AGP starts DarioHealth at buy; PT $2.50

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AGP/Alliance Global Partners initiated coverage of DarioHealth (NASDAQ:DRIO) with a “buy” rating and price target of $2.50. The stock closed at 76 cents on Dec. 12.

”DarioHealth is well positioned at the confluence of three major trends - the diabetes epidemic, the growth in digital health offerings, and the rise of big data,” writes analyst Ben Haynor.

DarioHealth offers a platform of digital mobile health solutions, as well as human coaching, to diabetes patients using their proprietary blood glucose meter. The meter provides real-time updates to the company's cloud platform, enabling alerts to caregivers in the case of an abnormal reading. In addition, DarioHealth applies machine learning algorithms to the “big data” captured using its device to improve patient outcomes.

Mr. Haynor said DarioHealth's solution is provided on a subscription, or membership, basis ranging from $25 a month to $70 a month, depending on the level of personalized human interaction. “We estimate the company's subscription model will allow the company to achieve gross margins approaching 70%.”

He said DarioHealth faces only one competitor providing real-time updates from a blood glucose meter with support from a certified diabetes educator, but other firms are pursuing a number of go-to-market approaches.

“Multiple firms, including Dario, have generated patient and clinical data suggesting digital-health-enabled coaching can improve glucose control in a cost-effective fashion, in many cases at more than $100 per patient per month in cost savings,” he said. “We believe this will lead to patient and payer adoption, ultimately leading to significant market expansion.”

Abby Hardy