When searching for long term investment opportunities, we look for areas with a changing landscape or long-term trend. With an aging population, this creates multiple challenges, solutions, and opportunities. According to data from World Population Prospects: the 2019 Revision, 1 in 6 of the world’s population will be over 65 by 2050, with this number rising to 1 in 4 in North America and Europe.
Teladoc (NYSE: TDOC) is a telehealth company that calls itself the “global virtual care leader”. It was founded by Dr. Byron Brooks and launched in 2005 before going public in 2015.
Teladoc aims to provide convenient, professional, efficient virtual care for people with both simple and complex needs. Its services include doctor visits, mental health, and guidance. Specialists are also on hand to review medical records, test results to confirm the accuracy of diagnoses and treatment. They connect patients with doctors over the phone, or on video chat with a subscription-based business model (monthly and per visit fees). Subscription revenue accounted for 87% of the $138 million revenue (24% growth year over year) in Q3 2019 and provides a steady stream of income.
The leading problems for people aged 65 and older are typically cardiac, cancer and respiratory. For many older people, living alone managing illnesses can be an issue. 72% of people surveyed by Teladoc said they would use virtual care to help manage a chronic condition.
Teladoc increased visits by 63% from the year previously to 2,899,000; a small portion of the 884 million doctor visits per year in the U.S, leaving a huge runway for growth. They have 40% of the Fortune 500 on their books and boasts an impressive 90% retention rate.
Teladoc has expanded its services through a number of acquisitions to try and become the one-stop-shop for healthcare needs. The most recent acquisition of InTouch expanded the reach of the company by providing telemedicine to health systems and hospitals. JPMorgan stated that the telemedicine budget for the health system increased by 40% in 2019.
They have continued to reduce the debt on the balance sheet with revenue continuing to climb by 24% in the last quarter which is an encouraging sign for investors and profitability may not be too far off.
Teladoc has positioned itself as a market leader in this space and should benefit as the number of people aged 65 and over increases in the coming years. There are multiple catalysts for growth both organically and through acquisitions.
Livongo (NYSE: LVGO) “empowers people with chronic conditions to live better and healthier lives.” Livongo was founded in 2008 by Glen Tullman, inspired by his diabetic son, and went public in July 2019.
6 in 10 people in the US have a chronic illness and 4 in 10 have two or more. Chronic illnesses account for $3.7 trillion of U.S healthcare costs annually. The high cost and number of people living with chronic conditions leave a large opportunity for Livongo.
Livongo’s initial focus was on diabetes management but has now widened its scope to hypertension (high blood pressure) and weight management. They use technology and data analytics in order to provide a personalized experience for customers who receive a call or message instructing them on what to do. They are tapping into a sector where there is very little help and guidance post-diagnosis and are aiming to carve out a niche in this space by integrating cloud-based technology.
The use of technology means that customers get increasingly personalized results as it improves with data recorded over time. The subscription-based model also provides a steady revenue stream. Revenue has grown an impressive 148% to $47 million in the last quarter year over year. However, this tends to slow as the size of the company increases.
Livongo boasts many high profile customers, with 20% of the Fortune 500 already using their services. The customer base has grown to 207,000 members up 118% from the year previously.
These small companies are providing solutions in a large industry. As the number of older people increases across the world and people’s healthcare deteriorates the opportunity will continue to grow. If these companies can keep up their impressive growth rates they are sure to play a big part in the future of healthcare.
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Contributing Writer at MyWallSt
This article was written by one of our MyWallSt contributing writers.