Health Care

First oncology specialist goes public via SPAC

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The first publicly traded oncology specialist debuted on the stock market this week following its merger with a special purpose acquisition company.

The Oncology Institute, a provider with 50 offices in four states headquartered in the Los Angeles area, closed on its combination with DFP Healthcare Acquisitions Corp. and is now trading on NASDAQ under the ticker symbols “TOI” and “TOIIW.” The company’s stock is currently valued at about $8.50, down more than 18% from its initial value on Monday.

Founded in 2007, TOI touts a brand of value-based oncology care its leaders say is lacking in the current cancer treatment industry, which is mostly delivered on a fee-for-service basis. Brad Hively, the company’s CEO, said TOI manages more than 1.5 million patients under value-based contracts, which comprise a little over half of its revenue. Of the 1.5 million patients, about half are covered by managed Medicaid, followed by commercially insurance and then Medicare Advantage. The other roughly half of TOI’s revenue is fee-for-service.

Hively said TOI assumes risk for the cost of patients’ oncology care through agreements with primary-care providers like UnitedHealth Group’s Optum, CareMore Health and P3 Health Partners, which have capitated contracts with health plans. None of the three companies commented on their agreements with TOI.

“Then they subcapitate us to provide and pay for all the oncology care beneath that,” he said.

It’s a model Hively said he believes should be expanded to more communities, and the capital he’ll raise through going public will help accelerate that growth. He said he views TOI as a market leader when it comes to value-based oncology.

“There’s a lot of scarcity value,” Hively said. “There’s just not a lot of people that do what we do.”

It’s possible that TOI’s value-based care focus will help differentiate it in what’s currently a crowded field of oncology players, said Matt Wolf, a director and healthcare senior analyst with RSM. In any case, going public through a SPAC will certainly boost its name recognition, he said.

Wolf said he wasn’t surprised to see the first pure-play oncology practice debuting in this manner. The COVID-19 pandemic has only accelerated the demand for oncology, but the aging population and rising cost of cancer drugs have long driven opportunity to add value to the system, he said.

“There’s just a lot of money going towards oncology,” Wolf said. “There has been for years.”

TOI has about employed 80 clinicians, including slightly more than 50 doctors plus a mix of nurse practitioners and physician assistants, Hively said. The company drew $155 million in revenue in 2019 and projects that will grow to $345 million in 2022, according to a slide presentation. The SPAC deal valued TOI at $842 million.

This marks the third SPAC deal sponsored by affiliates of Deerfield Management Company, said Richard Barasch, who headed up the deals and is now a TOI board member. Barasch also oversaw SPAC mergers with AdaptHealth in 2019 and CareMax in June.

“This is not a play around just controlling cost,” Barasch said of the TOI deal. “This is a play around improving quality at a better cost. And taking it one step further … a good part of the business is getting better access to cancer treatment to people on the lower half of the income scale.”


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