(Story updated at 3:27 p.m. ET)
Shares of Castlight Health gained more than 36% this week after technology company SAP made an $18 million cash investment in the company as part of a larger partnership.
San Francisco-based Castlight offers a health benefits software platform that aims to help consumers make better decisions around cost and quality. The companies made the announcement at the annual SAP users' group conference, Sapphire Now.
SAP, headquartered in Germany, on Wednesday took a 4.7% stake in Castlight, purchasing nearly 4.8 million newly issued shares of Class B common stock at $3.77 a share. Shares of Castlight closed Thursday at $4.38 after closing the previous day at $3.20.
SAP makes products for a number of industries, including healthcare providers. Its 2015 annual report singled out the healthcare sector as a key long-term growth opportunity. The company is now trying to build on its Hana data processing platform, which can analyze data at a faster speed so it can be used to make immediate clinical and business decisions.
Castlight, meanwhile, has been trying to regain momentum after its precipitous fall from its 2014 initial public offering price of $37.50. While the company has continued to gain revenue and clients, it has been operating in the red and its growth has not kept pace with Wall Street's expectations.
Castlight has been shifting its focus from price transparency to a broader offering that helps employees navigate their healthcare benefits, said Nita Sommers, the company's chief strategy officer. The companies also expect to enter into a distribution agreement that will allow SAP to package Castlight's software with its own human resources offering, the SuccessFactors Human Capital Management Suite. Castlight, in turn, gains access to SAP's scale in HR.
Separately, Castlight will be one of the initial participants in SAP's Connected Health platform, which also was launched at the conference and will run on SAP's Hana platform. The launch represents an ambitious attempt to bring together a number of organizations, from technology developers to healthcare providers, to share information. The goal is to find ways to reduce costs and improve outcomes in healthcare.
“The more data we get, and the more partners we get, the more the opportunities for analysis get richer,” said Dr. David Delaney, SAP's chief medical officer.
He pointed to one health system that used Connected Health to try to solve a staffing problem: volume fluctuations in the emergency departments. Its analysis discovered that when the pollen count spiked, more people would come to the ED over the next few days with respiratory complaints.
“A lot of this variance can be explained when you get enough datasets,” Delaney said. “There's data, data everywhere and not a lot of insight.”
The other early participants are CancerLinq, a data analytics subsidiary of the American Society of Clinical Oncologists, and Dharma Platform, which allows healthcare providers and researchers working in the field to collect and analyze data.
As more providers join the network, Castlight will be able to provide even more data to consumers to help them make decisions, Sommers said.
In moving beyond price transparency, Castlight hopes to focus on all areas where consumers make healthcare decisions. Last October, the company launched Castlight Action, a product that uses data and predictive analytics to send targeted information about benefits and vendors to employees.
It also partnered in November with Anthem. The insurer will offer Castlight's price transparency tools to its members, and make it easier for employers to access Castlight's other solutions. The companies also are working together to develop new products.