Digital health stocks get hammered by Wall Street in 2024, but Hims soars | Wilnesh News

If the COVID-19 era marks a boom time for digital health companies, 2024 is the final year.

With the Nasdaq up 32% this year and topping 20,000 points for the first time this month, health technology providers have largely suffered. About two-thirds of the 39 public digital health companies analyzed by CNBC have experienced declines this year. Others are now out of business.

There are some breakout stars such as his and her healthThe company’s growth has been boosted by the success of its popular new weight-loss products and its place in the GLP-1 craze. But that’s an exception.

Scott Schoenhaus, a healthcare IT company analyst at KeyBanc Capital Markets, said that while there are some company-specific challenges in the industry, overall it’s been a “turnaround year.” Business models that seemed about to explode during the epidemic did not all work as planned, and companies had to refocus on profitability and a weaker growth environment.

“The pandemic has driven demand tremendously, and we have tough, challenging competition,” Schoenhaus told CNBC. “Growth has slowed down significantly for most of my names, and I think employers, payers, providers Marketers and even pharmaceutical companies are becoming more selective and discerning about the digital health companies they work with.”

Digital health startups raised $29.1 billion in 2021, breaking all previous funding records, according to a report rock health. That year, nearly 20 digital health companies went public through initial public offerings or special purpose acquisition companies (SPACs), up from a record of eight in 2020. Growth is achieved with interest rates near zero.

But as the worst of the pandemic recedes, so does the insatiable demand for new digital health tools. It was a rude awakening for the industry.

“What we’re still going through is understanding the best ways to address digital health needs and capabilities, as well as the push and pull of current business models and how successful they might be,” Michael Cherneyanalysts at Leerink Partners told CNBC. “We are in a post-COVID stabilization period.”

DescendantsThe company, which provides benefits solutions for fertility and family planning, is down more than 60% year to date. Traddock HealthShares of the once dominant player in virtual care are down 58% in 2021 and are down 96% from their 2021 highs.

When Teladoc acquired Livongo in 2020, the two companies had a combined enterprise value of $37 billion. Teladoc’s market capitalization is currently less than $1.6 billion.

good receiverThe company, which provides drug price transparency tools, is down 33% year to date.

Schoenhaus said many companies’ expectations for this year were too high.

Progyny has lowered its full-year revenue guidance in every 2024 earnings report. By November, scope down to $1.14 billion to $1.15 billion.

GoodRx has also significantly lowered its full-year 2024 guidance multiple times. US$800 million to US$810 million Downgraded to $794 million in May November.

in Tradoch first quarter reportThe company said it expected full-year revenue of $2.64 billion to $2.74 billion. company withdrew its outlook In the second quarter, there was a continuous decline compared with the same period last year.

“For many of my companies, this is the year to embrace the prospect of growth, so I think we can ultimately look at 2025 as potentially a better year in terms of settings,” Schoenhaus said.

While overzealous predictions told part of the digital health story this year, there were some notable missteps by specific companies.

DexconShares of the company that makes diabetes and blood sugar management devices are down more than 35% so far this year. The stock plunged more than 40% in July, its biggest drop ever, after the company reported disappointing second-quarter results and issued weak full-year guidance.

Chief Executive Kevin Sayer attributed the challenges to a reorganization of the sales team, fewer new customers than expected and lower revenue per user. Following the report, JPMorgan analysts were surprised by the “severity of the downturn” and the fact that it “appears to be largely self-inflicted.”

genetic testing company 23 and me It’s been a particularly difficult year. The company went public via a SPAC in 2021, valuing the business at $3.5 billion after the popularity of its at-home DNA testing kits surged. The company is currently worth less than $100 million, and Chief Executive Anne Wojcicki is struggling to keep it afloat.

In September, all seven independent directors resigned from the 23andMe board, citing differences with Wojcicki over “the strategic direction of the company.” Two months later, 23andMe said it planned to cut 40% of its workforce and close its treatment business as part of a restructuring plan. Reorganization plan.

Wojcicki has repeatedly said she plans to take 23andMe private. The stock is down more than 80% year to date.

Highlights of digital health

Hims & Hers investors are having a much better year.

Direct-to-consumer shares are up more than 200% so far this year as demand for GLP-1 surges, giving the company a market value of $6 billion.

Hims & Hers began prescribing compound semaglutide through its platform in May after launching a new weight loss program late last year. The active ingredient of semaglutide is Novo NordiskThe blockbuster drugs Ozempic and Wegovy cost about $1,000 a month without insurance. Compound semaglutide is a cheaper, custom-made alternative to brand-name drugs and can be produced when brand-name drugs are available shortage.

Hims & Hers may have to contend with a dynamic supply and regulatory environment next year, but even before adding compound GLP-1 to its portfolio, the company said in its report February earnings Its weight loss program is expected to bring in more than $100 million in revenue by the end of 2025.

DosimitiThe digital platform for medical professionals also had a strong performance in 2024, with its stock price more than doubling. The company’s platform has been likened to a LinkedIn for doctors for years, allowing clinicians to stay up to date on medical news, manage paperwork, find referrals and set up telemedicine appointments with patients.

Doximity generates revenue primarily by providing recruitment solutions, telemedicine tools and marketing products to clients such as pharmaceutical companies.

Leerink’s Cherny said Doximity’s success can be attributed to its lean operating model and the “differentiated mousetrap” it creates due to its reach into the physician network.

Leerink analysts including Cherny wrote in a November report: “DOCS is a rare player in the healthcare IT space in that it has become profitable, generated strong incremental profits and is a stable company. Growthers. The company raised its price target on the stock to $60 from $35.

Another highlight this year is Oscar Healthis a technology insurance company co-founded by Joshua Kushner of Thrive Capital Management. Its shares are up nearly 50% so far this year. The company supports approximately 1.65 million members and plans to expand to approximately 4 million by 2027.

Oscar revenue grows strongly third quarter report November. Sales increased 68% year over year to $2.4 billion.

In addition, two digital health companies, Weixing and Tempus Artificial Intelligencewill achieve leapfrog and be listed on the market in 2024.

The IPO market has been largely dormant since late 2021, when surging inflation and rising interest rates forced investors to avoid risk. Few tech companies have gone public since, and no digital health companies are targeting IPOs in 2023, according to one company. Report From Rock Health.

Shares of healthcare payment software provider Waystar jumped to $36.93 from its June IPO price of $21.50. Precision medicine company Tempus also fared poorly. The company’s stock price has fallen from $34.91 to $34.91. IPO price $37also in June.

“Hopefully the valuation will provide more opportunities for other companies that have been lingering in the background as private companies over the past few years,” Schoenhaus said.

hang out with the old one

Several digital health companies have exited the public markets entirely this year.

Tips for healthconducts Covid testing and counts Google as an early customer, while Better Therapeutics uses digital therapeutics to treat cardiometabolic diseases, both Close operations and delisted from Nasdaq.

Revenue Cycle Management Company R1 RCM Yes obtained The $8.9 billion deal was completed by TowerBrook Capital Partners and Clayton, Dubilier & Rice. Similarly, Altaris acquires Sharecareoperates a virtual health platform valued at approximately $540 million.

Commure is a privately held company that provides tools to streamline clinician workflows. obtained Augmedix, a medical artificial intelligence dicing company, was acquired for approximately $139 million.

“During the pandemic, there’s been a lot of competition coming into the market and we’re seeing some of that competition get squeezed out, which is a good thing,” Schoenhaus said.

Cherny said the industry is adapting to the post-pandemic period and digital health companies are figuring out their roles.

“We are still exploring what could almost be called a digital health 1.1 business model,” he said. “It’s nice to say we’re doing things digitally, but it only matters if it has some way of impacting the ‘triple aim’ of health care: better care, more convenience, lower cost.”