- Lloyd Price
Generalist v Specialist TeleHealth: Why has confidence in Generalist TeleHealth companies collapsed on the public markets?
Exec Summary:
Teladoc’s long-time CEO left the company this week after its share price hit an 8-year low. Amwell's (AMWL) share price has collapsed from a $35 share price 3 years ago down to a $1 share price today.Amwell's $6 Billion market cap peaked in 2021 and has since declined over 96% down to a $235 million market cap today resulting in the possibility of being delisted from NYSE.
What's going on? Why has confidence in generalist TeleHealth companies collapsed on the public markets?
Market correction: The Telehealth sector may have been overvalued at its peak, and a correction was inevitable. This could be due to a number of factors, such as investor enthusiasm outpacing the actual profitability of these companies, or a realisation that the long-term potential of the Telehealth market was not as large as initially thought.
Regulation: The regulatory environment for Telehealth is still evolving, and there is some uncertainty about how future regulations will impact the industry. This uncertainty could be making investors cautious.
Competition: The Telehealth market is becoming increasingly competitive, which could be putting pressure on margins for Telehealth companies.
Burnout and churn: There is a concern that the initial wave of demand for Telehealth services may have been driven by the COVID-19 pandemic, and that demand could now start to decline. This could lead to problems with customer churn for Telehealth companies.
Maturity of the market: The Telehealth market is still relatively young, and it may take some time for companies to develop proven business models. Investors may be impatient with companies that are not yet profitable.
It's important to note that TeleHealth still holds promise for the future. The convenience and accessibility it offers are undeniable. However, the industry needs to address these challenges to regain investor confidence and ensure long-term success.
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Generalists vs. Specialists: TeleHealth Providers
The key differences between generalist and specialist TeleHealth companies can be identified as follows:
Broader Scope, Thinner Expertise: Generalist TeleHealth companies cater to a wide range of health concerns. While convenient, this might not provide the in-depth care needed for complex conditions. Patients might prefer specialists with a deeper understanding of their specific needs.
Limited Diagnostics and Procedures: General TeleHealth consultations often lack the ability to perform thorough physical examinations or complex procedures. This can be a limitation for many health issues. Specialists might have access to more advanced diagnostics or be able to perform procedures remotely for specific conditions.
Challenges for Generalists:
Building Trust: Establishing trust with patients remotely can be more challenging for generalists who haven't built a pre-existing patient relationship. Specialists, often seen in-person beforehand, might have an advantage here.
Focus on Simple Issues: General TeleHealth consultations might be well-suited for addressing common, non-urgent concerns. However, for complex or chronic conditions, specialists with a tailored approach might be preferred.
The Rise of TeleHealth Specialists:
Fulfilling a Niche: TeleHealth specialists are emerging to address specific areas like dermatology, mental health, or cardiology. This allows for more focused consultations, potentially leading to better patient outcomes.
Leveraging Technology: Specialists are increasingly utilising specialised telemedicine platforms that incorporate relevant diagnostic tools or remote monitoring capabilities for their field.
Amwell
Investor confidence in Amwell has taken a hit in the past year. Here are some reasons specific to Amwell that might be contributing to the decline:
Missed Earnings Expectations: Amwell may have fallen short of analyst expectations for revenue or profitability in recent quarters. This disappoints investors who were hoping for strong growth.
Lower-than-anticipated User Growth: Compared to initial forecasts, Amwell might not be adding new users at the expected pace. This could indicate a slowdown in Telehealth adoption or limitations in Amwell's user acquisition strategy.
Increased Costs: Amwell might be facing rising costs for technology, marketing, or acquiring new clients. This could squeeze profit margins and make the company less attractive to investors.
Focus on Lower-acuity Visits: Amwell might be primarily facilitating consultations for less serious medical issues. While this is a large market segment, investors might be looking for companies with a focus on more complex and profitable consultations.
Acquisitions not panning out: Amwell's past acquisitions might not be delivering the expected value or synergies, leading to investor disappointment.
Teladoc
Similar to Amwell, Teladoc's investor confidence has also taken a beating in the past year. Here's a breakdown of some potential reasons specific to Teladoc:
Missed Earnings Expectations: Like Amwell, Teladoc might have underperformed analyst expectations for revenue or profitability in recent quarters. This disappoints investors who were hoping for strong growth.
Lower-than-anticipated Member Growth: Teladoc might not be adding new members (patients or healthcare providers) at the expected pace. This could indicate a slowdown in Telehealth adoption or limitations in Teladoc's user acquisition strategy.
Integration Challenges: Teladoc made significant acquisitions in recent years (e.g., Livongo). Integrating these companies effectively can be complex and expensive. Delays or difficulties in this process can erode investor confidence.
Increased Costs: Just like Amwell, Teladoc might be facing rising costs for technology, marketing, or integrating acquisitions. This could squeeze profit margins and make the company less attractive to investors.
On top of these Teladoc specific factors, the broader Telehealth market struggles also likely play a role:
Market Correction: Teladoc's stock price might have been inflated during the initial COVID-19 surge. As the market adjusts to a post-pandemic landscape, investors are more focused on long-term profitability.
Increased Competition: The Telehealth market is getting more crowded, putting pressure on Teladoc's market share and pricing power.
Burnout and Churn: Concerns exist that the initial boom in demand for Teladoc's services was temporary, potentially leading to user churn and impacting the company's subscriber base.
Maturity of Telehealth Business Model: Teladoc might still be refining its business model to achieve sustainable profitability, disappointing investors seeking immediate results.
The Future of TeleHealth:
While general TeleHealth might need to adapt, the overall industry still holds promise. Here's what could happen:
Hybrid Model: A blend of general TeleHealth consultations for initial assessments, followed by referrals to specialists for ongoing care, could be a successful approach.
Technology Advancements: Development of more advanced remote diagnostics and procedures could expand the capabilities of general TeleHealth in the future.
Overall, the focus is shifting towards TeleHealth that offers a more specialized and tailored approach to patient care. This doesn't negate the role of generalists, but emphasises the value of specialists in specific areas.
Growth and M&A for Healthcare Technology companies
Healthcare Technology Thought Leadership from Nelson Advisors – Market Insights, Analysis & Predictions. Visit https://www.healthcare.digital
HealthTech Corporate Development - Buy Side, Sell Side, Growth & Strategy services for Founders, Owners and Investors. Email lloyd@nelsonadvisors.co.uk
HealthTech M&A Newsletter from Nelson Advisors - HealthTech, Health IT, Digital Health Insights and Analysis. Subscribe Today! https://lnkd.in/e5hTp_xb
HealthTech Corporate Development and M&A - Buy Side, Sell Side, Growth & Strategy services for companies in Europe, Middle East and Africa. Visit www.nelsonadvisors.co.uk
