If the Covid era marked a boom time for digital health companies, 2024 was the reckoning.<\/p>\n
In a year that saw the Nasdaq jump 32%, surpassing 20,000 for the first time this month, health tech providers largely suffered. Of 39 public digital health companies analyzed by CNBC, roughly two-thirds are down for the year. Others are now out of business.<\/p>\n
There were some breakout stars, like\u00a0Hims & Hers Health, which was buoyed by the success of its popular new weight loss offering and its position in the GLP-1 craze. But that was an exception.<\/p>\n
While there were some company-specific challenges in the industry, overall it was a \u201cyear of inflection,\u201d according to Scott Schoenhaus, an analyst at KeyBanc Capital Markets covering health-care IT companies. Business models that appeared poised to break out during the pandemic haven\u2019t all worked as planned, and companies have had to refocus on profitability and a more muted growth environment.<\/p>\n
\u201cThe pandemic was a huge pull forward in demand, and we\u2019re facing those tough, challenging comps,\u201d Schoenhaus told CNBC in an interview. \u201cGrowth clearly slowed for most of my names, and I think employers, payers, providers and even pharma are more selective and more discerning on digital health companies that they partnered with.\u201d\u00a0<\/p>\n
In 2021, digital health startups raised $29.1 billion, blowing past all previous funding records, according to a report from\u00a0Rock Health. Almost two dozen digital health companies went public through an initial public offering or special purpose acquisition company, or SPAC, that year, up from the previous record of eight in 2020.\u00a0Money was pouring into themes that played into remote work and remote health as investors looked for growth with interest rates stuck near zero.<\/p>\n
But as the worst waves of the pandemic subsided, so did the insatiable demand for new digital health tools. It\u2019s been a rude awakening for the sector.\u00a0\u00a0<\/p>\n
\u201cWhat we\u2019re still going through is an understanding of the best ways to address digital health needs and capabilities, and the push and pull of the current business models and how successful they may be,\u201d\u00a0Michael Cherny, an analyst at Leerink Partners, told CNBC. \u201cWe\u2019re in a settling out period post Covid.\u201d<\/p>\n
Progyny, which offers benefits solutions for fertility and family planning, is down more than 60% year to date.\u00a0Teladoc Health, which once dominated the virtual-care space, has dropped 58% and is 96% off its 2021 high.<\/p>\n
When Teladoc acquired Livongo in 2020, the companies had a\u00a0combined enterprise value of $37 billion. Teladoc\u2019s market cap now sits at under $1.6 billion.<\/p>\n
GoodRx, which offers price transparency tools for medications, is down 33% year to date.\u00a0<\/p>\n
Schoenhaus says many companies\u2019 estimates were too high this year.<\/p>\n
Progyny cut its full-year revenue guidance in every earnings report in 2024. In February, Progyny was predicting $1.29 billion to $1.32 billion in annual revenue. By November, the\u00a0range\u00a0was down to $1.14 billion to $1.15 billion.<\/p>\n
GoodRx also repeatedly slashed its full-year guidance for 2024. What\u00a0was $800 million to $810 million\u00a0in May shrank to $794 million by the\u00a0November.<\/p>\n
In Teladoc\u2019s\u00a0first-quarter report, the company said it expected full-year revenue of $2.64 billion to $2.74 billion. The company\u00a0withdrew its outlook\u00a0in its second quarter, and reported consecutive year-over year declines.<\/p>\n
\u201cThis has been a year of coming to terms with the growth outlook for many of my companies, and so I think we can finally look at 2025 as maybe a better year in terms of the setups,\u201d Schoenhaus said.\u00a0\u00a0<\/p>\n
While overzealous forecasting tells part of the digital health story this year, there were some notable stumbles at particular companies.\u00a0<\/p>\n
Dexcom, which makes devices for diabetes and glucose management, is down more than 35% year to date. The stock\u00a0tumbled more than 40%\u00a0in July \u2014 its steepest decline ever \u2014 after the company reported disappointing second-quarter results and issued weak full-year guidance.\u00a0<\/p>\n
CEO Kevin Sayer attributed the challenges to a restructuring of the sales team, fewer new customers than expected and lower revenue per user. Following the report, JPMorgan Chase analysts marveled at \u201cthe magnitude of the downside\u201d and the fact that it \u201cappears to mostly be self-inflicted.\u201d\u00a0<\/p>\n
Genetic testing company\u00a023andMe\u00a0had a particularly rough year. The company went public via a SPAC in 2021, valuing the business at $3.5 billion, after its at-home DNA testing kits skyrocketed in popularity. The company is now worth less than $100 million and CEO Anne Wojcicki is trying to keep it afloat.<\/p>\n
In September, all seven independent directors resigned from 23andMe\u2019s board, citing disagreements with Wojcicki about the \u201cstrategic direction for the company.\u201d Two months later, 23andMe said it planned to cut 40% of its workforce and shutter its therapeutics business as part of a\u00a0restructuring\u00a0plan.\u00a0<\/p>\n
Wojcicki has repeatedly said she intends to take 23andMe private. The stock is down more than 80% year to date.\u00a0<\/p>\n
Investors in Hims & Hers had a much better year.<\/p>\n
Shares of the direct-to-consumer marketplace are up more than 200% year to date, pushing the company\u2019s market cap to $6 billion, thanks to soaring demand for GLP-1s.\u00a0<\/p>\n
Hims & Hers began prescribing\u00a0compounded semaglutide\u00a0through its platform in May after launching a new weight loss program late last year. Semaglutide is the active ingredient in\u00a0Novo Nordisk\u2019s blockbuster medications Ozempic and Wegovy, which can cost around $1,000 a month without insurance. Compounded semaglutide is a cheaper, custom-made alternative to the brand drugs and can be produced when the brand-name treatments are in\u00a0shortage.<\/p>\n
Hims & Hers will likely have to contend with dynamic supply and regulatory environments next year, but even before adding compounded GLP-1s to its portfolio, the company said in its\u00a0February earnings\u00a0call that it expects its weight loss program to bring in more than $100 million in revenue by the end of 2025.\u00a0<\/p>\n
Doximity, a digital platform for medical professionals, also had a strong 2024, with its stock price more than doubling. The company\u2019s platform, which for years has been likened to a\u00a0LinkedIn for doctors, allows clinicians to stay current on medical news, manage paperwork, find referrals and carry out telehealth appointments with patients.\u00a0<\/p>\n
Doximity primarily generates revenue through its hiring solutions, telehealth tools and marketing offerings for clients like pharmaceutical companies.<\/p>\n
Leerink\u2019s Cherny said Doximity\u2019s success can be attributed to its lean operating model, as well as the \u201cdifferentiated mousetrap\u201d it\u2019s created because of its reach into the physician network.\u00a0<\/p>\n
\u201cDOCS is a rare company in healthcare IT as it is already profitable, generates strong incremental margins, and is a steady grower,\u201d Leerink analysts, including Cherny, wrote in a November note. The firm raised its price target on the stock to $60 from $35.\u00a0<\/p>\n
Another standout this year was\u00a0Oscar Health, the tech-enabled insurance company co-founded by Thrive Capital Management\u2019s Joshua Kushner. Its shares are up nearly 50% year to date. The company supports roughly 1.65 million members and plans to expand to around\u00a04 million\u00a0by 2027.\u00a0<\/p>\n
Oscar showed strong revenue growth in its\u00a0third-quarter report\u00a0in November. Sales climbed 68% from a year earlier to $2.4 billion.<\/p>\n
Additionally, two digital health companies,\u00a0Waystar\u00a0and\u00a0Tempus AI, took the leap and went public in 2024.\u00a0<\/p>\n
The IPO market has been largely dormant since late 2021, when soaring inflation and rising interest rates pushed investors out of risk. Few technology companies have gone public since then, and no digital health companies held IPOs in 2023, according to a\u00a0report\u00a0from Rock Health.\u00a0<\/p>\n
Waystar, a health-care payment software vendor, has seen its stock jump to $36.93 from its\u00a0IPO price\u00a0of $21.50 in June. Tempus, a precision medicine company, hasn\u2019t fared as well. It\u2019s stock has slipped to $34.91 from its\u00a0IPO price of $37, also in June.<\/p>\n
\u201cHopefully, the valuations are more supportive of opportunities for other companies that have been lingering in the background as private companies for the last several years.\u201d Schoenhaus said.\u00a0<\/p>\n
Several digital health companies exited the public markets entirely this year.\u00a0<\/p>\n
Cue Health, which made Covid tests and counted\u00a0Google as an early customer, and Better Therapeutics, which used digital therapeutics to treat cardiometabolic conditions, both\u00a0shuttered operations\u00a0and delisted from the Nasdaq.\u00a0<\/p>\n
Revenue cycle management company R1 RCM was\u00a0acquired\u00a0by TowerBrook Capital Partners and Clayton, Dubilier & Rice in an $8.9 billion deal. Similarly,\u00a0Altaris bought Sharecare, which runs a virtual health platform, for roughly $540 million.<\/p>\n
Commure, a private company that offers tools for simplifying clinicians\u2019 workflows,\u00a0acquired\u00a0medical AI scribing company Augmedix for about $139 million.<\/p>\n
\u201cThere was a lot of competition that entered the marketplace during the pandemic years, and we\u2019ve seen some of that being flushed out of the markets, which is a good thing,\u201d Schoenhaus said.<\/p>\n
Cherny said the sector is adjusting to a post-pandemic period, and digital health companies are figuring out their role.<\/p>\n
\u201cWe\u2019re still cycling through what could be almost termed digital health 1.1 business models,\u201d he said. \u201cIt\u2019s great to say we do things digitally, but it only matters if it has some approach toward impacting the \u2018triple aim\u2019 of health care:\u00a0better care, more convenient, lower cost.\u201d<\/p>\n<\/p>\n
If the Covid era marked a boom time for digital health companies, 2024 was the reckoning. In a year that saw the Nasdaq jump 32%, surpassing 20,000 for the first time this month, health tech providers largely suffered. Of 39 public digital health companies analyzed by CNBC, roughly two-thirds are down for the year. Others […]<\/p>\n","protected":false},"author":0,"featured_media":13497,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-13496","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/13496","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=13496"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/13496\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/13497"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=13496"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=13496"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=13496"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}