Teladoc who? Amwell, is the latest Telehealth company to become publicly traded on the NYSE. It raised its price per share in its offering from $14 to $18 given increasing demand for digital products in the Covid-19 stock market mania. Compared to its main competitor, Teladoc, who raised $157 million in 2015 when Telehealth adoption was closer to 1%, Amwell successfully raised $742 million and closed at a price of $23 or 28% higher on its first day of trading.
Amwell was founded by brothers Roy and Ido Schoenberg--both attended Medical School in Israel, and both founded previous health technology companies. The most recent was CareKey which was acquired in 2005 for $100 million.
When Amwell filed to go public in August, it announced a partnership with Google which would secure Amwell’s continued use of the Google Cloud platform as well as a $100 million investment at the IPO price contingent on successful closing of the offering. Google would own 3.03% and Roy and Ido Schoenberg would maintain 51% voting control.
Why is partnership important? Other than the shocking increase in adoption of Telehealth (40-60% by some estimates) in such a short time, Google wants to build out its AI capabilities in partnership with Amwell to offer a scale which is hard to imagine today. In Google’s own words:
“Imagine a not too distant future in which your visit begins with a customized greeting and relevant information in a digital waiting room. A conversational chatbot agent is immediately available to assist you, in your preferred language, by asking about your symptoms and the reason for your visit, and provides this information to your physician before she enters your virtual exam room. During your appointment, you continue to speak in your preferred language to your physician, while cloud-based artificial intelligence (AI) provides live, translated captioning of the conversation.
Before, during, and after the appointment, AI and conversational agents simplify, automate, or offload your providers’ routine tasks, such as filling out common intake forms or collecting insurance information, so they are free to focus on you. Your health information like medication, symptoms, and records from your past visits are immediately available during your telehealth visit and afterwards, your medical records are immediately updated, privately and securely. Your doctor can quickly share notes, fill prescriptions, send relevant information and schedule a follow-up visit via email.” Source
Telehealth is traditionally a low margin business, and that’s why to become profitable these companies need to offer higher margin compatible products. Case in point, Teladoc is acquiring Livongo (the higher margin diabetes chronic care management company) for $18.5 billion. Similarly, Amwell will need to build out higher margin products.
In fact, telehealth would be another great space for Amazon to compete in. Amazon runs the largest cloud platform in the world, is piloting a health insurance company with Telehealth, and recently acquired pill pack, a mail-order pharmacy in 2018. We’re just waiting for the announcement.
Headwinds: The opportunity is massive, especially when/if Amwell expands internationally which it hasn’t yet but with increased telehealth adoption the market starts to look attractive enough to increase competition in an already competitive market.
First, Amwell has its direct competitors such as Teladoc, MDLive, and Doctor on Demand. Second, while Amwell already has more than 50,000 physicians using the platform, it competes directly with the multi-billion-dollar EHRs like Epic when it sells to the health systems. Epic recently launched a Telehealth service in partnership with Twilio and more companies are expected to enter the space. In a world where most patients are seen by telehealth, the thin line between a video visit and the electronic medical record starts to disappear. In a few years, all these telehealth providers will likely start competing in remote monitoring hardware and services. Luckily for now, two of Amwell’s clients are UnitedHealthcare and Anthem, two of the country’s largest insurers.