The Amazon Pharmacy home screen on a smartphone placed in the Brooklyn Borough of New York, United States on Tuesday, November 17, 2020.
Gabby Jones | Bloomberg | Getty Images
Before a game, ask a sports star if their team is going to win, and they’ll likely say yes with confidence. And then you put the headlines that make the hubris sensational. But would you expect an athlete to say – would you want them to think – they are going to lose?
Corporate bosses sometimes talk similarly about the competition, and they shouldn’t sit in the hot seat of the CEO without confidence in their company’s profitability.
“It’s overrated based on the fact that it has an enterprise customer with 385 employees,” Gorevic said, answering a question on Amazon Care, the app-based retail and tech giant’s entry into Teladoc’s marketplace, which is its first contract signed customer, Peloton-owned fitness equipment company Precor, in May.
Should Teladoc’s CEO be more concerned? Even after Amazon’s deal with Berkshire Hathaway and J.P. Morgan, having failed to adopt the status quo with its joint healthcare effort, Haven, the merchandising giant still has a huge market to tap into.
It is expected that Amazon Care Expansion to own employees in all 50 states this summer. It has hired new employees faster than any other company in history, more than 500,000 in 2020. It also signed a contract with employer health provider Crossover Health for personal health clinics for employees that continues to expand across the states to set up these clinics within a few miles of all Amazon employees, especially given the attention it has Accident rates in the workplace have received.
J.P. Morgan is moving further and deeper into healthcare after Haven and recently announced that it will move forward on its own Efforts to invest in new health conceptsto be offered among its 165,000 employees and families.
As society has moved rapidly from the awareness phase of virtual care to the expectation phase, those expectations have risen, and Teladoc has added services such as mental health care as part of what Gorevic CNBC calls the future “unified experience” with patients .
“Virtual care is not a stay-at-home phenomenon,” said Gorevic. “The usage we see in multiple conditions suggests everything is here to stay.”
He cited the results of the first quarter of 2021, in which the volume of visits had increased by 69% compared to the previous year, although visits related to seasonal flu had decreased by 90%.
Nonetheless, Teladoc shares fell from a high of $ 290 earlier this year to about half that level, ending just above $ 146 last week. But Gorevic says investors are missing the bigger picture and overlooking improving numbers. His largest quarterly figure is revenue per member per month, which was $ 2.25 in the first quarter of 2021, down from 87 cents a year ago.
Others cite the rapid pace of mergers and acquisitions in the Teladoc market as a cause for concern.
Walmart acquired MeMD in May; two other telemedicine competitors, Doctor on Demand and Grand Rounds, recently joined forces.
“Everyone feels they must have a press release saying something about telemedicine to be relevant,” Gorevic told CNBC Healthy Returns. “I’m not surprised by any of these steps.”
“This pandemic set the entire market in motion. When we looked at the market, we said we had to be brave and we’ll see where the journey goes, ”said Teladoc CEO, citing the $ 18 billion acquisition of the chronic disease treatment company Livongo, focused on diabetes and its expanding mental health services.
Gorevic says health consumers are overwhelmed by health websites and apps and want a unified experience, and that’s what the company sees with multi-product bookings, which accounted for two-thirds of bookings in 2020.
Amazon’s ability to turn the healthcare industry around, or at least send waves of terrorism, was already evident with the launch of its online pharmacy, which to stocks of Goodrx down from over $ 52 to around $ 33 after the announcement last October.
Wall Street analysts reporting on Teladoc see Amazon’s presence as significant, but not all agree that it is currently an acute threat to Teladoc.
“The initiative from Amazon is not noticeable here,” wrote Sean Wieland, Managing Director and Senior Research Analyst with a focus on health information technology and health services at Piper Sandler, in an email.
“Even Amazon would have to bring the corporate market on board with one employer after another, as this is a highly fragmented market and it would take years. It is also a significant step forward in moving from urgent, on-demand care visits to health care for the whole person. “
Charles Rhyee, managing director and senior research analyst, health technology and sales at Cowen & Co., said Goodrx is a great example of how Amazon can disrupt healthcare and it would be a mistake to ignore Amazon’s potential. But he believes the threat is more direct in pharmacy than in telemedicine.
“It’s a mature market. There are tons of pharmacies and it’s not a growth sector. Literally more of a zero-sum game,” said Rhyee, and Amazon can afford that, at the expense of CVS or Goodrx.
Telemedicine is still a nascent field and that could play in Teladoc’s favor in the years to come.
“We’re all talking about it because Covid is forcing everyone to get virtual care, but considering how many visits Teladoc will make this year, it’s 12-13 million visits,” Rhyee said.
This is like a US market that has a billion or more visits a year, including mental health care.
Whether Teladoc or American fountain As the telemedicine market grows, that accounts for around 2% to 3% of visits, according to Rhyee, a small fraction of what can be virtualized and an indicator that the market will expand.
“I’m not worried,” said Rhyee. “Where Teladoc is located is not what Amazon does. It’s not just simple video visits to speak to a doctor about a minor matter. There are increasingly multiple specialties and second opinions and Livongo. You can currently only see very few, if at all, argue. have these broad capabilities, and that’s why Doctor on Demand is merging with Grand Rounds. “
He looks at Amazon in primary care and pharmacy similarly to his analysis of health care from Walmart after the acquisition of MeMD. “You want to provide some basic connectivity and recipes that can be dropped off at Walmart.”
Stocks move up and down on discrete periods of time, and that doesn’t always align with the longer-term trend. That’s part of the challenge for investors with Teladoc right now to figure out what growth looks like after Covid.
Membership growth projections for this year may not be as strong as some Covid investors have asked for, and app tracking companies have shown declining momentum in day-to-day usage. But the people who are using Teladoc less now than last April don’t mean they are using it less than they were in 2019. And last year has been unusual.
“We don’t know what virtual will look like in the end,” said Rhyee.
The Cowen analyst has a target price of $ 240 on the stock and says it trades at $ 140 at about 8 times futures sales, which is higher than before Covid, but at the time people didn’t believe that it was a real deal. “
Rhyee says he will be more concerned about Amazon as it starts pooling acquisitions in healthcare, including in chronic disease management. “That would tell me that they are taking it a lot more seriously,” he said.
As long as Amazon Care is a corporate customer and its own employee, the Teladoc outlook will be located elsewhere.
According to David Grossman, Research Manager Director at Stifel, the idea of competition between Teladoc and Amazon may overlook the real threat Amazon poses to healthcare. This also includes disrupting the legacy providers in insurance and pharmacy service managers.
Teladoc disrupts traditional providers by creating a 24/7 virtual network on demand that can offer a potentially lower cost alternative. The traditional providers who are now forced to offer telemedicine are, in Grossman’s view, more of a short-term threat to Teladoc as they evolve from the introduction of telemedicine “literally overnight” to the integration of virtual care as a permanent feature of their care models.
“Virtual care is critical to providers now, whereas 15 months ago it was barely on the radar screen,” he said.
Setting up appointments online and the telemedicine option can be one of Amazon’s features, but this is a short-sighted way to see what Amazon is looking for in the healthcare system.
Grossman, concerned about Teladoc’s ability to grow revenue and margins, says Gorevic is a smart guy who is building a sensible model. Now they can create health plans using a network of providers they have created at a lower cost to employers when workers agree to be the first point of contact for virtual services. This disintermediates the traditional network of providers, but he does not see Amazon stop there or even think specifically in these terms.
“Amazon says we’ll do it all,” Grossman said, referring to the traditional healthcare market, which is flawed in terms of delivery, price, and offers little value. “It’s not letting go after Teladoc. That’s casual.”
Amazon has already proven great at taking the cost out of the system by crowding out players who offer no value and shouldn’t be there. “In this sense, I defend it,” said the Stifel analyst.
But whether it’s the efforts of Amazon or Walmart popping up in healthcare, the models to watch don’t rule out Teladoc. “There’s no indication that we should write it off,” Grossman said.
Teladoc’s stocks have fallen for a variety of reasons, starting with the market rotation from growth stocks and the market recognizing that traditional vendors are launching their own telemedicine products.
“Everyone is pointing to Amazon, and let’s be fair, it was a high multiple stock and the market comes out of staying at home and calculates how high that occupancy translates into pricing,” Grossman said. He added that Teladoc is struggling to convince the street of its pricing power. “They were opaque.”
The company is increasing monthly revenue per member, Gorevic noted, but the Stifel analyst was quick to point out that most recent growth in the first quarter was based on the Livongo acquisition. Livongo is the largest provider of virtual chronic care and that is of paramount importance to employers, but Teladoc still has a lot of work to do to prove that demand is a long-term driver of its business growth.
Behavioral medicine is now the fastest growing incremental service, but there is only a limited amount that can be delivered on an automated basis, making it a human resource platform that brings supply and demand together and helps individual mental health practice owners keep their books fill like an Uber or Lyft.
While 8x the revenue the company trades in may seem less than rich, multiple companies tend to be in sectors like software, where scalability can be done quickly and with high margins. Teladoc’s subscription-heavy sales model means that much of the revenue is fixed while costs remain variable.
“Their claim all along that it is good for them when the load increases, but there is no pricing algorithm for it. We don’t know how to calculate that,” Grossman said.
Companies like Teladoc and American Well can attract members and increase membership utilization, but how these growth measures will affect pricing power remains unpredictable. The utilization can increase, but the turnover does not correspond to this. And that adds to investor concerns about its scalability.
“It is factually correct that with more services you can get more per member and there are many options but a lot of competition for every module and booking,” said Grossman. The size and visibility of the company give him an advantage, “but much remains uncertain,” he said.
Gorevic told CNBC that this is not a pandemic story. “Something’s going on here. People are reaching for other things.”
Mental health, dermatology and chronic diseases including diabetes and related health problems such as weight loss. “Not one and done things, and that’s why I’m convinced,” said the Teladoc CEO.
Building the virtual primary care model and convincing payers and employers that it is most cost-effective to choose this option and agree that members enter the health system virtually in the first step is the greater chance of generating higher revenue per member, Grossman said, and in the longer term, disrupting the traditional network of providers is the more sustainable way.
With that in mind, Teladoc is gaining market share just like Amazon, and they can grow over a longer period of time. This can be a discreet interruption in healthcare that becomes permanent. However, the biggest disruption in healthcare doesn’t affect telemedicine.
“All roads lead to the payer,” said Grossman. “There satisfaction is low and control is high.”