If the Covid era marked a boom time for digital health firms, then 2024 was the 12 months of reckoning.
In a 12 months by which the Nasdaq rose 32% and topped 20,000 for the primary time this month, health technology providers largely suffered. Of 39 public digital health firms analyzed by CNBC, about two-thirds reported losses for the 12 months. Others at the moment are out of business.
There were some breakout stars Health for him and herwhich has been boosted by the success of its popular latest weight reduction offering and its position within the GLP-1 trend. But that was an exception.
Although there have been some company-specific challenges within the industry, overall it was a “year of change,” said Scott Schoenhaus, an analyst at KeyBanc Capital Markets who covers healthcare IT firms. Business models that seemed poised to take off through the pandemic didn’t all work as planned, and firms needed to refocus on profitability and a more subdued growth environment.
“The pandemic has driven demand tremendously, and we are facing these tough, challenging competitions,” Schoenhaus said in an interview with CNBC. “Most of my names have clearly seen growth slow, and I think employers, payers, providers and even the pharmaceutical industry are becoming more selective and demanding about the digital health companies they work with.”
According to a report by , digital health startups raised $29.1 billion in 2021, surpassing all previous funding records Rock health. Nearly two dozen digital health firms went public via an initial public offering or special purpose acquisition company (SPAC) this 12 months, up from the previous record of eight in 2020. Money flowed as investors sought to play into themes that played distant work and distant health for growth with rates of interest near zero.
But because the worst waves of the pandemic subsided, so did the insatiable demand for brand spanking new digital health tools. It was a rude awakening for the industry.
“We are still in the process of understanding how best to address digital health needs and capabilities, and how current business models drive and attract and how successful they can be.” Michael Chernyan analyst at Leerink Partners told CNBC. “We are in a post-Covid calming phase.”
Progynywhich provides fertility and family planning profit solutions, has fallen greater than 60% 12 months up to now. Teladoc Healthwhich once dominated the virtual care space, is down 58% and is 96% below its 2021 peak.
When Teladoc acquired Livongo in 2020, the businesses had a combined enterprise value of $37 billion. Teladoc's market cap is currently under $1.6 billion.
GoodRxwhich provides drug price transparency tools, is down 33% 12 months up to now.
Schönhaus says many firms' estimates were too high this 12 months.
Progyny lowered its full-year revenue forecast in each earnings report in 2024. In February, Progyny forecast annual revenue of $1.29 billion to $1.32 billion. That's until November reach fell to $1.14 billion to $1.15 billion.
GoodRx also repeatedly cut its full-year 2024 guidance. What was $800 million to $810 million shrunk to $794 million in May November.
At Teladoc First quarter reportThe company said it expects full-year revenue of $2.64 billion to $2.74 billion. The company withdrew his gaze within the second quarter and posted consecutive year-over-year declines.
“This has been a year of grappling with the growth prospects of many of my companies, and so I think we can finally look at 2025 as potentially a better year in terms of lineup,” Schoenhaus said.
While overzealous predictions have been a part of the digital health story this 12 months, there have been some notable stumbles amongst certain firms.
Dexcomwhich makes diabetes and glucose management devices, is down greater than 35% 12 months up to now. The stock plunged greater than 40% in July – its biggest decline ever – after the corporate reported disappointing second-quarter results and gave weak guidance for the complete 12 months.
CEO Kevin Sayer attributed the challenges to a reorganization of the sales team, fewer latest customers than expected and lower revenue per user. Following the report, analysts at JPMorgan Chase marveled at “the magnitude of the downtrend” and the indisputable fact that it “appears to be largely self-inflicted.”
Genetic testing company 23andMe had a very tough 12 months. The company went public via a SPAC in 2021, valuing the corporate at $3.5 billion after its at-home DNA testing kits gained popularity. The company is now value lower than $100 million and CEO Anne Wojcicki is attempting to keep it afloat.
In September, all seven independent directors resigned from 23andMe's board, citing disagreements with Wojcicki over the “strategic direction of the company.” Two months later, 23andMe announced that it planned to chop 40% of its workforce and shut its therapeutics business as a part of a plan restructuring plan.
Wojcicki has repeatedly stated that she intends to take 23andMe private. The stock has fallen greater than 80% for the reason that start of the 12 months.
The brilliant spots of digital health
Hims & Hers investors had a a lot better 12 months.
Shares of the direct-to-consumer marketplace have risen greater than 200% 12 months up to now, pushing the corporate's market cap to $6 billion because of soaring demand for GLP-1.
Hims & Hers began prescribing compounded semaglutide through its platform in May after launching a brand new weight reduction program late last 12 months. Semaglutide is the energetic ingredient in Novo NordiskThe blockbuster drugs Ozempic and Wegovy, which may cost about $1,000 a month without insurance. Compounded semaglutide is a less expensive, tailored alternative to the brand-name drugs and may be manufactured when the brand-name drugs can be found Shortage.
Hims & Hers will likely need to contend with a dynamic supply and regulatory environment next 12 months, but even before adding compound GLP-1 to its portfolio, the corporate said in its report February profit Call expects its weight reduction program to generate greater than $100 million in revenue by the tip of 2025.
Doximacya digital platform for healthcare professionals, also had a powerful 2024 and saw its share price greater than double. The company's platform, which has been likened for years to a LinkedIn for doctors, allows doctors to not sleep up to now on medical news, manage paperwork, find referrals and conduct telemedicine appointments with patients.
Doximity generates revenue primarily through its hiring solutions, telemedicine tools and marketing offerings for clients similar to pharmaceutical firms.
Leerink's Cherny said Doximity's success was attributable to its lean operating model in addition to the “differentiated mousetrap” it created due to its reach within the physician network.
“DOCS is a rare company in healthcare IT in that it is already profitable, generating strong incremental margins and experiencing steady growth,” Leerink analysts, including Cherny, wrote in a November note. The company raised its price goal on the stock to $60 from $35.
Another highlight this 12 months was Oscar healththe technology-focused insurance company co-founded by Joshua Kushner of Thrive Capital Management. Its shares are up nearly 50% for the reason that start of the 12 months. The company serves around 1.65 million members and plans to grow to around 4 million by 2027.
Oscar experienced strong sales growth Third quarter report in November. Revenue rose 68% 12 months over 12 months to $2.4 billion.
Additionally, two digital health firms, Waystar And Tempus AItook the plunge and went public in 2024.
The IPO market has been largely dormant since late 2021 as rising inflation and rising rates of interest pushed investors out of risk. According to just a few technology firms have gone public since then, and no digital health firms held an IPO in 2023 report from Rock Health.
Waystar, a healthcare payment software provider, saw its shares rise to $36.93 from $21.50 in its June IPO. Tempus, a precision medicine company, didn't fare so well. The stock has slipped from its level to $34.91 IPO price of $37also in June.
“Hopefully the valuations will support the opportunities for other companies that have remained in the background as private companies in recent years,” said Schönhaus.
Out with the old man
Several digital health firms have completely exited public markets this 12 months.
Keyword healthwhich conducted Covid testing and counted Google amongst its first customers, and Better Therapeutics, which used digital therapeutics to treat heart problems closed businesses and delisted from Nasdaq.
The revenue cycle management company R1 RCM was acquired from TowerBrook Capital Partners and Clayton, Dubilier & Rice in an $8.9 billion deal. Similar, Altaris bought Sharecarewhich operates a virtual health platform, for around $540 million.
Commure, a personal company that gives tools to simplify physician workflows, acquired Augmedix, a medical AI writing company, for about $139 million.
“A lot of competition has come into the market during the pandemic years and we've seen some of that flushed out of the markets, which is a good thing,” Schoenhaus said.
Cherny said the sector is adapting to the post-pandemic era and digital health firms are starting to acknowledge their role.
“We are still going through what you could almost call Digital Health 1.1 business models,” he said. “It's great to say we're doing things digitally, but it only matters if there's an approach that achieves the 'triple aim' of healthcare: better care, more convenient, lower cost.”
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