Don’t believe the hype?
Why bother with telehealth? For all the huge sums raised, the high valuations and in some cases the spectacular IPOs, it’s actually quite rare for them to make any money. Or latterly, for them to hold their share prices. Teladoc doubled its revenue, and Babylon quadrupled its revenue in 2021 – yet both have seen share prices drop 90% over the last two years. What gives?
Ali Parsa, the charismatic healthcare entrepreneur who founded digital health company Babylon, sought to give an explanation last month when he branded his company’s stock market performance an “unbelievable, unmitigated disaster”. It’s hard to disagree, but it was a surprising public admission none the less. Parsa attributes the meteoric fall in share price to the “market not understanding” Babylon’s business model. We posit it could be something more basic. As one digital health expert told us: “Nothing has really changed to the fundamentals of these businesses to alter their valuations. I think they were simply too high to start with.”
Almost none of these companies are making money. Some investors have been waiting for years for their huge return, with no reward (yet). High flying Kry might expect imminent profitability, but recently announced its second round of layoffs this year. There may be hope, however. Some European groups, such as Doktor.se and Medgate have nudged into profit.
As for Babylon, it is refocusing its efforts on the US where it is finding greater opportunities. Kry, meanwhile, is withdrawing from Germany, where it did not.
What is proving more successful is a hybrid approach of the right balance of digital plus bricks and mortar, as practiced by the big three Portuguese hospital groups, and Spanish group Ribera Salud where apps offer telehealth solutions, appointment bookings, and tracking of health data points such as blood sugar, crucially married to buildings where real people can be seen by other real people, in the flesh.
Unicorns are so called because they are rare, and backing one is not a guarantee of success. Some of these may turn into ponies – and those waiting to cash in on the promise of a largely digital solution may need to bide their time a while yet.
We would welcome your thoughts on this story. Email your views to Joe Quiruga or call 0207 183 3779.
