Some thoughts on Teladoc and the Week That Was in telehealth

May 4, 2022 | by

Yes, your Editor has, for the past few weeks, felt like Pepper the Robot, moving at two speeds–crazed and off. (‘Off ‘ to the left. Now cart me off.) Home renovations, with strangers tramping through your abode, noise, dust, and the corresponding moving of furniture, packing and unpacking, pre- and post-cleaning, then trying to put things right and get your life back will do that. Add to that an unexpected gushy kitchen sink that took three ‘fixes’ to get actually fixed. Then there were technical problems with our email sender that Editor and Administrator Emeritus Steve had to work through. One becomes more appreciative of order, routine, and Peace and Quiet.

Speaking of Peace and Quiet, there is little to be found in telehealth. Instead, there is a lot of Feeling Off. The Big News of late last week, of course, was Teladoc’s troubles. In the words of Seeking Alpha, they had one horrific quarter. The horror show started with writing off the Livongo acquisition– a noncash goodwill impairment charge of $6.6 billion, for a massive loss of $41.11 per share for a total of $41.58 per share. To compare, last year’s Q1 loss was $1.31 per share. While revenues were up almost to projection (25%), it was still a $3 million miss and in context, it was the cherry on a very nasty sundae. After rosy projections last year, Teladoc lowered their 2022 revenue guidance from $2.6 billion to $2.45 billion.  

Moving forward from the questionable Livongo acquisition at the absolute peak of the market, CEO Jason Gorevic admitted some hard truths to investors that deepened the hole: much more competition, particularly in telemental health; the rising cost of paid search advertising and the keywords driving towards direct-to-consumer telehealth driving up the cost of acquisition; and difficulty closing B2B deals. This creates, in the terms of analyst SVB Leerink’s Stephanie Davis quoted in FierceHealthIT, “a direct-to-consumer air pocket that business-to-business sales (and their inherently longer cycles) are too slow to fill” at least, in her view, until the end of the year.

Teladoc’s difficulties, as this Editor has noted, started after a peak in early 2021 as the pandemic started its protracted wind-down and telehealth volumes plunged to well below 5% of claims as practices reopened. The stock value is down over 90% from last February, not helped by a volatile market triggered by war and inflation. Similar difficulties are plaguing Amwell (down 92% since February 2021), Talkspace (down to a paltry 16 cents and in court for misleading investors), SOC Telemed (taken private at a 70% drop in value, TTA 8 Feb), and other health tech companies. For our Readers, this is no surprise: the telehealth bender is ovah.

One industry leader in a post-ATA conversation with this Editor cited a less obvious factor–that hospitals and other health providers are now putting together their own telehealth/triage packages tied into population health and case management software, with and without ‘white label’ providers such as Bluestream Health and Zipnosis (acquired by insurtech/payvider Bright Health a year ago). Teladoc is a late entry to this provider/payer market with Primary360, where they also compete with Babylon Health [TTA 7 Oct 22]. And health retailers have joined the primary care telehealth game. Walmart last week announced a virtual health diabetes care program for employers through their recently acquired MeMD.

Big Telehealth’s troubles may depress investment in related earlier stage companies–or help those in niches such as telemental and population health, or remote patient monitoring (RPM) systems that have telehealth features (e.g. TytoCare), as VC investment seeks a brighter home. Right now, this Editor’s Magic 8 Ball is saying ‘outlook, cloudy”. 

Digital health funding’s Q1 hangover from 2021’s bender–and Q2 is a question mark, even for Rock Health

April 6, 2022 | by

Chug the Pedialyte and pickle juice, down those milk thistle caps for the liver. It’s a morning after quarter that we knew was coming. After 2021’s mighty year for health tech investment, doubling 2020’s, capped by a $29.1 billion total across 729 deals [TTA 29 Jan], the slump we knew would arrive, did. Rock Health’s tracking of 2022’s Q1 proved to be a less than stellar $6.0 billion across 183 deals. It mildly lagged 2021’s Q1 but was still 75% more than 2020’s depressed Q1 at the start of the pandemic.

Even in January, the 2022 projections were iffy. Silicon Valley Bank projected, based on anemic post-IPO performance, that there would be ‘massive consolidation’ and even acquiring companies to hire talent [TTA 14 Jan]. Rock Health and Silicon Valley Bank noted the waning of SPACs as an easy way to IPO for a variety of reasons, including SEC scrutiny. A combination of both was SOC Telemed. which IPO’d via a SPAC at $10, and was taken private seven months later at $3 per share–after trading at $0.64. SOC was not an outlier–larger telehealth brothers Amwell and Teladoc had taken major share price kicks in the head at 50% and more by February [TTA 8 Feb].

The rest of the story is mixed as the economy continues to open up with the pandemic over, but the stock market is wobbly, inflation soars as does a Russia-Ukraine war. 

  • Average deal size was $32.8 million, again below 2021
  • January was a cheerier month than the following two, with companies raising $3.0 billion. Some of this was carryover from 2021 deals that didn’t quite make it past the post. February slumped to $1.4 billion while March ticked up to $1.6 billion, not a good trend going into Q2.
  • Rock Health’s Digital Health Index (RHDHI), a composite of publicly traded digital health securities, fell 38%, far below the S&P 500’s 5% dip over that same time period.
  • SPACs tumbled along with the market, continuing their fall since 2021. Deals were canceled, taken private (SOC Telemed), and companies sued for misleading investors (Talkspace).
  • Late stage deals continued to roll: mega Series D+ deals in Q1 2022 included TigerConnect ($300M), Lyra ($235M), Alto Pharmacy ($200M), Omada Health ($192M), and Ro ($150M). D and above deal size fell by $16 million. But average deal size fell off at every Series, less so for B and C.
  • Lead clinical investment areas were mental health continuing far in the lead, followed by oncology, cardiovascular, and diabetes. Oncology rose from the fifth spot in 2021 to #2 in Q1, displacing cardio. In value proposition, the top three were on-demand healthcare, R&D, and clinical workflow–this up from the 11th spot.

A weak start for 2022, but only compared to 2021. Q2 and maybe even Q3 will be the test in this mid-term election year. Rock Health Q1 report

The end of the bubble? SOC Telemed, SPAC’d at $10 per share, acquired for $3 and $300M by Patient Square Capital

February 8, 2022 | by

SOC Telemed (NASDAQ: TLMD), one of the earliest health tech SPACs [TTA 4 Aug 2020], is going private in a deal with the Sand Hill Road healthcare investment firm Patient Square Capital. Patient Square is paying $3 per share in cash.

Based on the 100,840,000 shares outstanding (MarketWatch), this Editor’s best estimate of the transaction is about $303 million. Holders of 39% of the outstanding shares have already voted in favor of the transaction. The deal includes a 30-day “go shop” period in which SOC Telemed’s board of directors can solicit additional bids. Unless there is a superior bid, the deal with Patient Square is expected to close in the second quarter of 2022. 

According to the release, Dr. Chris Gallagher, CEO since September of 2021 will remain. He was previously co-founder/CEO of Access Physicians, a multi-specialty acute care telemedicine business acquired by SOC Telemed in March of 2021. SOC Telemed claims to be the largest telemedicine provider in the US acute care market, supplying virtual consults in specialty areas such as neurology, psychiatry, and ICU. 

Here is where it gets interesting–and worrisome for telehealth. SOC Telemed’s SPAC in August 2020 started at $10.00 per share and a valuation of $720 million. On 2 February, two days before the announcement, SOC Telemed was trading at $0.64 per share. That is a plunge of 94% from the SPAC, with a 72.6% drop in the prior three months that was only arrested by the buyout. The reality is that the Patient Square offer represents a 368% premium over SOC Telemed’s closing share price on 2 February. It is currently trading in about the $2.75 range. 

The worrisome trend is that since August, the publicly traded and established industry giants, Teladoc and Amwell, have also taken it in the shins on their share prices. Teladoc has tumbled by half and Amwell (American Well) by 60%. Even the private companies like MDLive and Included Health (Grand Rounds + Doctor on Demand) must take note that telehealth consults have plunged to about 4% of claims. SPACs, which had opened up an alternate, less complicated channel of public financing for health tech and had its own role in inflating company valuations, have faded due to a combination of circumstances. Will more cautious investments and fewer IPOs be the trend in telehealth for 2022?

News and deals roundup: SCP Health-SOC Telemed, Epion Health-MSU, Sensyne Health’s new data agreements, Geisinger’s RPM app

May 26, 2021 | by

SCP adds more SOC. SCP Health, a clinical management company that provides both staff and services to hospitals, and SOC Telemed, an acute, post-acute, and specialty care telemedicine provider, are increasing their engagement. SCP presently provides specialty care staff for SOC’s Telemed IQ platform for acute care. SCP will be increasing engagement with the platform to expand into a hybrid clinical approach between onsite and virtual care for hospital medicine, emergency medicine, and critical care programs. SOC Telemed was an early SPAC less than a year ago in August 2020 and last month shelled out $196 million for competitor Access Physicians. SOC release

NJ-based Epion Health, which has a digital check in and patient messaging platform that includes telehealth, announced an agreement with MSU Health Care, the academic health center of Michigan State University. MSUHC’s 600 providers will use Epion’s platform for provider search, patient registration, check-in, patient education, and payment for services. Epion’s client base is primarily regional provider groups. Epion release.

Sensyne Health of Oxford inked two deals in the past week for expanding its already extensive medical dataset of anonymized and de-identified patient data, adding patient data from the Colorado Center for Personalized Medicine (CCPM) and St. Luke’s University Health Network (Pennsylvania and New Jersey). The strategic research agreements add their data records to Sensyne’s dataset, now at 18.2 million records. Sensyne mines the data primarily for use by life science clients. When Sensyne commercializes these discoveries, they will share proceeds with CCPM and St. Luke’s respectively. Sensyne releases for CCPM and St. Luke’s.

Geisinger Health launches ConnectedCare365 app + RPM for chronic condition patient management.  The app, developed by Noteworth, monitors and analyzes multiple vital signs provided by patients directly or through devices, combining them with information from Geisinger’s EHR to send information and notifications directly to the care team. The app also connects families and caregivers with the care team via messaging. Noteworth release.

Deals and news roundup, April Fool’s Edition: SOC Telemed’s $196M acute care telehealth buy, HIMSS takes over SCAN Health, Livongo’s Burke joins Owlet board, CirrusMD text app raises $20M

April 2, 2021 | by

(We’ve gone bug-eyed for 1 April!)

SOC Telemed ponies up a Spritely $196 million for competitor Access Physicians. The completed combination forms, according to SOC, the largest acute care telemedicine provider in the US serving 1,000 facilities, including over 700 hospitals, across 47 states. The deal is cash and stock. No transitional information other than the CEO of Access Physicians joins the SOC Telemed board. Both companies are in the enterprise acute care telemedicine area, facilitating virtual consults between specialists and to patient bedsides. In its SEC 10-K filing released earlier this week, SOC Telemed reported $59 million in 2020 revenue, up from $66.2 million in 2019. Q4 was a mixed bag: a 95 percent increase in Q4 bookings but a 13 percent revenue decline due to reduced hospital visits. Losses are limited–a net loss per share of $3.55 which is light for like telehealth companies (more in SOC release). For 2021, the projection is $107 to $113 million in pro forma annual revenue. SOC Telemed was one of the first digital health companies to use a SPAC to go public (amazingly) less than one year ago and with substantial assets at formation [TTA 4 Aug 20]. The combined company connects specialists in neurology, psychiatry, critical care, infectious disease, cardiology, maternal-fetal medicine, and nephrology. SOC Telemed release, Mobihealthnews, Becker’s Hospital Review 

HIMSS assumes the operations of SCAN Health, a networking and events company concentrating on best practices in the healthcare supply chain. SCAN was founded by the Canadian government out of the University of Windsor’s Odette School of Business. Their events are held with over 100 partners in North America and Europe, and will transfer to HIMSS effective immediately. SCAN’s founder, Dr. Anne Snowdon, launched the Clinically Integrated Supply Outcomes Model, a supply chain infrastructure strategic roadmap, with HIMSS Analytics in 2019. HIMSS release, Healthcare IT News.

Zane Burke, former CEO of Livongo, has joined another board–this time, with ‘sock’. Mr. Burke joins the board of Owlet, the baby monitoring sock company. In February [TTA 17 Feb], Owlet announced their SPAC estimated at $325 million. The transaction is expected to complete in Q2. Becker’s Health IT

CirrusMD, an on-demand text-first telehealth app, raised $20 million for its Series C led by The Blue Venture Fund and 7wire Ventures. Total funding to date is $47 million. Visits cover primary or urgent care, chronic condition management, women’s health, pediatrics, and behavioral health with text first then connection to a board-certified physician within one minute. Release, Mobihealthnews

Health tech M&A moves: Well Health’s $45M Series C, GigHealth2/UpHealth’s $1.35 bn ‘blank check’ acquisition

November 26, 2020 | by

Santa Barbara, California-based Well Health, a patient communication platform that connects patients and providers through the care experience including the home, earlier this week announced a $45 million Series C funding round, bringing total funds raised to $75 million since its founding in 2015. The lead investor is Lead Edge Capital, with Martin Ventures plus previous funders Jackson Square Ventures, Health Velocity Capital, Summation Health Ventures, Structure Capital and Freestyle Capital. Their target markets are providers, payers, and accountable care organizations (ACOs). Well Health’s CEO/founder Guillaume de Zwirek, claimed that annually 200,000 healthcare providers use the platform to send more than 1 billion messages with 30+ million patients.

Well Health also announced Dana Gelb Safran, Sc.D. as Senior Vice President, Value Based Care and Population Health. She was previously with Blue Cross Blue Shield of Massachusetts. Well Health release, Mobihealthnews

GigCapital2 Inc., a publicly-traded US special purpose acquisition company (SPAC) or ‘blank check’ company, has agreed to merge with UpHealth Holdings Inc and Cloudbreak Health LLC to create a digital healthcare company valued at $1.35 billion. According to their release, UpHealth is expected to generate over $190M in revenue and $24M in EBITDA next year; 69% of the 2021 incremental revenue growth is already contracted. The combined company will be named UpHealth, Inc. and trade on the NYSE under UPH.

The new company will be organized in four lines across population health management and telehealth: Integrated Care Management, Global Telehealth, Digital Pharmacy, and Tech-enabled Behavioral Health. Global Telehealth under the Cloudbreak brand claims 100,000 encounters per month on over 14,000 video endpoints at over 1,800 healthcare venues nationwide, with telepsychiatry, telestroke, tele-urology, and other specialties.

GigCapital2 previously raised $150 million in an IPO in June 2019. It will raise an additional $160 million as a private investment in a public equity, or PIPE, transaction. GigCapital is located in Palo Alto and is led by CEO/President Dr. Raluca Dinu and Executive Chairman Dr. Avi Katz. The roots of the company are interestingly in the companies ultimately rolled up into GigPeak, which was sold to Newark NJ-based telecom company IDT Corporation in 2017.

‘Blank check’ acquisition companies are becoming a popular way for digital health companies to go public without the fuss and bother of the necessary and expensive filings, SEC review, financing, etc. of an IPO. In August, SOC Telemed went this route in the other direction, acquiring a SPAC [TTA 4 August]. Hims, Augmedix, and Clover Health also went public through SPACs.The former principals of Livongo, post-Teladoc, are also forming a SPAC [TTA 30 Oct]. Reuters, Fierce Healthcare

SOC Telemed will go public in unusual ‘blank check’ acquisition

August 4, 2020 | by

Acute care telemedicine developer/provider SOC Telemed, formerly Specialists On Call, will be going public in an interesting maneuver called a ‘blank check’ acquisition. They are acquiring an already publicly-traded company, Healthcare Merger Corporation (HCMC) (NASDAQ: HCCO). HCMC is a special purpose acquisition company (SPAC) that had its own assets of $250 million of cash from a December 2019 IPO. A group of institutional investors, including funds and accounts managed by BlackRock Inc., Baron Capital Group, and ClearBridge Investments, have committed to a private additional investment of $165 million in common stock when the deal closes.  HCMC will disappear and the company will trade as SOC Telemed. The companies estimate the combined value to be about $720 million. 

The combination of the two companies allows SOC Telemed to go public fairly quickly without the usual routine and steeper climb of an IPO by acquiring a purpose-built public company. Given that telemedicine is hot, but markets are post-COVID volatile, it’s a smart move that others (Hims) are already rumored to be following.

According to the release, HCMC will file a registration statement (which will contain a joint proxy statement/consent solicitation statement/prospectus) with the SEC in connection with the transaction as part of their Form 8-K. The closing is expected to be in 4th Quarter 2020, subject to the usual approval and timing procedures present in public company acquisitions.

SOC Telemed is also an interesting company in that it specializes in telemedicine for the acute care market, supplying virtual consults in specialty areas such as neurology, psychiatry, and ICU. It claims to be the largest national telemedicine provider to hospitals, health systems, value-based care organizations, post-acute care, and physician networks. SOC provides services to 847 facilities including 543 acute care hospitals in 47 states, including 19 of the 25 largest U.S. health systems. It is also the largest provider of acute teleneurology and telepsychiatry. The company has delivered over one million acute care consultations. Recent acquisitions include behavioral health telemedicine company JSA in 2018 and NeuroCall in 2017.

From the release, some details about how the acquisition will work:

  • SOC’s current management and equity holders, including Warburg Pincus, will roll a portion of their equity into SOC.
  • SOC Telemed’s existing majority equity holder, Warburg Pincus, will remain SOC’s largest shareholder.
  • Proceeds generated by the transaction will be used to pay down existing debt, purchase a portion of the equity owned by existing SOC shareholders, and capitalize the SOC Telemed balance sheet.
  • Assuming no redemptions of HCMC public shares, current SOC equity holders will own 40%, HCMC shareholders will own 32%, PIPE investors will own 21%, and HCMC’s sponsor will own 7% of the issued and outstanding shares of common stock of SOC immediately following the closing, respectively.

SOC’s management team, based in Virginia, will also shuffle a bit. Paul Ricci, Interim Chief Executive Officer, will be stepping down (presumably back to Warburg Pincus where he is an advisor). John Kalix, currently President, will become CEO. Hai Tran, presently COO and CFO, will continue in those positions. At HCMC, Steve Shulman, currently CEO and a director of HCMC, will become the Chairman of the SOC Telemed board of directors.  Mobihealthnews, FierceHealthcare  Hat tip to reader Paul Costello of Boost Health Network.