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.
