In 2021, Toronto’s MCI Onehealth made its public debut on the Toronto Stock Exchange. While the company still trades on that exchange, the business today looks vastly different.
Now operating as Healwell AI, the company has shed its old skin—the clinical business is gone, replaced by a narrowed focus on using AI for early disease detection.
“We feel we’re in a strong position, especially with our partner in Well Health, to really grow something both quickly and something of value.”
The road to this point for Healwell was marked by a series of tactical deals and strategic shifts. Divesting its clinical side in May 2023, the company spun out MCI Onehealth’s AI unit into a new business with a new name in October and launched a multilayered partnership with Well Health. Healwell’s CEO, Alexander Dobranowski, believes the company is now poised to be an early mover at the crossroads of AI and healthcare.
“There aren’t many publicly traded, healthcare and AI-focused companies with genuine AI technology and a commercial track record,” Dobranowski told BetaKit in a recent interview. “We feel we’re in a strong position, especially with our partner in Well Health, to really grow something both quickly and something of value.”
Founded in 2012, MCI Onehealth’s business comprised two “buckets,” according to Dobranowski. The company owned a large footprint of clinics in Ontario and Alberta, and by the time of the company’s $30-million initial public offering (IPO) on the Toronto Stock Exchange, the company claimed those clinics served more than 850,000 patients annually.
The second bucket of the business was MCI’s innovation arm, through which it focused on developing software products, including an AI-enabled technology aimed to increase the rate of detection for chronic disease and improve overall clinical standards.
This technology allows clinics to screen patient data from their electronic medical record system, in compliance with health guidelines, and use AI algorithms to identify risk and support diagnosis of more than 110 diseases.
Getting the business Well
MCI Onehealth made its public markets debut roughly eleven months into the COVID-19 pandemic, and at the time of its IPO, the company said in a prospectus that revenue declined 20 percent in the first nine months of 2020, as the number of walk-in clinic visits dropped significantly due to the COVID-19 pandemic.
“The clinics financially were in distress, they weren’t performing,” Dobranowski said. “Everyone was expecting the downtown core to kind of reignite—our big clinics were all in the downtown core in Calgary—and the patient volumes just never recovered.”
In the fall of 2022, Dobranowski became connected with Hamed Shahbazi, CEO of Well Health Technologies, which is Canada’s largest owner and operator of outpatient health clinics.
“I shared with [Shahbazi] that we needed to explore a way to partner together, because we had this innovative component of the company, plus these clinics. [Well is] the best clinic operator arguably in North America.”
In the spring of 2023, Well Health acquired five of MCI Onehealth’s primary care clinics in Calgary, a deal that came with a price tag of $2 million. It was the first move in what became a much broader partnership between the two healthtech companies.
Healwell’s employee count decreased by hundreds following the sale of its clinics, with the reduction coming from employee transfers to new ownership. Dobranowski added there was “very little in the way of terminations.”
This transaction was the first move in what the companies are calling a “strategic alliance.” Dobranowski said Well decided to invest in and recapitalize the remaining company, which was purely focused on AI and data science. In October 2023, MCI Onehealth officially relaunched as Healwell AI, and raised $10 million in convertible debenture financing, with Well Health contributing a significant portion.
“We relaunched off the track record of the data science and AI business that we built over the last three years now as that being our sentinel focus for the company,” Dobranowski added.
Subsequent to the relaunch, Healwell AI changed its stock ticker and remains a senior-listed public company on the TSX. On October 18, Healwell raised an additional $8 million in a bought deal private placement. Well participated in that financing as well.
The key component of the strategic alliance between Healwell and Well is through the product. Well has white-labelled Healwell’s diagnostic software under the name WELL AI Decision Support, and has begun disseminating it throughout its marketplace of multi-jurisdictional clinics.
“One of the difficulties that healthcare technology or AI companies face is access to a partner that can give you considerable scale, and that’s what Well Health does for us for Healwell,” Dobranowski said.
Healthy capital allocation
Healwell has moved quickly since its fall relaunch, closing a number of transactions as part of an aggressive acquisition strategy. In November, the company made a minority investment in Germany-based doctorly, a provider of comprehensive practice management software.
In December, Healwell closed a majority stake acquisition of Toronto-based Pentavere, a healthcare artificial intelligence (AI) company that has built a best-in-class AI engine. In a statement, Healwell said the deal would add revenue, new pharmaceutical and life sciences customers, access to hospitals as well as growing Healwell’s dedicated team of AI engineers.
That same month, Healwell closed an additional bought deal private placement at $11.5 million, bringing its funding since the October relaunch to almost $30 million. Well also participated in that financing.
Finally, last month, Healwell closed an acquisition of Intrahealth, an electronic medical records platform, in a $24.2-million deal.
“Part of our thesis is we want to be a capital allocator,” Dobranowski noted. “So at Healwell AI, you will see us working fairly intensely on our M&A strategy. We want to acquire real key healthcare AI companies that increase our capability [and] increase our scale of access.”
Dobranowski noted the firm’s acquisition strategy is focused on two buckets: acquiring early-stage AI-focused companies, and more mature companies in the health software space that focus on areas like EMR.
At the same time, Healwell itself is a targeted acquisition for its new strategic partner. Shahbazi told BetaKit Well Health is currently the largest security holder in Healwell, since it owns most of its interest in the form debentures and warrants, which means on a converted basis, Well is Healwell’s largest shareholder, though it is still a minority shareholder. However, Well has an option that allows it to become a majority shareholder in Healwell in the next two years.
“International Financial Reporting Standards, IFRS, indicates that if you own more than 20 percent of a company economically, you own more than 50 percent of the votes, and have board control, then you basically qualify for being able to consolidate that company as a subsidiary,” Shahbazi added “And that’s our goal.”
Healing the financials
Healwell’s M&A strategy also speaks to another priority for Dobranowski: to improve Healwell’s financial profile.
According to the company’s Q3 financial results, the last quarter before MCI OneHealth’s rebrand, its revenues were down 11 percent compared to the same period in 2022, the company had $11 million in debt, and less than $1 million in cash on hand.
Today, Dobranowski describes the financial health of Healwell as “extremely strong,” citing that the firm has raised $29.5 million in new capital, has no bank debt, and as of a few weeks ago, had $17.5 million in the bank.
“Two and a half years ago, companies were [focused on] growth at all costs,” Dobranowski added. “We’re very mindful that we want to get to a cash flow positive position as soon as possible.”
To that end, the CEO expects Healwell to become cash flow positive by the end of 2024 or early 2025.
“Our aim is, if we have the right support, to continue to raise capital and deploy it in a very disciplined manner, and build something special in healthcare AI.”