- Virtual health visits, called telehealth, is the next major innovation in American health care, exemplified by market leading companies like Teladoc, which have grown rapidly since launch and provide less expensive, simpler access to health professionals
- Recent launchee eWellness Healthcare Corporation (EWLL) will onboard their first major account in March and should begin to generate revenue imminently. The company's PHZIO platform is one of very few telehealth physical therapy platforms, and the company should sign up more accounts throughout 2018. New partnerships and emerging revenue could send EWLL ripping this year. A return to highs would be worth 4X
It's been slow coming, but the digital revolution is finally making its way to healthcare, and investors should be taking note. One of the leaders in telehealth, also called virtual health care where doctors speak with patients by phone or computer, Teladoc Inc (NYSE:TDOC) has grown their revenue from $44 million in 2014 to $232 million in 2017, a 5-fold increase in less than 4 years. Major health insurers including United Healthcare (UNH) and Aetna (NYSE:AET) are Teladoc customers, along with an abundance of Fortune 500 companies. The stock has been a monster winner as investors have recognized that virtual health care could revolutionize the United States' bloated health care system, doubling in the last year.
Moving doctor visits, behavioral health, and even ambulatory care (like physical therapy) to virtual visits via the web is a fast-growing trend. Teladoc's membership has grown to 23 million lives as of 2017, or nearly 10% of the U.S. population, from 4 million people four years ago, all because of cost-savings for insurers, patients, and providers.
This trend is just getting started. Amazon.com Inc (AMZN) announced plans last month to partner with Berkshire Hathaway Inc. (BRK.A) and JPMorgan Chase & Co. (JPM) in a major effort to cut costs and improve healthcare for their combined 1.1 million employees. The partnership will focus on using technology to provide accessible healthcare at reasonable costs, and with these three companies throwing their weight behind a cost-cutting initiative like this, expect forward-thinking solutions to include virtual health care offerings.
These digital health innovators, like eWellness Healthcare Corporation (EWLL), are poised to dominate this growing market. EWellness has a fully operation virtual telehealth platform called Phzio, with its first large-scale customer base being on-boarded this quarter. The company's revenue since launch late in 2017 will emerge rapidly, and the company plans to sign new clients throughout 2018; there's a clear path to significant patient adoption, revenue, and possible upside to EWLL, and it won't take much to get this unknown name moving in the first half of 2018.
Technology Slowly But Surely Revolutionizing Health Care, Virtual Visits Worth Tens of Billions
Health care costs have been rising in the U.S. for decades, much of the increase driven by in-patient events like doctor consultations and hospital visits. U.S. health care spending increased another 4.3% to reach $3.3 trillion, or $10,348 per person in 2016,and 52% of these costs came from hospital and physician services (prescription drugs only account for 10% of this spend).
According to the CDC, there are more than 1.2 billion outpatient hospital or primary care (family doctor) visits yearly in the U.S. - the arguable market-leader, Teladoc, believe that about one-third of these could be addressed by telehealth/virtual care providers, and they estimate this total addressable market at $17 billion dollars.
The digital revolution has been slow to impact health care costs, but efforts by companies like Teladoc and other internet pioneers like Amazon, through their JPM/Berkshire coup, are a major step forward in lowering costs and improving care. In Amazon's press release last month, they and JPM/Berkshire said that the initial focus of their jointly owned independent company, which will be free from profit-making incentives, "will be on technology solutions that will provide [our] U.S. employees and their families with simplified, high-quality and transparent health care at a reasonable cost." Virtual visits are a no-brainer, already known to reduce costs at all levels - for patients, for health care providers, and for insurers or payors. A $30 telehealth consult is significantly cheaper than a $800 visit to the emergency room for an ear infection. It's no wonder that this is a booming market, and possible users like Amazon/JPM/Berkshire will only accelerate market penetration for virtual health companies.
$30B Physical Therapy Market Ready for Disruption
Amazingly, about 33 million doctor episodes annually are due to lower back, back, and knee symptoms alone. With an aging baby boomer population in the U.S., this should come as no surprise to most. Physical therapy is a $27 billion industry that is expected to grow 7% annually in the coming years, according to Harris Williams & Co. A single "episode", or event that requires a series of phyiscal therapy/rehabilitation visits, costs about $900-1000 dollars.
EWellness' PHZIO platform seeks to streamline and reduce these costs, possibly as low as $300 all-in. PHZIO allows for one-on-one evaluations with a doctor or physical therapist, by phone, computer, or tablet, followed by one-to-one or one-to-many physical therapy sessions, with the patient at home. This reduces the burden for the patient, as they don't have to show up in person to do their physical therapy - it's estimated that 35% of patients drop out before even completing a full course of phyiscal therapy! PHZIO takes the PT to the patient, simple enough as most exercises are resistance-based, for increased convenience, improved outcomes, and lowered costs for all involved.
This virtual care system exemplifies the type of solutions that Amazon-and-company may pursue: insurance reimbursable real-time monitored treatments. EWellness' business model is to license their PHZIO platform to physical therapy clinics and to have large-scale employers use the PHZIO platform as a fully monitored corporate wellness program.
The company began development two years ago, launching the first stage of PHZIO in late 2016 and scaling up their offerings through 2017, signing their first major customer late in 2017. Endeavor Services Plus is a third-party administrator (TPA), an organization that processes insurance claims and other aspects of employee benefit plans for small and medium sized companies. The company signed on in October of 2017, and implementation is underway - these members should begin to throw off revenue soon, and EWLL has said that this deal alone could be worth $4.2 million in recurring annual revenue. Endeavor is projecting to grow rapidly in the small group health insurance market, and eWellness is essentially the company's physical therapy gatekeeper and wellness program supplier. According to eWellness, "this level of sales is anticipated to allow the Company to gain cash flow positive operations during the middle of 2018."
Investors Haven't Caught On, EWLL Could Rally In Coming Weeks
With a $15 million market capitalization, investors haven't caught on to the fact that EWLL could be the next big play in health care as they onboard customers and ramp up memberships in 2018. Public companies are generally valued based on their future revenue and earnings. EWellness has now signed their first account, and if it generates the $4 million-plus in sales that the company has estimated, EWLL could be on the verge of a major rally. The company is onboarding these clients in March, meaning that revenue should emerge in the months after - now's the time to be thinking about EWLL, as it could be worth 2-3X within one year.
Teladoc (TDOC) has ramped substantially in the last year, and the company is estimating $350 million in sales in 2018. The company is already valued by the public markets at $2.25 billion, indicating a Price-to-Sales ratio of about 6.5 based on their 2018 estimates, or 9.7X their 2017 sales. The same ratio applied to $3-4 million in sales for EWLL, as the company has posited could happen, could make EWLL worth $24 to $40 million in market value yet this year, or 50% to 250% higher.
Risks exist, as with any micro-cap stock. The company needs for members to actually begin using the PHZIO platform, and the company could require more capital in order to finance operations before achieving positive cash flow. It could be significantly undervalued, or the company could also be worth nothing without the right execution.
The first sign of revenue for EWLL in the coming 2-3 months, or announcements of new accounts like Endeavour, could be the catalyst to send EWLL soaring. And a look at other telehealth companies, like Teladoc, are enough to suggest the upside could be significant.
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