There’s No Exit – The Well being Care Weblog

By MATTHEW HOLT

Hastily we’re again in 2021.

You digital Health followers keep in mind that halcyon time. In 2019 a number of digital Health corporations went public, after which someway bought conflated within the pandemic meme inventory growth, with the harbinger occasion being the August 2020 sale of Livongo to Teladoc that valued IT at $19bn and early in 2021 somewhat extra, as Teladoc itself bought to a market cap of $44bn in February 2021

Enterprise cash poured into digital Health as a fin de siecle for the ZIRP, that had been going for a decade, mixed with the concept that Covid meant we’d by no means go away our homes. The vaccine that turned typically accessible firstly of the Biden Administration in 2021 put paid to the concept that telehealth was the vast majority of the way forward for care supply.

Nonetheless between mid 2021 and early 2022 Jess DaMassa and I have been reporting on VC funding in a present known as Health in 2 Level 00 (later Health Tech Offers) and each week there have been a number of offers for $100m and up going into new Health tech corporations.

Issues don’t look so fairly now. Even whereas enterprise cash was flooding into digital Health, these public corporations, as exemplified by Teladoc, began to see their inventory value fall. Whereas IT was really a great yr for the inventory market general, in 2021 the digital Health sector fell by round 60%. IT saved taking place. 2022 was worse and though one or two particular person corporations have recovered (Hello Oscar!), almost two years later the market cap of all the sector stays in the bathroom.

Of the listing that I’ve been following for years there’s solely 11 broadly outlined digital Health corporations with a market cap of greater than $1 billion–that’s solely 11 public unicorns

What’s worse is that just one firm on that listing is decently worthwhile, and that’s Doximity. IT revamped $170m revenue on income of lower than $500m final yr and trades at 10 x income. However Doximity all the time was worthwhile, going approach again to 2014 (lengthy earlier than its IPO), and though IT’s doing cool stuff with AI and telehealth, IT’s mainly an promoting platform for pharma.

There isn’t a such factor as a worthwhile public digital Health firm within the mainstream of care supply and even insurance coverage–except after all you rely Optum. Which implies there’s virtually definitely no worthwhile VC-backed non-public firm both.

Which leads me to this month. You bear in mind these big rounds that Jess & I used to report on and make enjoyable of? They’re again.

I get IT. The inventory market is sizzling and all these pension funds try to place their winnings from Nvidia someplace. VC seems to be an affordable guess and there have been a number of tech IPOs. When you squint actually arduous, as Health-tech-investments-optimism-after-post-pandemic-lull/” data-type=”hyperlink” data-id=”https://www.statnews.com/2024/07/08/Health-tech-investments-optimism-after-post-pandemic-lull/”>STAT’s Mario Aguilar did, you possibly can faux that Waystar & Tempus are Health tech IPOs, though a funds/RCM firm and a diagnostics firm that are each dropping a ton of cash wouldn’t give me confidence as an investor.

However the quantities being thrown round should give anybody pause. Let’s take a number of examples from the final month. Now these aren’t a knock on these corporations, which I’m certain are doing nice work, however let’s have a look at the maths.

Digital entrance door chatbot Ok-Health Health-at-900-million-valuation” data-type=”hyperlink” data-id=”https://www.bloomberg.com/information/articles/2024-07-01/claure-bets-on-ai-startup-k-Health-at-900-million-valuation”>raised at a $900m valuation. This spherical was a $50m top-up however IT has raised almost $400m. IT says IT’ll be worthwhile in 2025, and has Elevance as its largest consumer. Harmonycares is a housecall medical group, presumably pursuing the technique that Signify and others adopted. IT raised $200m, so presumably has a $500m+ valuation–Health-company-for-200-million/” data-type=”hyperlink” data-id=”https://homehealthcarenews.com/2013/12/centene-corp-buys-into-home-Health-company-for-200-million/”>Centene purchased an earlier model of the corporate for $200m a decade in the past and offered IT to some buyers two years again. Headway is a psychological Health supplier community that makes use of instruments to get suppliers on their system and markets them to insurers. IT raised $200m at a reported $2.3bn valuation.

You’ll be able to have a look at that listing of public corporations, together with Health-tech/private-equity-firm-altaris-plans-take-sharecare-private-518m-acquisition-deal” data-type=”hyperlink” data-id=”https://www.fiercehealthcare.com/Health-tech/private-equity-firm-altaris-plans-take-sharecare-private-518m-acquisition-deal”>ones taken non-public like Sharecare, and see that there are many telehealth chatbots, medical teams and psychological Health corporations on the listing. Any of which in all probability have related Technology buried inside them. I’m certain for those who shook Sharecare arduous sufficient all these applied sciences would fall out given the number of companies IT acquired over its decade plus of growth.

However let’s take psychological Health.

Amwell acquired a psychological Health firm known as Silvercloud, and a chatbot known as Conversa. Its market cap is bouncing round between $250m & $350m and IT has greater than that in money–which suggests the corporate itself is value nothing! The VCs who put cash into Ok-Health and Headway might actually might have purchased Amwell for about what they invested for a fraction of these corporations. Is Headway is doing greater than the $250m a yr in income Amwell is placing up? Headway’s worth is sort of 6 x the worth of Talkspace which is bringing in about $150m a yr in income. And for those who contemplate BetterHelp to be 50% of Teladoc — which IT roughly is — Headway is 3 x the worth of BetterHelp Health-platform-via-b2b-expansion/” data-type=”hyperlink” data-id=”https://bhbusiness.com/2024/01/10/teladoc-to-grow-betterhelp-mental-Health-platform-via-b2b-expansion/”>which is doing $1bn a yr in income. Is there any likelihood that Headway is doing near these numbers? Perhaps somone who noticed the newest pitch deck can let me know, however I extremely doubt IT.

Now after all these new investments might be creating new Technology or new enterprise fashions which the earlier era of digital Health corporations couldn’t work out. They could even have found out the best way to develop profitably–though so far as I do know Doximity stands alone as a worthwhile firm that took VC funding IT by no means wanted and by no means used.

However isn’t IT extra seemingly that they’re out there competing with the general public corporations and people non-public corporations that bought funding in 2020-22, have related pitches, related tech and are equally dropping cash?

I’m a very long time proponent of digital Health and actually hope that Technology can change the sclerotic Health Care sector. I would like all these corporations to do effectively and alter the world. Perhaps these VCs investing in these mega rounds are extra smart than they have been in 2022. However given the state of the digital Health sector on the present inventory market–which is in any other case in any respect time highs–I simply don’t know what the exit will be, and IT pains me to say IT.