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Daily Intelligence Briefing

Thursday, July 8, 2021

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Digital Health Spend Set to Shatter Records as Big Tech Takes Notice, Accelerates M&A Activity

Summary: Investment in the digital health sector continues to see strong growth in 2021, as funding in the first half of this year has already surpassed the total amount invested in 2020. M&A activity among major tech companies, including Apple, Walmart and Amazon, has been particularly strong with each of those firms working to cement their presence in the healthcare services sector. IPO and SPAC listings of digital health startups have also continued to heat up this year.

Though overall digital health utilization has dropped off in some categories since the height of the pandemic, usage remains well above pre-pandemic levels and growth is expected to continue – albeit at a more moderate pace than the breakout witnessed last year.

Related ETF & Stocks: Global X Telemedicine and Digital Health ETF (EDOC), Doximity, Inc. (DOCS), Teladoc Health, Inc. (TDOC), Apple Inc. (AAPL), Walmart Inc. (WMT),, Inc. (AMZN)

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Investment On Pace to Double Last Year’s Record Spend

Digital health investment has shown no signs of slowing, even as the global pandemic begins to subside. Last year, digital health funding in the US totaled a record $14.6 billion, amid a rise in telehealth usage. According to Bloomberg, investment recently topped $14.7 billion at the end of Q2, topping last year’s total in just the first half of 2021.

Funding has jumped more than 1200% over the last decade and is projected to climb even higher going forward. According to a recent Accenture report, surveying 399 healthcare executives across six different countries, healthcare’s digital transformation is just getting started as 87% of healthcare executives believe their business and technology strategies are becoming inseparable. Additionally, an equal portion of executives said their digital transformation is accelerating, while 93% said they are tackling the tech transformation with a sense of urgency this year.

Digital health is poised for tremendous growth across the globe through the next decade. A market research report from Precedence Research, highlighted by Globe News Wire, found that the global digital health market was worth roughly $181.8 billion in 2020. That sum is forecast to grow to $551.1 billion by 2027 as the healthcare industry continues to capitalize on technology trends including smartphone usage and artificial intelligence development. 

MRP highlighted the ongoing wave of growth in digital health earlier this year, noting that 25 companies raised $100 million or more in Q1 2021, also known as a ‘megadeals’. According to Forbes, there have been 48 megadeals so far this year, on pace to more than double the 40 megadeals completed in 2020. Leading the way is weight loss app Noom, which raised $540 million in May giving it a $3.7 billion dollar valuation. Online pharmacy startup Ro followed up with a $500 million dollar funding round, bringing its valuation to roughly $5 billion.

Not all digital health trends that benefited from the pandemic are accelerating in 2021. After reaching record highs in the middle of the pandemic, telehealth usage has declined 37% in the first quarter of 2021, per a Trilliant Health report published by eMarketer.

However, that figure is bit misleading, as telehealth appointments are still significantly ahead of where they were two years ago. eMarketer writes that there were roughly 9 million telehealth visits in March of 2021, well ahead of the 2 million average monthly visits between April 2019 and January 2020.

Digital health offerings, including telehealth, online pharmacies, weight loss apps, continue to garner significant investor interest. As more money flows into the sector, larger companies including Apple, Walmart and Amazon have begun to move into the industry, striking deals to capitalize on the growing digital trends.

M&A Activity Heats Up, Prompting More Public Offerings

Mergers and acquisitions have been accelerating in 2021, with 131 digital health M&A deals taking place thus far, an average of 22 acquisitions per month compared with 12 per month last year, according to Pharma Phorum.

Further, Forbes writes that 11 digital health companies have gone public in 2021, 6 from an IPO and 5 from SPAC mergers. The article notes that there are 11 additional digital health SPAC mergers expected to close by the end of the year.

Among those IPOs was Doximity, a self-described LinkedIn for doctors that connects 1.8 million medical professionals in the US. Per the Motley Fool, its customer list includes over 80% of the physicians in the US, more than 50% of nurse practitioners and physicians’ assistants, and an estimated 90% of graduating medical students in the country. Debuting on the New York Stock Exchange in late June, the company closed their first day of trading with a market cap of $9.4 billion, raising around $500 million in its IPO.

Doximity, which is already a profitable company, also introduced a telehealth solution last year and has reported rapid adoption among its existing customers, noting that it delivered 63 million telehealth visits last year.

That presents a threat to companies like Teladoc, whose primary service is digital doctor appointments. After surging into relevancy during the height of the pandemic, Teladoc’s share price has had a rough 2021, down nearly 50% from its February peak. Though Yahoo Finance notes the consensus forecast from 29 analysts covering Teladoc is for revenues of $2.01 billion in 2021, which would reflect a strong 47% improvement in sales YoY, the tech sector’s increasing expansion into healthcare services has compounded downward pressure on Teladoc stock.

MRP recently wrote about big tech companies diving into the digital health space, most notably being Microsoft, which acquired software company Nuance Communications for $19.7 billion as a part of its broader “Microsoft Cloud for Healthcare” venture.

Since then, both Apple and Walmart have taken steps toward developing new or improved business segments centered around digital health services.

According to the Wall Street Journal, Apple has been trying to enter the healthcare industry since 2016, with plans to develop its own medical service for consumers with Apple devices. That plan, however, has yet to pan out as the company is now focused on improving its current digital health apps and services.

The next line of Apple Watches are expected to add new health features, including body temperature and blood glucose sensors, per eMarketer. With upgraded health services, Apple continues to expand into the remote patient monitoring (RPM) market, which is forecast to have over 30 million users by 2024. Apple has also partnered with the Mayo Clinic, utilizing Apple’s Health app in order to make it easier for both doctors and patients to access health records.

Apple has both the technology and the user base to make a serious splash in the primary care market if its health devices and apps continue to offer valuable health information.

Additionally, Walmart has expanded into the telehealth space by acquiring with MeMD, a virtual care company. Healthcare IT News writes that the partnership aims to provide services in 16 states, a move that will complement its current in-person care clinics.Walmart is following in the footsteps of Amazon, who has been developing its own telehealth service called Amazon Care. Amazon has already inked deals with multiple companies across the US, aiming to operate in all 50 states, per Firece Healthcare.

M&A activity should continue to rise as larger corporations dive into the digital health space by acquiring existing companies, instead of building from within.

Even as the pandemic subsides, investment in digital health companies continues to surge, on pace to double the records set last year. Some trends, including telehealth usage, have slowed compared to their pandemic highs but remain well above 2019 levels.


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