MCI Onehealth Technologies Inc
TSX:DRDR
Earnings Call Analysis
Summary
Q3-2023
Healwell, a healthcare AI and data science firm, is shifting its growth strategy to focus on AI and technology revenues, moving away from patient services. The company has a strong, debt-free balance sheet and is actively pursuing mergers and acquisitions (M&A), with recent investments in Doctorly and a proposed majority stake in Pentavere. Healwell's relationship with WELL Health is expected to accelerate growth in North America. The firm plans to build a commercial growth team targeting the U.S. market, with the new team selling expanded offerings from Pentavere. Pentavere's development of the DARWEN platform took around 6-7 years and millions in R&D investment, indicating the company's commitment to high-quality, validated technology. A focus on identifying undiagnosed patients is seen as a significant growth area. Healwell did not specify detailed key performance indicators (KPIs) but will focus on onboarding more physicians, validating and publishing research, and announcing new commercial partnerships.
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Good day, and thank you for standing by. Welcome to the Healwell AI Fiscal Third Quarter 2023 Financial Results Conference Call. [Operator Instructions]. Please be advised today's conference is being recorded. I would now like to hand the conference to your speaker today, Pardeep Sangha, Head of Investor Relations. Please go ahead.
Hello. Thank you, operator. Joining me on the call today are Dr. Alexander Dobranowski, CEO of Healwell; and Scott Nirenberski, the company's CFO. I trust that everyone has received a copy of our financial results press release that was issued earlier today. Listeners are also encouraged to download a copy of our quarterly financial statements and management discussion and analysis from sedar.com. Please note, course of today's call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities laws. These statements are made under the safe harbor provisions of those laws. Please refer to today's press release and to our management discussion and analysis for further details on the company's risks and forward-looking statements. We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future. We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to our forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions or circumstances on which any such statement is based, except if as required by law. We use terms such as adjusted EBITDA on this conference call, which is a non-IFRS and non-GAAP measure. For more information on how we define these terms, please refer to our definition set out in the management discussion and analysis. With that, let me turn the call over to Dr. Alexander Dobranowski, CEO.
Thank you, Pardeep, and good day, everyone, and we hope that you are all keeping safe and healthy, and we truly appreciate everyone for joining us today. I'd like to start today's call by providing some introductory commentary about the company. Then Scott, our CFO, will review the financial results for the third quarter, following which I will then provide a much more fulsome and detailed discussion highlighting our vision, strategic plan for the company, the tremendous market opportunity before us and also some very exciting and material updates on what we have accomplished subsequent to the quarter. Afterwards, we'll have some time for Q&A and concluding remarks. I'm thrilled to convey that Q3 was nothing short of a transformational quarter for the company. First and foremost, we completed the strategic transaction with WELL Health Technologies led by their visionary CEO, Hamed Shahbazi. This resulted in the company renaming itself to Healwell AI with a new stock ticker and launching itself as a healthcare technology and data science company focused on preventative care. Our mission, which we believe is a very important one is to improve healthcare and save lives through the early identification and detection of disease. Healwell leverages AI to empower patients and doctors to deliver increased access, reduce healthcare costs and improve patient outcomes. We are extremely excited about the future growth opportunity for the company. And in our view, there's a generational opportunity before us in healthcare data science and artificial intelligence, whereas we believe the landscape couldn't be more ideal to execute on our mission and build a high-growth leading AI company, I'll expand on this further. In addition, as this is a noteworthy mention, Healwell has entered into a strategic alliance agreement with WELL that positions the company for new found growth and expansion opportunities as an emerging AI-enabled healthcare technology company. Further to this and subsequent to the quarter, we closed a bought deal private placement for gross proceeds of $8 million. With our combined recent fundraising, we are very well capitalized with sufficient cash and no debt on our balance sheet to execute on our organic growth objectives and robust pipeline of acquisition opportunities. Subsequent to the quarter, we have already executed on this pipeline successfully, and I'd like to highlight the announcement we made today to acquire control of Pentavere Research Group, a healthcare AI company that in my view has built, validated and deployed into production some of the best artificial intelligence technology in healthcare in the country. This is a very exciting acquisition. The stage is now set with the required building blocks in place to succeed, not just from a value perspective in healthcare AI, but also through empowering our provider partners and materially improving patient outcomes. It is an absolute privilege to work with this team and our partners as WELL and work on these discerning problems in healthcare. As mentioned, I will provide additional details on the company's direction later on the call. But first, I'd like to turn this over to our CFO, Scott, who will review the financial results for the third quarter.
Thank you, Alex, and welcome, everybody, and good afternoon. I'm pleased to highlight key metrics and progress in our Q3 results for the 3 months ended September 30, 2023, and I'll also provide an update on key milestones that we've reached post quarter end as we have some exciting news during the month of October and November. Our third quarter 2023 results are as follows, and please note these results are from continuing operations. Healwell achieved quarterly revenues of $2.75 million during Q3 2023 compared to revenue of $3.1 million generated during Q3 of 2022. Healwell achieved gross profit of $750,000 in Q3 2023 compared to gross profit of $1.085 million during Q3 2022. Healwell's gross margin percentage in Q3 2023 was 27.8% compared to 28.9% in Q3 2022. During Q3 2023, Healwell reported adjusted EBITDA loss of $2.6 million, which is the same roughly adjusted EBITDA loss in the prior quarter, Q3 2022. The decline in revenue and gross profit was largely driven by declines in technology year-on-year as the company's technology business suffered a little bit from the financial condition of the company during the second and third quarter of 2023. I'm now going to provide an update on our cash and balance sheet. As of September 30, 2023, Healwell had $833,000 in cash and debt of $12.2 million, consisting of $1.3 million line of credit with TD, $7.9 million in related party secured loans and a $3 million bridge loan from WELL Health compared to a cash balance of $1.4 million and debt of $7 million at the end of 2022. Subsequent to September 30, the company completed its strategic transaction with WELL Health and closed a bought deal equity financing, which dramatically strengthens balance sheet. More specifically, on October 2, 2023, Healwell announced the closing of the strategic transaction with WELL, and we relaunched the company as an AI and data science focused healthcare technology business. The company has significantly strengthened its balance sheet by, one, selling the vast majority of its Ontario clinics to WELL Health and using the proceeds to fully discharge its line of credit with TD Bank. Two, completing a convertible debenture unit financing for gross proceeds of $10 million led by WELL Health and a syndicate of investors and simultaneously retiring the bridge loan with WELL Health. Three, we completed the transfer of non-core assets to First Canadian Wellness to retire $1.5 million in related party loans. And four, the closing of the bought deal private placement financing of 13.3 million Class A subordinate shares at a price of $0.60 net brought in gross proceeds of $8 million on October 18. Finally, it is worth noting that we've spent a tremendous amount of time reducing our trade AP during the course of the summer and the fall. And specifically, we were at $11 million in trade AP at the end of the second quarter of 2023. And today, it stands at roughly $2.8 million. We got there through an intense process of restructuring and renegotiating liabilities. And in fact, we were able to settle approximately $4.3 million of gross AP for $0.20 on the dollar, and we still have room to go. So you'll see us make further progress on that in the future. Currently, the company has a cash balance of $12 million and the convertible notes are solidly in the money. Alex, I'll turn it back to you for some more comments on the business.
Thank you, Scott. I'd like to take this time to help investors understand what is Healwell AI? And what exactly is our market opportunity and strategic plan going forward? And I'll start by providing some key perspectives and background first, highlighting some of the major challenges or headwinds that we see today in healthcare, and then I'll expand with some context around artificial intelligence and data science. Although we have seen an incredible acceleration in healthcare innovation in recent years, including acceleration in technology adoption, I think it's safe to say that, unfortunately, healthcare systems have really been pushed to their limits during and now subsequent to the COVID-19 pandemic. At the core of these challenges are the 3 main stakeholders that have been affected. And of course, the most important is the patient and this is where I will start. Specifically in Canada, we have seen a major increase in patient wait times for both primary and specialist care. With the backlog of procedures and outstanding appointments for diagnostics and consultations still in the millions, and this is just in the province of Ontario. What does this mean for patients? This may sound like an oversimplification, but what this means more specifically for patients is late diagnosis, delayed treatments and therapies, delayed access to acute and chronic care and ultimately worsened patient outcomes. This is a very significant problem. It would not be a stretch for me to say that for most people attending this conference call, we've all been touched by loved one or relative who may have had a missed or late diagnosis or had essentially fallen through the cracks. This is at the core of our mission to address. Dovetailing for a moment, the next stakeholder that has been tremendously strained by our healthcare system is, of course, our provider and clinician base. I can add particular expertise and commentary around this point as I'm also a physician and I left clinical practice to focus on this important intersection of AI technology and healthcare. Nonetheless, at the root of the issue is that our providers, clinicians, administrators and nurses are simply overworked, they cannot keep up with demand and are suffering from exhaustion and burnout in what seems like a never-ending stream of patient requirements. The third stakeholder that is worthy of mention is our health system itself. The cost of care have continued to accelerate and this acceleration is not slowing down. Are we going to deal with these out-of-control costs and what can we do about it? Well, what we firmly believe at Healwell and with our partners at WELL Health is that we can solve for these problems. Where we believe a large part of the solution lies in preventative care or in other words, in early detection and identification of disease. This is at the heart of our mission, and this is where we focus our resources, both on our organic road map and, of course, inorganically. How do we solve for missed or late diagnosis or improving physician workflow efficiency, or save the healthcare system from a cost perspective. Early detection and identification of disease, this capability in part, in our view, solve for these issues. That to us is the fundamentally most important driver to execute on that will ultimately yield the highest results in improving patient outcomes and saving system costs. Irrefutably, early detection saves lives. To touch on a few important stats, late or misdiagnosis is linked to nearly 800,000 deaths or cases of permanent disability in the U.S. every single year. And using AI to make diagnosis may reduce treatment costs by up to 50% and improve health outcomes by 40%. These are very dramatic statistics, and this is according to the Harvard School of Public Health. In addition, and more as a commercial justification, early detection creates multiple revenue opportunities for pharmaceutical, precision medicine, medical device and life science companies. These companies are all developing life-saving therapeutics and in order to accelerate research in these domains, these stakeholders require access to patients that are eligible for clinical trials and other studies. The earlier a patient is diagnosed, the sooner they can then be enrolled if they're eligible in what, in many ways, could also be lifesaving or health improving trials and studies. An important vector of access that our technologies enable. And this also warrants mentioned that Healwell is already working with 6 of the top 10 largest pharma companies, more details on this to come. When I highlight our mission and our focus on preventative care, preventative care is an umbrella term, but our specific area of focus on that spectrum is early detection and again, highlighted by our mission. But how do we do this? How do we actually move the needle with regards to early detection and preventative care? The short answer is that you need the core building blocks in place. You need access to a major provider physician footprint, you need access to vast amounts of high quality and well structured clinical information, and you need the right mix of technology capabilities. This highlights at the core why our partnership with WELL Health is so ideal to position Healwell for immense success. Back to the question of how do we move the needle in preventative care. This is now what I'll spend some time focusing on, as we do so through the application of technologies such as artificial intelligence, machine learning and data science. I'd like to take a minute now to provide some commentary on perspectives around healthcare AI and specific. Just in the last 10 to 15-years, we have seen incredible transformation in healthcare. First, with the digitization of health records moving healthcare information from stacks of Manila folders onto the first version of the electronic medical record system. This was one of the first major infrastructural changes in healthcare, which was an enabling vector for innovation. The second and relevant major transformation shift in more recent years has been the accessibility and storage of clinical and administrative information onto the cloud. This change has been equally as remarkable as the shift to digital records, as it has enabled a critical piece of the healthcare data framework, the accessibility, interoperability and exchange capability of clinical information between platforms and health systems. In addition, the recent acceleration in cloud computational tools and access to both CPU and GPU cloud processing systems, now has unlocked the next transformational shift in healthcare. The use of learning systems, algorithms, data analytics and artificial intelligence. Let me take a step back for a moment and highlight again just how important our strategic partnership and relationship is with WELL Health. The lifeblood for artificial intelligence and machine learning in any vertical industry is data. This is table stakes. And healthcare is, of course, no exception. Without high-quality, diverse and vast amounts of clinical information is very difficult, if not impossible, to execute against an AI mission or innovate in healthcare. Our partnership with WELL directly solves for this. WELL Health under the leadership of Hamed Shahbazi has become a very special company, one that in our view is not just one of the largest healthcare and technology companies in North America, but that it is also a critical piece of the healthcare fabric in Canada. Hamed has done an exceptional job of growing WELL Health from a clinical footprint perspective, as highlighted by their strong quarterly results announced yesterday. But what is in particular and relevant to the success of Healwell is that WELL Health fully own and operate a number of electronic medical record systems that their provider base use. This is wholeheartedly unique and it is rare to find a healthcare companies providers use a fully owned and integrated EMR system of this size and scale. Why is this important to Healwell? In order for Healwell to succeed, we need to continue to onboard and engage with providers and physicians. This is critical to the success of any technology or AI-oriented company in healthcare. And WELL Health provides us with this critical access as highlighted by the announcement we made with WELL Health effectively white labeling Healwell Technology as WELL AI decision support. For exact context, Hamed yesterday on the WELL Health earnings call highlighted why AI decision support is so important to them. He said the following, "we expect that over time, decision support will support physicians in the following ways. One, help them improve their accuracy of diagnosis, particularly for thousands of rare and ultrarare diseases, many of which have known successful interventions. Number two, help physicians search patient records with much greater ease as unstructured clinical notes become structured and searchable through the use of artificial intelligence. And three, allow physicians to see more patients as they are able to be more effective and rapidly triage patients, especially as such patients have complete health history available with the provider. " This really highlights the commitment of WELL Health to these technologies and why this will be a driver of success for Healwell. Through the onboarding and engagement of providers, this is how we compliantly and safely harness clinical information and unlock both clinical and commercial value. Providers are the key. How does Healwell harness AI, I'll answer this question by going back to our mission that is anchored on early detection and early identification of disease. Under the subsidiary of Khure Health over the last 3-years, we have developed validated and commercialized technology that can effectively screen clinical information, provide clinical decision support to our provider partners and help optimize the patient's care pathway and journey. This is incredible technology and is at the core of the Healwell platform, an anchor, so to speak, that we will be both expanding on organically and inorganically as highlighted by our announcement today regarding Pentavere. I'd like to now make a few remarks with regards to the commercial and value opportunity in artificial intelligence and healthcare. First, I'll start with some perspective. The global AI healthcare market size is estimated to grow from $19 billion in 2022 to $281 billion in 2032. This is exceptional growth of an already very sizable market opportunity. But what I really wanted to highlight that is more important than just simply the growth of the market is that currently, now in 2023, despite the multibillion-dollar investment interest in the market behind such companies such as Hugging Face, Character, OpenAI and others, we are still in very, very early days when it comes to healthcare AI market maturity. And this, in our view, is very important. Hamed and I, we both fiercely believe that the timing could not be better to position ourselves for first-mover advantage and, of course, execute on a land grab M&A strategy focused on healthcare technology, data science and AI. We will be moving fast. So why us and why now? As mentioned, we believe through our strategic partnership and alliance with WELL Health, plus our track record and demonstrated commercial capabilities in AI, that we have all the building blocks and foundational pieces in place to successfully execute against our mission and not just position ourselves as leaders in Canadian healthcare AI, but also from a global perspective. I'd also like to add, from an AI market perspective that although as I mentioned, we are in early days of the healthcare AI industry, over the last 3 to 4-years, many innovative companies have started to validate, to deploy and even start to mature revenues in this space, making the timing ideal for an inorganic growth strategy. I'd like to now discuss in greater detail our strategic alliance agreement with WELL Health, more specifically as this agreement is a critical factor in helping Healwell unlock near-term success. As mentioned, we've established this strategic alliance agreement and it positions Healwell to become a significant player in the multibillion-dollar data sciences' and preventative care industry. WELL Health is the largest shareholder of Healwell and being part of the WELL family opens many doors for Healwell. Healwell is working very closely with WELL Health, including the appointment of Hamed Shahbazi, Chairman and CEO of WELL to the Board of Healwell, and this strategic alliance agreement provides Healwell with exclusive access to WELL'S clinicians. As such, on October 18, Healwell announced the launch of WELL AI Decision Support. I touched on this earlier, in conjunction with WELL to assist healthcare providers in improving early disease diagnosis and preventative health. WELLS AI decision support is a white label version of Healwell's technology platform, validating and giving credibility to the technology that we've developed under the banner of Khure Health. WELL'S goal is to make AI decision support a core offering to all physicians supported by its fully managed and SaaS platforms, which collectively power more than 31,000 physicians and other care providers across Canada and the U.S. This enables an immediate multi-jurisdictional access point for Healwell. What an opportunity this is to have access to the entire WELL Health clinical footprint. Next, I would like to touch on our 2 main strategic objectives and areas of focus from a growth and value perspective. The first is our organic growth strategy, whereas we will continue to focus resourcing and expertise to grow our key artificial intelligence capabilities organically, namely through the focused growth of our subsidiary, Khure Health under the leadership of President Don Watts. Khure has demonstrated commercial success in our key competency of being able to screen EMR records, identify and risk stratify patients that are rare, chronic and complex diseases. This is particularly valuable to all stakeholders, but more pointedly also to our commercial partners in pharma and life science. Some points to highlight include that we are currently actively engaged with 6 of the top 10 largest pharma companies and to highlight the bolstering of our commercial growth team. We recently made an exceptionally key hire, Mark Findlay has joined our team as SVP of Sales and Marketing of Khure Health, and he joins our team with over 30-years of experience working at a number of large pharma companies at a senior leadership level. We are extremely excited to have Mark join our team and in my view, this is an indicator of just how strong our core technology is today and how exciting the opportunity is going forward. Further to this, now that Healwell has been recapitalized and properly resourced, Khure Health is on track again to expand its product offerings and also expand its commercial pipeline, both domestically and in the U.S. You will see lots of activity under this banner Khure health in coming quarters. I'll now provide more details on our plans for inorganic growth and our M&A strategy. It is important to highlight and emphasize that besides our focus on organic growth efforts, a very important area of focus for Healwell is on executing against our inorganic growth strategy, highlighted by the points I mentioned earlier that we believe the market is ready for an early mover to execute on a healthcare AI technology and data science land grab, so to speak. Since our debut in early October, no more than 6 weeks ago, we have already demonstrated very compelling success in terms of capital allocation, and I'm very excited to share more. Healwell intends to adopt a similar acquisitive growth strategy to WELL Health and will be WELL Health capital allocation vehicle for preventative health and AI targets. WELL Health, as they have aptly demonstrated as a capital allocator having completed more than 60 transactions. Our corporate development efforts led by Blake Corbet and with the help of WELLS' corporate development resources, have been very busy as we've already executed on 2 transactions, and we have many more exciting opportunities on the horizon. On November 8, Healwell announced a strategic investment in Doctorly, an innovative provider of comprehensive practice management software based in Germany as part of Doctorly's recent completed new round of funding. Concurrently, we also entered into a strategic alliance agreement with Doctorly, which provides us access to Doctorly's rapidly growing healthcare provider base and support for provider onboarding onto the Healwell AI Clinical Decision Support platform. This partnership marks our inaugural foray into the European healthcare technology landscape. Our second transaction announced this morning is the proposed acquisition of Pentavere. An innovative AI health tech company based in Toronto. Pentavere focuses on identifying eligible patients for approved medications and interventions. Pentavere's expertise in data abstraction and structuring combined with their extensive network and experience in specialty care perfectly aligns with Healwell's commitment to providing the best possible care for patients. This proposed acquisition not only adds topline revenue, but also introduces key expertise, new footprints and access to valuable commercial customers. But let me expand. In our view, Pentavere is one of the leading healthcare AI assets in Canada, especially from a technology validation and rigor perspective. Pentavere is also led by an exceptional team. Aaron Leibtag, the CEO; and Steve Aviv, the CTO, both who have had demonstrated deep sector expertise and capability both in AI and commercial viability over the last 6-years, building Pentavere in its core data ingestion and abstraction engine named, DARWEN. Let me provide some more specific commentary on Pentavere. While the Pentavere proposed acquisition is so important is that Pentavere has developed and repeatedly validated its capability of taking unstructured data and making it structured. And you'll hear this discussion around this capability from both me and also from Hamed Shahbazi, because it's a critical and fundamental capability that without there's a low likelihood of success in healthcare AI. As most data being captured today, still in 2023, in healthcare is largely in an unstructured form. This is why the Pentavere technology is so critical to our strategy in AI because the DARWEN engine solves for this problem and can be applied to all areas of healthcare, broadening the Healwell capability spectrum to now be able to apply AI to all specialty areas and ingest unstructured data in various forms. It is also very important to highlight that Pentavere has built one of the most substantial bodies of evidence through published manuscripts and high-impact factor medical journals of any Canadian healthcare AI company to date. Pentavere has published over 20 manuscripts, irrefutably validating the strength and effectiveness of their AI technology. Further to this, Pentavere has had a number of notable commercial successes with growing revenues and a very compelling pipeline. Pentavere has successfully commercialized with 11 pharma customers, 5 of which are de novo new relationships for Healwell that expand Healwell's commercial reach. In addition and equally as important, Pentavere's DARWEN platform has been successfully deployed into 7 hospital networks along with signed Ironclad data sharing agreements, including some of the largest hospital systems in Canada and 2 in the U.S. marking Healwell's first foray into hospital systems as the fantastic work of Healwell and Khure has been largely focused on expanding our technology offering into a community footprint of providers and specialists. These are all important synergistic vectors. Another way to summarize, Pentavere's strategy has been to build world-class AI to discover healthcare knowledge buried in multiple silos and sources of complex unstructured and hard-to-access clinical data. Healwell intends on being a vehicle for further capital allocation as we seek to expand and grow our product suite in AI-driven preventative health. With that in mind, we want to give an update on our M&A philosophy and pipeline. Firstly, on philosophy, Healwell will be focused on disciplined M&A that is highly financial and strategically accretive to Healwell shareholders. Our unique relationship with WELL and access to data and providers gives us a unique competitive advantage as we examine investment opportunities, and we will be focused on leveraging this advantage to drive strong returns on capital for shareholders. Secondly, on the pipeline, we have been working closely with WELL Health in evaluating potential acquisition targets. Together, we have been actively filling the pipeline. Now in terms of pipeline, first and foremost, our top priority area of focus is adding AI and data science technology and commercial capability to our ecosystem. We are working on a number of exciting ideas on this front. Typically, we are in the pursuit of companies that are maturing technology, have recurring revenue and have proven out a commercial plan of viability in clinical decision support, diagnostic AI, and of course, data science. In addition, as access to providers and data is a key driver to success in healthcare AI, we are also focused on healthcare technology and software companies that have maturing recurring revenues and also healthy bottom lines. They also need to be suitable candidates to benefit from the deployment of AI into their offerings and thus aligning with our mission. One important theme that we may build up on is that EMR systems plus artificial intelligence equals in our view, the future of healthcare. And thus, why we made our investment in Doctorly, more to come on this topic in the future. I'd like to now explain how we earn revenue today and how we will generate revenue in the future. Today, as highlighted by our financials, we generate revenue in 2 separate buckets. The first is through patient services, which is currently makes up a large portion of our revenue, and the second is through our technology, AI and research capabilities. Healwell has one large well-run clinic still under its banner, Polyclinic. That has a quality mix of primary and specialist care physicians and a clinical research organization, providing Healwell with an avenue for immediate deployment and testing of technologies. However, going forward, we will not be focusing on growth if any patient services domain. We will focus our organic and inorganic growth strategy strictly on the technology and AI-driven revenue, as I mentioned before.
I would now like to make some comments with regards to our outlook and some ideas around how to measure our success going forward. As we have only just debuted 6 weeks ago, I'll refrain from giving any specific and trackable KPIs for our business, but where you will see some immediate successes in coming quarters are the following buckets. You'll see us continue to onboard more physicians onto the Healwell platform and offerings. Growing into the WELL Health ecosystem is an immediate and important available vector of growth, including in the U.S., and we are in discussions with Circle Medical. You will also see us to continue to validate and publish more research. Further to this, we will also speak to some of our new and ongoing commercial relationships and how our commercial pipeline is building plus new commercial wins. I look forward to sharing more news on these topics in the coming quarters. In closing, I wanted to reiterate that Healwell is a healthcare AI and data science company that has proven results in revenue from 6 of the top 10 pharma firms. We have a tremendous multibillion dollar opportunity in front of us and in our view, an early mover advantage. The WELL Health relationship accelerates our growth with exclusive access to providers across North America. We have a very strong balance sheet with no debt, which enables us to execute on our capital allocation plan. M&A will play a significant role at Healwell, and we have already completed 2 transactions, an investment in Doctorly and a proposed majority stake ownership in Pentavere. We believe that since we have the necessary building blocks in place to successfully execute in healthcare AI, the time is now to plant our flag as a leader in healthcare AI and execute against our mission. Finally, I want to thank the entire team at Healwell, whose hard work continues to elevate the company at higher levels. I'd like to thank our investment banking partners and also our partners at SAF, namely Brian Paes-Braga. I would like to thank Hamed and the leadership team at WELL Health plus I'd like to thank my Board of Directors. Also, I'd like to thank you all for joining us on this call today. We look forward to providing an update next quarter. I will now hand it back to the operator. Thank you.
[Operator Instructions] Our first question comes from Christian Sgro with Eight Capital.
I'll start with one of the parts of the outlook you provided, Alex, and that's onboarding more physicians. You commented plenty on the strength of the WELL Health relationship. So I was just -- recognizing it's only been a month since the strategic partnership has been announced. Just wondering how the partnership with WELL Health has evolved, how the go-to-market has evolved and how things are changing, how conversations are changing with the launch of AI Decision Support?
Yes. Christian. So, in short, the relationship with WELL has been progressing exceptionally. And I'll give a little bit of context. So the methodology behind first of all, this transaction, right, and then how to enable artificial intelligence from a Healwell perspective, right? There has been a lot of work and discussion right for the large portion of this entire year, okay? So it's no secret that providers, right, are seriously overworked and overburdened. And they don't just have spare time, right, to start using new tools and technology. So the offering that we've put together, which now has been white labeled right into the WELL Health banner has been introduced, right, and with care. And you need to have that care and that cultural adjustment right in order to have increase in provider uptake. And remember, WELL Health has done this before with other technologies, right, under their banners. So this now isn't kind of the first foray into doing this, right? There's a well-oiled machine. We have access to and are working with the exceptional team on the operations side, which is helping and assisting and we had a running start, right, even previous to the announcement of our transaction, we had already started to make headway. So that's, of course, very compelling, and we'll soon start sharing and giving a little bit more visibility into the results of this effort. And then we're also expanding, of course, outside of the WELL Health ecosystem. But -- what really excites me the most Christian, about this partnership with WELL, is that Hamed from a leadership perspective has prioritized this. And that's really, really unique. So when I look at the entire provider footprint of thousands of physicians and then, of course, tens of thousands more through their EMR capabilities, right? I would look at succeeding there as being able to onboard a large majority of that volume of providers, right? So that's the ambition here. And the ambition isn't only coming from the side of Healwell, but also, of course, from WELL Health.
Okay. Great. That's helpful. Congrats on this morning's acquisition of Pentavere. It looks like a very interesting asset. Maybe I'll ask a leading question. Would you say the data ingestion engine is one of the core technical advantages that comes with Pentavere or other areas that you call out that are highly complementary to Khure and that you look forward to integrating?
Christian, another great question. So I will -- let me answer this from a couple of directions. So we couldn't actually be more excited about this acquisition. And WELL Health and their corporate development team after they launched their AI investment vehicle, right, they really canvassed the landscape. And part of my background is, of course, working directly in this space, right? So I'm very familiar with who in particular, has some of the leading technology and offerings in Canada and the U.S. And in Pentavere, they took a different approach to the development of their business where they focused on building the absolute best -- empirically validated piece of technology, right, that actually exists in the Canadian healthcare AI landscape. And that can be substantiated. Those claims can be substantiated by other third parties. So you need to picture Pentavere as essentially a data engine that takes unstructured data and structures it. And that, as I mentioned, right, is a very fundamental capability, and that's actually really, really hard to do. And the Khure Health platform also has these kinds of competencies. But the approach of Khure Health and the capabilities has been in a separate domain, right? So this is like we have a very strong technology under the Khure Health banner. And now we have a very strong data engine ingestion component where they work together remarkably synergistically. So in a round of a way, I just wanted to provide some perspective here that Pentavere is bringing just an incredible piece of technology, right, that now we're going to be able to use -- cross-platform through our partners at WELL and of course, through our other access points.
I'll ask one more question before passing the line. Just the ability for Healwell and Pentavere to share network access, Pentavere looks like it has interesting relationships with hospitals. Is there an area that Khure can lock there, or vice versa is access to those clinic network. I would say, easy or doable today from Pentavere's perspective? Or is there a technical lift to get either side ready for either network?
Very good question, Christian. So as you're highlighting, right, Pentavere has painstakingly navigated the very, very cumbersome and heavy regulated waters of being able to work productively from an AI perspective within hospital systems. And the kind of work it takes to do that, it takes years. And there are delays, there are technology investments and capabilities that need to be made, right? So they got there, right? And Pentavere has been working on those data access points for -- since their inception really for 6-years. So there's a huge amount of value, right? And currently, Healwell, we do not interface directly with many hospital systems or work productively at a commercial or a research level. So our focus was always driving scale into the community, onboarding primary care and specialist doctors in the community. But adding this building block from Pentavere, it unlocks a very, very valuable vector here for growth that, again, is really, really synergistic, and this might sound overly simplistic, but remember, patients in the community are then referred into a hospital, they have their stay in hospital and then they're, again, right, discharge back to the community. So now we're able to bring really both sides of that clinical information paradigm, and that's exceptionally important for us to drive forward more robust relationships commercially with our commercial partners.
Our next question comes from Gabriel Leung with Beacon Securities.
A couple of things. First, just going back to Pentavere. Alex, can you just talk about what areas of the expertise do they have in terms of the disease detection. How does that complement what Khure is doing on the rare disease [indiscernible]?
Gabe, I'll keep it succinct. So on the Khure Health side, our focus has been on screening and finding patients with rare, ultrarare complex disease. And also, we've started to work in the chronic area. But where Pentavere is particularly strong. Number one is in that capability of structuring unstructured data, so number one. And number 2 is just covering those disease indications in a whole host of hospital-based medical specialties, right? So it's a domain of access that we were heading towards. That's part of the Khure Health road map and Pentavere has already got there right and directly complements. So I think that answers your question, Gabe.
That's helpful. And just staying on with Pentavere, can you talk about the nature of work they're doing right now with their paying customers who I presume are similar to you guys are the pharma companies. Can you just talk about some of the work they're doing right now?
Yes, absolutely. So one of the key competencies from a commercial perspective of Pentavere has been able to grow a real-world evidence studies business. And I don't know if I need to provide too much detailed background on what RWE or real-world evidence studies are. But it's essentially when pharma or life science or a medical device company wants to learn more about the effect of a specific therapeutic that's outside of a clinical trial. So like patients in the wild, what's happening in the real world. So they'll pose a question that they want an answer to, a clinical insight to, and Pentavere will be able to go and find that answer, and they work in some of the most complex data that exists in healthcare, like oncology data. You'll see some of their publications validating the technology in lung cancer, breast cancer, et cetera, right? So yes, so Gabe, I think that answers your question.
Maybe just following up that. So in your discussions with pharma, where do you see the greatest, let's call it, revenue opportunity for Healwell. Is it in real-world evidence work? Is it in sort of pre-post clinical trial analysis, maybe patient recruitment, where is the most amount of demand you're seeing within the pharma industry for your type of solutions?
Sure. And Gabe, this is a very, very exciting area of innovation, right? So we are truly at that tip of the spear innovating, right, where we're working with our customers, and we're coming up ideas with ideas collectively, right? But where I see the largest opportunity, and I think our President of Khure Health, Don Watts and our new hire, SVP of Sales and Marketing, Mark Findlay, where they would agree is, look these companies that develop these therapeutics, right, they're in the pursuit of making sure that they can accelerate the time it takes to do research and get these life-saving therapeutics out into the community. And in order to do so, the groundswell of finding patients who are missed or undiagnosed, that's where the value lies. So you'll see some significant growth on our side of continuing, right, to do these major and important screening initiatives where we're sifting through patient populations and finding those that fall through the cracks. I think that satisfies a lot of important commercial aims for these commercial customers, and that's where they're going to be willing to continually invest.
Got you. And just one last question for me. With the addition of Mark to the team, what are the plans in terms of building out a team around him. And how is that going to impact sort of the operating expense base? And concurrently, since you're going to be taking a majority ownership in Pentavere. How should we think about the operating expense is overall, factoring those 2 things?
You should think about them Gabe as being highly synergistic and complementary, right? And under the leadership of Don and Mark, we will be building a focused commercial growth team that will be oriented not just to grow in Canada, but more importantly, in the U.S. And you can picture the capabilities of Pentavere providing additional menu items that we will be then -- that we will then be commercializing right to our partners. So we've now expanded essentially what we can sell, and we're going to be expanding under the capabilities of Mark and Don from a growth perspective.
Our next question comes from Jason Zandberg with PI Financial.
I just wanted to ask a couple of questions. First of all, on Pentavere. Just not sure how much you can share at this point, but just wanted to know whether you could provide how much money, and how long it took to develop the DARWEN platform on Pentavere side?
Sure. I can definitely answer that question, and thank you so much for it. And that's really important because I do want to shine a light on what it actually took to build and validate, right, and publish against some of the competencies developed at Pentavere. So the CEO, Aaron, and Steve, they've been at it now for 6 to 7-years. And they initially raised capital for the company. They grew revenues and they reinvested about 60% or more of their revenue right back into platform development. So over time, we're talking about $7 million, $8 million, even more million dollars that have been spent from an R&D perspective on building and then improving these capabilities. And I'll just add, right, we talked about publications right, that validate this type of technology, that's extremely hard to do. We've published as well some of the capabilities at Khure Health, but that takes years to do, to get into high-impact medical journals that are peer-reviewed. So having that body of evidence is very, very credible when you're interfacing with stakeholders like the government, associations, and then more importantly, any kind of commercial partners, right? Because this is a space of real rapid innovation. Everyone wants to be very careful, and they don't just want to be working with all offerings and all platforms. These paying customers want to be working with the best. That's why we've been able to have success from a monetization perspective under the Khure banner, and then, of course, now adding the Pentavere building block to our portfolio.
Absolutely. Okay. And just a second question that I have, just in terms of your Doctorly investment and strategic alliance. I just wanted to see if you could walk us through the opportunity there in Germany. But as well, just sort of where you see or how you see the value in partnering with EMR companies?
Okay. And so you're -- yes, you're touching on a very important topic and something that's actually a really important part of our go-forward strategy. So I'll answer the second part first, and I'll come back to Doctorly. So, there was a time historically, right, when the EMR systems first became popular, right, there was a lot of efficiencies that were introduced. Now as we see and as has been demonstrated, right, the EMR system that physicians use is critical to care delivery, like they can't really do it without it anymore. And those technologies, right, that were first introduced, some of them are becoming antiquated, and now there's newer cloud-enabled offerings, and this is what Doctorly is, right? And these now kind of new EMR systems are very much in line with adopting capabilities and tools such as machine learning tools and tools in artificial intelligence. So we believe that the future of healthcare is EMR plus AI. And that's really important, and there's been other validating moves, for instance, that have happened and big ones in the U.S. that are kind of in line with this thesis, right, namely with the very sizable transaction of Oracle acquiring Cerner. So you'll see us both from an M&A perspective, look very closely at EMR offerings and that kind of is the sentinel justification of why we invested in Doctorly. Now, WELL Health, of course, invested in Doctorly earlier. So that was a familiar name. There was a lot of due diligence that was done and Doctorly was raising a little bit more capital. So we participated mainly because we've had some exposure to the German market, and we understand just how large it is, right, from a pharma, life science and medical device opportunity perspective. So we're working on becoming compliant, right, for deployment into the EU. This strategic alliance agreement with Doctorly, similarly, in some ways to what we've established with WELL Health, it enables us to drive onboarding with providers there, right. With the true support of that EMR. So I'll stop there. There's a lot more to discuss, but that's really what the thesis is why we invested in Doctorly and that there's a large opportunity in Germany.
And I'm not showing any further questions at this time. I'd like to turn the call back to Alex for any closing remarks.
In closing, I'd like to thank everyone again for joining our call today. Thank you [indiscernible] questions. And everyone, please stay safe and healthy, and we look forward to providing more updates in the future. Thank you very much.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.