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Boston-based company Amwell is preparing to go public less than one month after raising nearly $200 million in funding to keep up with surging demand for its telehealth services. The company reported a 4,000% uptick in patient visit volume last month in some areas, per CNBC. Amwell is attracting attention from players across the healthcare ecosystem — its previous investors include US health insurer Anthem, Japanese pharmaceutical company Takeda, and Philadelphia-based health system Jefferson Health.
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Here’s why we think it makes sense for Amwell to enter the public market despite the recession:
- As Amwell faces a spike in patient visits, it will need capital to hire experts to manage a host of technical and compliance issues associated with building out its telehealth platform. For context, Cleveland Clinic’s Amwell-powered platform, Express Care Online, reported that its service crashed several times due to a soaring number of online visits during the pandemic — often delaying wait times by more than an hour. We think Amwell will need to expand its engineering and tech support teams to address these issues. Further, we’ve also seen telehealth regulations evolve amid the pandemic: For example, prior to the pandemic most telehealth providers needed a license to practice within each state, but now some states have issued temporary allowances for out-of-state providers. These technical and regulatory challenges are unlikely to go away, given that demand for virtual increases is still rising and a second wave of outbreaks looms — but an influx of funding will put Amwell on better footing to navigate them.
- Skyrocketing demand for telehealth services will likely lead investors to continue making digital health investments despite an economic downturn. According to a Rock Health report, digital health companies raised a record $3.1 billion across 107 deals during Q1 — that’s 1.5 times more than the funding allocated in Q1 2019. And although it’s likely that the downturn caused investors to take a more conservative approach, we still think these Q1 numbers indicate that digital health investments — particularly telehealth — are more recession resistant. To that end, 44% of digital health firm leaders think that the pandemic will positively impact business, according to a Research2Guidance survey.
As established telehealth leaders further cement their position in the market, we expect to see fewer new competitors enter the telehealth space. Amwell isn’t the only telehealth titan to see increased success during the pandemic: Its competitor, New York-based Teladoc, raked in $181 million in Q1 2020, a 41% year-over-year (YoY) leap, for instance.
Both firms have already forged deals with major private insurers — and have reported plans to expand their partnerships to additional health systems or payers this year. That could spell trouble for telehealth entrants, which will likely lack the capital and name recognition to compete with the likes of Amwell and Teladoc. As a result, as these massive telehealth companies grow, we expect opportunities for smaller entrants to dwindle.
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