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Accolade Buys 2nd.MD for $460M

January 15, 2021

Accolade which provides personalized, technology-enabled solutions that help people better understand, navigate and utilize the healthcare system and their workplace benefits has signed a definitive agreement to acquire Innovation Specialists, LLC (d/b/a 2nd.MD), an Expert Medical Opinion and medical decision support company based in Houston, TX. With healthcare utilization expected to rise significantly in 2021, on the heels of the COVID-19 pandemic, the integration of 2nd.MD with Accolade’s health and benefits solutions and clinical service offerings will simplify the healthcare experience for employees and increase return on investment for employers by ensuring their employee populations are receiving appropriate care and reducing unnecessary treatment in high-cost scenarios. Accolade will continue to offer 2nd.MD’s service on a stand-alone basis as well.

“We share a common vision to help every person live their healthiest life by dramatically improving quality and accessibility of care through a people-focused, clinically-driven support model. Bringing 2nd.MD’s world-class Care Team and digital approach with expert medical consultation into Accolade, and continuing to offer it on a stand-alone basis, will have an immediate and measurable impact for our customers, their employees, and the health plans we work with,” said Rajeev Singh, chief executive officer, Accolade. “Both companies have built deep relationships with employers and health plans by helping employees navigate the increasingly complex and inconsistent healthcare system. With the addition of 2nd.MD, we’ll nearly double our total addressable market while providing the most comprehensive, integrated healthcare navigation experience available.”

The 2nd.MD solution: Personalized medical expertise from elite specialists in 3 to 5 days
When employees access Expert Medical Opinion healthcare benefits, it is generally during a critical point in their lives following a diagnosis that requires a significant and high-cost care decision such as whether to have surgery. 2nd.MD connects employees with board-certified national experts across the country for a valuable medical consultation in a real-time video call or by phone within three to five days. This rapid turnaround compares to the industry average of several weeks, which is time that causes delay in treatment and adds to the patient’s stress. On average, 2nd.MD employer-customers save over $5,000 per consultation and $27,000 per consultation when a surgery is involved.

The 2nd.MD Care Team is comprised of highly specialized nurses and medical record retrieval specialists who coordinate all the details to eliminate friction in the process and ensure the employee can remain focused on their health. 2nd.MD’s service covers conditions across all adult and pediatric specialties and subspecialties, serving over 300 employer-customers and more than seven million employee-members. The company consistently delivers outstanding value as evidenced by Net Promoter Scores (NPS) in the nineties.

“When it is you or a loved one facing a serious health decision, waiting for weeks to receive a second opinion from an expert isn’t acceptable. We’ve built a scalable Expert Medical Opinion offering that treats every member like family,” said Jason Melton, chief executive officer, 2nd.MD. “Combining our Care Teams and technology with Accolade will enhance the reach and quality of support to members from the moment of crisis to the other side of treatment on the path to wellness. We share a common business vision, our cultures are highly aligned around employee purpose and we share a common mission to change healthcare for the benefit of all consumers.”

Transaction Summary
The transaction is expected to close by the end of February 2021, subject to customary closing conditions. Under the terms of the agreement, the purchase price of up to $460 million will consist of $230 million in cash, $130 million in Accolade common stock, and up to $100 million of Accolade common stock payable upon the achievement of defined revenue milestones following the closing. Goldman Sachs & Co. LLC acted as the exclusive financial advisor and Cooley LLP acted as legal advisor to Accolade in the transaction. Balch & Bingham LLP acted as legal advisor to 2nd.MD.

Financial Reporting and Business Outlook
Steve Barnes, chief financial officer, Accolade, commented, “We are enthusiastic about the business benefits that 2nd.MD will bring to Accolade. In addition to the expanded services and clinical capabilities we will be able to offer our customers, 2nd.MD brings new industry distribution relationships to help grow our business and expands our addressable market by an estimated $22 billion. We expect 2nd.MD to be accretive to our revenue growth rate in fiscal 2022 at a similar gross margin profile, and plan to invest in integration between our companies to maximize the value of our combined offerings. We intend to provide more financial details after the acquisition is completed.” For the calendar year ended December 31, 2020, 2nd.MD reported unaudited revenues of approximately $35 million, and is currently serving more than 300 customers covering more than seven million members.

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