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Digital Health Sector: Teladoc Health completes $18.5bn merger with Livongo

Virtual healthcare provider Teladoc Health has acquired Livongo, a technology company which collects patient data to advise upon personal management of chronic illnesses, for $18.5bn, in one of the most prominent deals over the height of the global pandemic. Announced on August 5th, the deal was completed by the end of October and the combined entity is worth over $37bn.

Livongo common stock has ceased trading, with its shareholders receiving shares of Teladoc Health plus cash and special dividends. Teladoc CEO Jason Gorevic will lead the combined company, whilst Chief Human Resources Officer, Arnnon Geshuri, joins from Livongo after the merger. The board will consist of eight directors from Teladoc, including Gorevic; and five from Livongo. Teladoc and Livongo will also merge their respective research and development teams, including chief engineers, data scientists, product officers, and medical officers.

Strong demand for life sciences and health tech

Earlier this week, Teladoc Health reported strong third quarter results and sustained growth is expected. By the end of 2020, Teledoc expects to have directly delivered more than 10 million virtual patient visits and has reported an additional 3 million enabled visits for its health system clients so far. Livongo also reported stronger-than-expected patient enrollment for its flagship program, Diabetes, which added 442,000 new members, up 113% year-on-year. Its total client base also increased over this year, up 71%. Teladoc and Livongo join several other life sciences startups to merge and flourish during the pandemic.  Bristol-Myers Squibb, a pharmaceutical company, announced intentions to acquire Californian drugmaker MyoKardia for $13.1bn to expand its portfolio of cardiovascular drugs.  Omada Health, who offer a similar product to Livongo with its diabetes management programme, is hotly following the sector and wishes to receive a similar valuation. Google Cloud meanwhile is investing $100m into Amwell (formerly American Well), one of the largest telehealth providers, in a concurrent private placement with its IPO.

Post-COVID-19: Is the medical & health care sector still a good bet?

Until now, inertia within the Western private healthcare system, particularly that of the US, has led the consumer patient experience to yet be fully disrupted and overhauled by technology. Despite the strong take-up in the recent months, spurred significantly by the reduction of in-person contact throughout the global pandemic, will progress of a COVID-19 vaccine wane this trend towards health technology? When social distancing becomes no longer mandatory, will patients continue to reach out to healthcare providers in a virtual setting, favouring its convenience over true contact?

The continued trajectory would largely depend upon whether this technology restores the close, deeply personal relationship between the patient and their doctor, as patients have become increasingly dissatisfied with the quality of service within the private healthcare sector — a sector which incentivises doctors to increase patient numbers, reduce the length of individual visits and thus exacerbates the impartiality of private health service and advice.  The sustained take-up of this also lies equally with the healthcare professionals who adopt such new incentives to improve relationships with patients. The technology has potential to improve efficiency between appointments and also save health insurance companies on payouts, thus further incentivising the take-up. Corporations, offering employees health and life insurance packages, in line with their ESG targets and compensation incentives, may also be inclined to partake in this digital revolution to personal health and wellbeing.

The products offered are also evolving. Livongo brings data transparency, quantified metrics and even AI to patients, allowing patients greater awareness and control over their health, whilst Teledoc enhances the digital interface and connection between patients and their physicians. Alongside diabetes, hypertension and obesity are also monitored and advised by Livongo. Individualised and personalised treatments can also develop further, including the ability to tailor 3D-print orthopaedic supports as well as provide personalised therapy through tailoring the specific food nutrients and medicine against particular diseases that your genes may be susceptible to. AI analysis together with continued, voluntary data collection to expand the data bank of even the slightest symptoms in patients may vastly accelerate scientific understanding of early diagnosis and development of certain diseases. It has been found that the lack of patients coming forward during the early stages of Alzheimers, only visiting a health professional when symptoms persist, hampers scientists’ efforts to understand early protein build-ups in the brain at those very early stages. Similarly, AI is vastly improving early diagnosis of cancers within radiology, through sharper detection of patterns within these imaging scans. To be able to bring this type of diagnosis to patients from their homes, via the use of personal biometric sensors and imaging devices already available in our smartphones or as external specialist devices, could revolutionise current standards of health and wellbeing.

Challenges ahead for the digital consumer health care sector

With the possible removal of physicians required during early stages of digital diagnosis of common symptoms, as well as the ongoing monitoring of certain diseases, there must remain an open pathway to receive specialised advice face-to-face with professionals, should symptoms no longer align with prescribed patterns. Even a single misdiagnosis and subsequent suffering will be cause for major ethical scandals for these health technology firms.

As much as the digital technology sector is innovating, consumer-oriented health products still face barriers in passing safety criteria in order to be fully licensed, endorsed and adopted by the professional medical community. Until they pass these assessments, products will remain “quasi-medical” and viewed with scepticism by both the patient and professional medical community. Livongo’s remote blood glucose meter was originally approved by the US FDA for in-home use in 2014, whilst Apple’s smartwatch being the first smartwatch to pass the US Food and Drug Administration (FDA) test in 2018. Even so, there are still various degrees of these licenses, as though the Apple Watch has been cleared by the FDA to sell as a low-grade health tracking device, it is not considered to be producing medical grade data. Therefore, despite healthy scepticism which maintains ethics over the reliance on these devices, this should not significantly hamper the efforts of technology firms to continue building upon their innovations, given that the global digital health market was valued at $111.4bn in 2019 and is expected to reach $510.4bn by 2025, growing at a CAGR of 29.0% during the period 2020-2025.

Sources

https://pitchbook.com/news/articles/teladoc-to-buy-livongo-for-185b-to-face-telehealth-demand

https://www.fool.com/investing/2020/11/03/teladoc-and-livongo-demolished-expectations-so-why/

https://finance.yahoo.com/news/teladoc-health-completes-merger-livongo-123000555.html

https://medcitynews.com/2020/10/livongos-top-leaders-to-depart-after-teladoc-merger/

https://www.forbes.com/sites/leahrosenbaum/2020/04/15/exclusive-livongo-helps-hospital-staff-go-hands-free-to-help-diabetic-coronavirus-patients/

https://www.ft.com/content/6351d67d-37e7-4328-b47e-b4dce3792748

https://www.evaluate.com/vantage/articles/news/trial-results/can-omada-do-livongo

https://seekingalpha.com/article/4387596-teladoc-is-strong-buy-radical-healthcare-change-will-come

https://pharmaphorum.com/news/is-livongo-teladoc-merger-a-leap-forward-for-digital-health/

https://telecoms.com/492154/the-fda-certified-apple-watch-is-still-not-a-medical-device/#:~:text=The%20new%20Apple%20Watch%20has,not%20producing%20medical%20grade%20data.&text=Though%20it%20was%20not%20the,watch%20to%20pass%20FDA%20test

https://www.globenewswire.com/news-release/2020/05/23/2037920/0/en/Global-Digital-Health-Market-was-Valued-at-USD-111-4-billion-in-2019-and-is-Expected-to-Reach-USD-510-4-billion-by-2025-Observing-a-CAGR-of-29-0-during-2020-2025-VynZ-Research.html#:~:text=The%20global%20digital%20health%20market,29.0%25%20during%202020%2D2025

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