny. Class III devices are new and frequently help sustain life.
Unless an exemption
applies, each medical device commercially distributed in the United States will require a 510(k) clearance, 510(k)+ “de-novo”
clearance, or pre-market approval (or PMA) from the FDA.
510(k) Clearance
Process. After a device receives 510(k) clearance, any modification that could significantly affect
its safety or effectiveness, or that would constitute a major change in its intended use, requires a new 510(k) clearance
or could even require a premarket application approval. The FDA requires each manufacturer to make this determination
in the first instance, but the FDA can review any such decision. If the FDA disagrees with the determination, the agency
may retroactively require the manufacturer to seek 510(k) clearance or premarket application approval. The FDA
also can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or premarket
application approval is obtained.
De
Novo Classification . If the FDA denies 510(k) clearance of a device because it is novel and an
adequate predicate device does not exist, the “de novo classification” procedure can be invoked based upon a reasonable
assurance that the device is safe and effective for its intended use. This procedure approximates the level of scrutiny
in the 510(k) process but may add several months to the clearance process. If the FDA grants the request, the device is permitted
to enter commercial distribution in the same manner as if 510(k) clearance had been granted.
Premarket
Application Approval Process . After approval of a premarket application, a new premarket application or
premarket application supplement is required in the event of a modification to the device, its labeling or its manufacturing process. The
premarket application approval pathway is much more costly, lengthy and uncertain. It generally takes from one to three
years or longer.
European and Non-European
Regulation Generally
Sales of medical devices
outside the United States are subject to foreign regulatory requirements that vary widely from country to country. These laws and
regulations range from simple product registration requirements in some countries to complex clearance and production controls
in others. As a result, the processes and time periods required to obtain foreign marketing clearance may be longer
or shorter than those necessary to obtain FDA clearance.
The commercialization
of medical devices in Europe is regulated by the European Union. The European Union presently requires that all medical products
bore the CE mark, an international symbol of adherence to quality assurance standards and demonstrated clinical effectiveness. Compliance
with the Medical Device Directive (MDD) or the Active Implantable Medical Device Directive (AIMD) or the In Vitro Diagnostic Medical
Device Directive (IVDD) as audited by a notified body and certified by a recognized European Competent Authority, permits the manufacturer
to affix the CE mark on its products.
14
In September 2013,
we obtained ISO 13485 certification for our quality management system and CE Mark certification to market Dario, and
in May 2015 Dario was cleared to fulfill the criteria according to EN ISO 15197:2013 The granting of the CE Mark allows Dario to
be marketed and sold in 32 countries across Europe as well as in certain other countries worldwide. On November 21, 2014,
MDSS, our European Authorized Representative, completed the registration of the Dario Blood Glucose Monitoring System with the
German Authority as required by Article 10 of Directive 98/79/EC on in vitro diagnostic medical devices. We commenced an initial
soft launch of the product in Europe in 2014, created initial demand for the product and established brand awareness and marketing
techniques to reach our target market with a goal to continue expansion to new markets and territories.
We achieved regulatory
clearance to market Dario in other countries that do not rely on the CE Mark. To date, the non-CE Mark jurisdictions which we have
begun to market Dario include the United States, New Zealand, Canada, and Australia.
To the extent that
we seek to market our product in other non-CE Mark countries in the future, we will be required to comply with the applicable regulatory
requirements in each such country. Such regulatory requirements vary by country and may be tedious. As a
result, no assurance can be given that we will be able to satisfy the regulatory requirements to sell our products in any such
country.
Clinical Studies
Even when a clinical
study has an approved Investigational Device Exemption (IDE) from the FDA under significant risk (SR) determination, has been approved
by an Institutional Review Board (IRB) under non-significant risk (NSR) determination and/or has been approved by local or regional
Ethics Committee, the study is subject to factors beyond a manufacturer’s control, including, but not limited
to the fact that the institutional review board at a given clinical site might not approve the study, might decline to renew approval
which is required annually, or might suspend or terminate the study before the study has been completed. There is no assurance
that a clinical study at any given site will progress as anticipated; the interim results of a study may not be satisfactory leading
the sponsor or others to terminate the study, there may be an insufficient number of patients who qualify for the study or who
agree to participate in the study or the investigator at the site may have priorities other than the study. Also, there
can be no assurance that the clinical study will provide sufficient evidence to assure regulatory authorities that the product
is safe, effective and performs as intended as a prerequisite for granting market clearance. See “Clinical Trials”
above for clinical trials performed to date.
Post-Clearance Matters
Even if the FDA or
other non-US regulatory authorities approve or clear a device, they may limit its intended uses in such a way that manufacturing
and distributing the device may not be commercially feasible. After clearance or approval to market is given, the FDA and foreign
regulatory agencies, upon the occurrence of certain events, are authorized under various circumstances to withdraw the clearance
or approval or require changes to a device, its manufacturing process or its labeling or additional proof that regulatory requirements
have been met.
A manufacturer of a
device approved through the premarket approval application process is not permitted to make changes to the device which
affects its safety or effectiveness without first submitting a supplement application to its premarket approval application
and obtaining FDA clearance for that supplement. In some instances, the FDA may require a clinical trial to support
a supplement application. A manufacturer of a device cleared through a 510(k) submission or a 510(k)+ “de-novo”
submission must submit another premarket notification if it intends to make a change or modification in the device that could significantly
affect the safety or effectiveness of the device, such as a significant change or modification in design, material, chemical composition,
energy source or manufacturing process. Any change in the intended uses of a premarket approval application device
or a 510(k) device requires an approval supplement or cleared premarket notification. Exported devices are subject
to the regulatory requirements of each country to which the device is exported, as well as certain FDA export requirements.
15
Mobile Medical Applications Guidance
On September 23,
2013, the FDA issued final guidance for developers of mobile medical applications, or apps, which are software programs that run
on mobile communication devices and perform the same functions as traditional medical devices. The guidance outlines
the FDA’s tailored approach to mobile apps. The FDA plans to exercise enforcement discretion (meaning it will not enforce
requirements under the Federal Food, Drug & Cosmetic Act) for the majority of mobile apps as they pose minimal risk to
consumers. The FDA plans to focus its regulatory oversight on a subset of mobile medical apps that present a greater
risk to patients if they do not work as intended. The FDA is focusing its oversight on mobile medical apps that:
●
are intended to be used as an accessory to a regulated medical device – for example, an application that allows a health care professional to make a specific diagnosis by viewing a medical image from a picture archiving and communication system (PACS) on a smart mobile device or a mobile tablet; or
●
transform a mobile platform into a regulated medical device – for example, an application that turns a smart mobile device into an electrocardiography (ECG) machine to detect abnormal heart rhythms or determine if a patient is experiencing a heart attack.
Ongoing Regulation by FDA
Even after a device
receives clearance or approval and is placed on the market, numerous regulatory requirements apply. These include:
●
establishment registration and device listing;
●
quality system regulation, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation, and other quality assurance procedures during all phases of the product life-cycle;
●
labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or “off-label” uses, and other requirements related to promotional activities;
●
medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur;
●
corrections and removals reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the Federal Food, Drug and Cosmetic Act that may present a risk to health; and
●
post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.
Failure to comply with
applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions:
fines, injunctions, civil or criminal penalties, recall or seizure of our current or future products, operating restrictions, partial
suspension or total shutdown of production, refusing our request for 510(k) clearance or PMA approval of new products, rescinding
previously granted 510(k) clearances or withdrawing previously granted PMA approvals.
We may be subject to
announced and unannounced inspections by the FDA, and these inspections may include the manufacturing facilities of our subcontractors.
If, as a result of these inspections, the FDA determines that our or our subcontractor’s equipment, facilities, laboratories
or processes do not comply with applicable FDA regulations and conditions of product clearance, the FDA may seek civil, criminal
or administrative sanctions and/or remedies against us, including the suspension of our manufacturing and selling operations.
Ongoing Regulation
by International Regulators
International sales
of medical devices are subject to foreign government regulations, which may vary substantially from country to country.
16
In order to maintain
the right to affix the CE Mark to sell medical devices in the European Union, an annual surveillance audit in the company premises
and, if needed, at major subcontractors’ premises needs to be carried out by the notified body. Additionally,
European Directives dictate the following requirements:
●
Vigilance system, which requires the manufacturer to immediately notify the relevant Competent Authority when a company product has been involved in an incident that led to a death; led to a serious injury or serious deterioration in the state of health of a patient, user or another person; or might have led to death, serious injury or serious deterioration in health; and
●
Post-market surveillance including a documented procedure to review experience gained from devices on the market and to implement any necessary corrective action, commensurate with nature and risks involved with the product.
Failure to comply with
applicable regulatory requirements can result in enforcement action by the regulatory agency, which may include any of the following
sanctions: fines, injunctions, civil or criminal penalties, recall or seizure of our current or future products, operating restrictions,
partial suspension or total shutdown of production, refusing our request for renewing clearance and/or registration of our products
or granting clearance/registration for new products.
State Licensure
Requirements
Several states require
that Durable Medical Equipment (“DME”) providers be licensed in order to sell products to patients in that state. Certain
of these states require that DME providers maintain an in-state location. If these rules are determined to be applicable to
us and if we were found to be noncompliant, we could lose our licensure in that state, which could prohibit us from selling our
current or future products to patients in that state.
Federal Anti-Kickback
and Self-Referral Laws
The Federal Anti-Kickback
Statute prohibits the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or
to induce the:
●
referral of a person;
●
furnishing or arranging for the furnishing of items or services reimbursable under Medicare, Medicaid or other governmental programs; or
●
purchase, lease, or order of, or the arrangement or recommendation of the purchasing, leasing, or ordering of any item or service reimbursable under Medicare, Medicaid or other governmental programs.
To the extent we are
required to comply with these regulations, it is possible that regulatory authorities could allege that we have not complied, which
could subject us to sanction. Noncompliance with the federal anti-kickback legislation can result in exclusion from
Medicare, Medicaid or other governmental programs, restrictions on our ability to operate in certain jurisdictions, as well as
civil and criminal penalties, any of which could have an adverse effect on our business and results of operations.
Federal law also includes
a provision commonly known as the “Stark Law,” which prohibits a physician from referring Medicare or Medicaid patients
to an entity providing “designated health services,” including a company that furnishes durable medical equipment,
in which the physician has an ownership or investment interest or with which the physician has entered into a compensation arrangement.
Violation of the Stark Law could result in denial of payment, disgorgement of reimbursements received under a noncompliant arrangement,
civil penalties, and exclusion from Medicare, Medicaid or other governmental programs.
17
Federal False Claims
Act
The Federal False Claims
Act provides, in part, that the federal government may bring a lawsuit against any person whom it believes has knowingly presented,
or caused to be presented, a false or fraudulent request for payment from the federal government, or who has made a false statement
or used a false record to get a claim approved. In addition, amendments in 1986 to the Federal False Claims Act have
made it easier for private parties to bring “qui tam” whistleblower lawsuits against companies. Penalties
include fines ranging from $5,500 to $11,000 for each false claim, plus three times the number of damages that the federal government
sustained because of the act of that person.
Civil Monetary Penalties
Law
The Federal Civil Monetary
Penalties Law prohibits the offering or transferring of remuneration to a Medicare or Medicaid beneficiary that the person knows
or should know likely to influence the beneficiary’s selection of a particular supplier of Medicare or Medicaid payable items
or services. Noncompliance can result in civil money penalties of up to $10,000 for each wrongful act, assessment of three times
the amount claimed for each item or service and exclusion from the Federal healthcare programs.
State Fraud and Abuse Provisions
Many states have also
adopted some form of anti-kickback and anti-referral laws and false claims acts. A determination of liability under such laws could
result in fines and penalties and restrictions on our ability to operate in these jurisdictions.
Administrative Simplification
of the Health Insurance Portability and Accountability Act of 1996
The Health Insurance
Portability and Accountability Act of 1996, or HIPAA, mandated the adoption of standards for the exchange of electronic health
information in an effort to encourage overall administrative simplification and enhance the effectiveness and efficiency of the
healthcare industry. Ensuring the privacy and security of patient information is one of the key factors driving the legislation.
Intellectual Property
Patent applications
On May 8, 2011,
certain of our founders filed a Patent Cooperation Treaty (PCT) Application No. PCT/IL2011/000369, titled “Fluids Testing
Apparatus and Methods of Use.” This PCT claimed priority from two preceding U.S. provisional applications filed
by our founders, with the earliest priority date being May 9, 2010. The PCT application was transferred to us by our founders
on October 27, 2011.
This application covers
the novel blood glucose measurement device, comprising the glucose meter; and an adaptor that connects the glucose meter to a smart-phone
to receive power supply and data display, storage, and analysis. A PCT search report and written opinion on patentability
that we received from World Intellectual Property Organization (known as WIPO) that included only two “Y” citations
and one additional non-relevant reference. Corresponding national applications of our PCT were filed in the U.S., Europe,
Japan, China, Australia and Israel.
On May 1, 2014,
we announced the receipt of a U.S. Notice of Allowance for a key patent relating to how the Dario Blood Glucose Monitoring System
draws power from and transmits data to a smartphone via the audio jack port. This patent was issued as U.S. Patent No. 8,797,180
in August 2014, and in August2015, we received U.S. patent (No. 9,125,549) that broadened our registered patent No. 8,797,180
to include testing of other bodily fluids through an audio jack connection. We believe these early patents represent critical intellectual
property recognition and a significant initial validation of our intellectual property efforts. Further, a corresponding European
patent was granted to us in May 2016, as European patent No. 2569622 for testing of fluids through an audio jack connection.
An additional corresponding patent was granted in Israel in April 2016. In February 2016 we were granted U.S. patent
No. 9,257,038, which is a further Continuation application connected to the U.S. patent No. 8,797,180, this new patent
enhanced the way the Dario Blood Glucose Monitoring System communicates with the end user’s smartphone devices.
18
In November 11,
2017, U.S. patent No. 9,832,301 titled “Systems and methods for adjusting power levels on a monitoring device”
was granted. This patent enhances the way the Dario Blood Glucose Monitoring System communicates with users’ smartphone devices.
This family includes a corresponding pending application in China.
Additionally, we recently
received U.S. patent No. 10,445,072 that enables optical communication between the Dario Blood Glucose Monitoring System and
the end user’s smartphone devices.
Additional patent applications
are in the process of being discussed and developed, and we believe that we have a rich potential pipeline of future technologies
that we intend to develop.
For example, we are
further seeking to develop and protect new intellectual property around future generations of our hardware and software with the
goal of achieving enhanced functionality, user interface, data usability, cyber protection, and artificial intelligence enhancement.
Design patents and
patent applications on the Dario Blood Glucose Monitoring System
To further protect
our market distinction and branding for the Dario Blood Glucose Monitoring System, three U.S. Design Applications have been filed
and granted covering the glucose meter, the cartridge, and connection dongle. At least some of these applications were granted
and registered in the United States, as well as Brazil, Canada, China, Europe, and Hong Kong.
Trademark applications
We have also filed
several families of trademark applications covering the “Dario” name (wordmark), the Dario name and logo (logo), the
Dario logo alone (logo), the DARIO-LITE wordmark, the LABSTYLE INNOVATIONS wordmark, the DARIOHEALTH wordmark, and the DARIOHEALTH
logo. In particular, the “Dario” wordmark is registered as a trademark in the Australia, Canada, China,
Costa Rica, United States, Israel, China, Canada, Hong Kong, South Africa, Japan, Costa Rica, Europe, Israel, Japan,
Korea, Mexico, New Zealand, Panama, Russia, South Africa, and the USA. The “DARIOHEALTH” wordmark is registered as
a trademark in the United States, Canada, China and India.
Utility Models
We have been granted
Utility Models for our core invention in Japan and Germany.
Other intangible
assets
As the number of Dario
users grows, an ever-growing amount of data is being collected from diabetic patients, including their blood sugar levels, meal
compositions, routines, physical exercise (intensity and duration) as well as many other factors, and lately also blood pressure
data, which are all useful for creating meaningful correlations between these factors and insulin use. We expect that
this database will be highly valuable and may be capitalized in many ways. The accumulation of this type of know-how and related
algorithms are protected as trade secrets using specialized confidentiality protocols.
Competition
In recent years, a
number of digitally supported solutions have emerged to manage diabetes and other chronic conditions. Competitors are developing
new technologies rapidly and, in some cases, are also expanding to manage other chronic conditions. In this crowded field, our
success is predicated on our flexibility to adapt to evolving customer requirements in digital health and superior execution in
engagement, retention and clinical outcomes in a manner that delivers clear return on investment in required time-horizons and
in complex, highly regulated business environments. We expect new entrants in the field and the emergence of novel technologies,
as well as competition from larger technology platform players such as Amazon, Apple and Google. Dario’s competitors vary
by intervention (devices, applications, coaching and analytics), by channel (health plan, pharma, provider, employer) and by condition
(including, for example, diabetes, MSK, HTN, and others). Certain of our competitors offer this integrated approach in varying
degrees, including, among others, Hinge Health, Inc., Livongo Health Inc. (acquired by Teladoc Health Inc.), Omada Health, Inc.,
Vida Health, Inc., Virta Health Corp., Informed Data Systems Inc. (OneDrop), Glooko, Inc., and OnDuo LLC. We believe
that our competitors are comparatively disadvantaged along several axes:
19
● Our competitors offer point solutions for a single condition (which model is unattractive to enterprise
customers needing to manage multiple vendor relationships);
● Our competitors fail to share member-level data or granular reporting with partners, which prevents
these partners from leveraging their own assets to support care;
● Competitor applications have limited or minimal levels of personalization, where communications
(or “nudge”) from the application may be somewhat personalized, but actual user experiences are heavily templated,
and not personalized or dynamic;
● Competitor applications are supported only by short term outcome data, as compared to our studies
which cover a 2-year period and offer 7 years of direct-to-consumer data;
● Failure of any one of our competitors to successfully engage and retain a substantial portion of
the base population, as none has the direct-to-consumer experience or data required, resulting in frustrated customers who cannot
realize promised cost savings;
● Customers of our competitors suffer an inadequate user experience, as evidenced by few app store
reviews and low scores in Apple, Google and Amazon stores;
● Our competitors offer medical device-oriented approaches with delayed product update cadences,
rather than our more agile, software-driven approaches that push out new products every few weeks;
● Our competitors have slowed their improvements in the area of clinical metrics (including, for
example, blood pressure, HbA1c, and pain), which decreases the solution’s return on investment;
● Our competitors often utilize cumbersome form factors and alternative connected devices, which
are not easily portable or that otherwise require significant user effort for connectivity. By contrast, our diabetes solution,
for example, utilizes lancets, strips and a dongle held in a lipstick-sized device that physically connects to a user’s phone
and doesn’t require independent charging. As another example, our MSK device is small and easily attaches to body parts for
convenient and easy use;
● Our competitors’ applications experience limited interoperability and connectivity, such
that they are unable to integrate with third party devices, electronic health records or partnered solutions; and
● Our competitors have higher costs; our solutions are priced 30-50% lower than current comparable
in-market solutions.
Employees
As of March 1, 2021,
we had 127 full-time employees and 12 part-time employees. We have employment agreements with our five executive officers. See
“Management – Employment Agreements.”
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