Digital Health Companies Struggle in 2024 Amid Post-Covid Adjustments

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The year 2024 has been a tough one for digital health companies, marking a stark contrast to the boom times of the Covid era. While the Nasdaq soared 32%, surpassing 20,000 for the first time this month, digital health stocks have mostly suffered. Of 39 public companies in this sector analyzed by CNBC, approximately two-thirds have seen significant declines, with some even going out of business.

However, there have been a few success stories, including Hims & Hers Health, which benefited from its new weight loss program and its positioning within the GLP-1 craze. Despite these exceptions, the sector as a whole faced challenges. According to Scott Schoenhaus, an analyst at KeyBanc Capital Markets, 2024 marked a “year of inflection” for the industry. The pandemic-driven surge in demand has slowed, and businesses are now focusing on profitability in a more subdued growth environment.

During the pandemic, digital health startups raised record-breaking funds, with $29.1 billion secured in 2021 alone, and numerous companies went public. However, with the pandemic’s worst waves behind, the demand for digital health tools has cooled. As a result, many companies are rethinking their business models, with mixed outcomes.

Companies like Progyny, a fertility and family planning benefits provider, have seen a dramatic 60% decline in their stock prices, while Teladoc Health, once a leader in virtual care, has seen its stock plummet by 58%, and is 96% off its 2021 high. Teladoc’s market cap, which once stood at $37 billion after acquiring Livongo in 2020, is now under $1.6 billion. Similarly, GoodRx, which offers medication price transparency, is down 33% year-to-date.

The year saw several companies adjust their revenue forecasts, with Progyny and GoodRx repeatedly lowering their full-year guidance. In the case of Teladoc, the company withdrew its 2024 revenue outlook after experiencing consecutive declines.

Dexcom, a diabetes management device company, also faced challenges, with its stock dropping 35% in 2024, including a 40% plunge in July after disappointing results. Genetic testing company 23andMe had an especially difficult year, with its stock down more than 80%. The company’s post-SPAC valuation has fallen from $3.5 billion to under $100 million, and it has had to restructure its workforce and shut down its therapeutics business.

Despite these setbacks, some companies have thrived. Hims & Hers, for instance, saw its stock surge by over 200%, reaching a market cap of $6 billion. The company’s success was driven by high demand for GLP-1 drugs, particularly compounded semaglutide, a more affordable alternative to expensive treatments like Ozempic and Wegovy. Doximity, a digital platform for medical professionals, also had a strong year, with its stock more than doubling.

Oscar Health, a tech-enabled insurance provider, also performed well, with shares up nearly 50% in 2024. The company has been expanding rapidly, supporting around 1.65 million members with plans to reach 4 million by 2027.

Additionally, two companies, Waystar and Tempus, went public in 2024. Waystar, a healthcare payment software vendor, saw its stock rise significantly post-IPO, while Tempus, a precision medicine company, saw a slight decline.

Despite these bright spots, the sector has witnessed several exits. Companies like Cue Health and Better Therapeutics have shut down, and large-scale acquisitions occurred, such as the $8.9 billion acquisition of R1 RCM by TowerBrook Capital Partners and Clayton, Dubilier & Rice. Digital health companies like Commure and Augmedix were also involved in acquisitions.

As the digital health sector adjusts to a post-pandemic reality, industry experts believe the future lies in refining business models. Michael Cherny, an analyst at Leerink Partners, emphasized that digital health companies need to focus on achieving the “triple aim” of healthcare: better care, more convenience, and lower costs, if they are to succeed in the long term.

 

S&P 500 Rises 1% on Christmas Eve, Tech Stocks Drive Gains: Live Updates

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The U.S. stock market saw a strong performance on Christmas Eve, with the S&P 500 gaining 1.1% to close at 6,040.04. The Dow Jones Industrial Average also rose by 0.91%, adding 390.08 points to reach 43,297.03, while the Nasdaq Composite climbed 1.35% to finish at 20,031.13. A significant contributor to the Nasdaq’s rise was a 7.4% increase in Tesla’s stock price, alongside gains in Amazon and Meta Platforms, which each rose over 1%.

The New York Stock Exchange closed early at 1 p.m. ET, and the bond market followed suit, closing at 2 p.m. The market will remain closed on Wednesday for Christmas Day.

Tuesday’s gains marked the beginning of the “Santa Claus rally,” a seasonal trend in which the market tends to see stronger performance during the last five trading days of the year and the first two days of January. Historical data from LPL Research shows that since 1950, the S&P 500 has averaged a 1.3% return during this period, far outpacing the typical seven-day return of 0.3%.

Despite the upbeat performance, experts advise caution. Paul Hickey, co-founder of Bespoke Investment Group, mentioned on CNBC’s “Squawk Box” that while the market shows positive momentum, it’s important to temper enthusiasm, as the market has already rallied significantly.

Over the past two days, the S&P 500 has gained 1.8% for the week, with the Dow up about 1%. The Nasdaq has surged 2.3% week-to-date, fueled by strong gains in megacap tech stocks. Additionally, the S&P 500 has turned positive for the month, rising by 0.1%. The tech-heavy Nasdaq has seen an impressive 4.2% increase in December, with major players like Google’s parent Alphabet up 16%, Apple up nearly 9%, and Tesla soaring by about 34%. However, the blue-chip Dow remains down by around 3.6% for the month, on track for its worst monthly performance since April.

On the corporate front, American Airlines experienced fluctuations in its stock price on Tuesday after the airline temporarily grounded all flights in the U.S. due to a technical issue during one of the busiest travel days of the year. Despite the disruption, the stock ended the session up 0.6%.

In other retail news, analysts at Jefferies expressed optimism about toy sales this holiday season. Their store checks indicated high traffic and lower inventory levels compared to earlier in the season. Board games, in particular, were reported as strong sellers both in-store and online. Jefferies also noted that discounts were lower than the peak Black Friday levels.

In the toy sector, Mattel and Hasbro stocks showed mixed results. While Mattel’s shares are down over 5% year-to-date, Hasbro has seen a more significant gain of 11%. However, Hasbro has faced recent declines, with its stock down nearly 13% month-to-date, while Mattel’s shares have fallen 6%.

 

China’s Satellite Megaprojects Challenge Elon Musk’s Starlink

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China is aggressively pursuing satellite megaprojects to rival SpaceX’s Starlink, which has already established a formidable presence in low Earth orbit (LEO) with nearly 7,000 satellites. Starlink provides high-speed internet to millions in remote and underserved regions, with plans to expand its constellation to 42,000 satellites. However, China is aiming to launch a similar-scale network with around 38,000 satellites through its Qianfan, Guo Wang, and Honghu-3 projects.

While companies like Eutelsat OneWeb and Amazon’s Project Kuiper are also entering the satellite internet arena, China’s interest in these megaconstellations goes beyond just competition. Experts believe China’s motivations are partly driven by concerns over the potential influence of Starlink’s uncensored internet service, especially in regions under its geopolitical influence.

Steve Feldstein, a senior fellow at the Carnegie Endowment for International Peace, suggests that Starlink could undermine China’s strict internet censorship policies by providing uncensored access to websites and apps. As a result, China views this satellite-based connectivity as a potential threat to its control over information within its borders and in allied countries. To counter this, China is investing in its own satellite network that could offer a censored alternative to Starlink.

Blaine Curcio, founder of Orbital Gateway Consulting, adds that China’s satellite service could appeal to countries interested in a more controlled internet experience. While China may not prioritize Western markets like the U.S. or Europe, it sees opportunities in regions where Starlink has limited coverage, including Russia, Afghanistan, Syria, and parts of Africa.

In Africa, where Huawei already plays a dominant role in 4G infrastructure, China’s satellite service could further strengthen its influence. The Chinese satellite constellation might be seen as an extension of its technological and geopolitical presence, especially in regions where internet access is limited or censored.

National security is another crucial factor behind China’s satellite ambitions. Starlink’s role in providing satellite-based communication for military purposes, particularly in conflict zones like Ukraine, has demonstrated the strategic value of satellite internet. The ability to maintain internet connectivity during war, especially for military operations such as drone warfare, makes satellite constellations a key component of national security. China recognizes this, making its satellite internet projects a strategic necessity.

In conclusion, while China’s satellite services may not directly compete with Starlink in Western markets, they represent a significant geopolitical and security challenge. As China expands its satellite capabilities, it will likely target regions where Starlink has limited coverage, furthering its influence and maintaining control over digital infrastructures.