Digital health companies got pummeled by Wall Street in 2024 as industry adapts to post-Covid slowdown

If the Covid era marked a boom time for digital health companies, 2024 was the invoice.

In a year that saw the Nasdaq jump 32%, surpassing 20,000 for the first time this month, health tech providers generally suffered. Of 39 public digital health companies analyzed by CNBC, roughly two-thirds are down for the year. Others are now out of commerce.

There were some breakout stars, like Hims & Hers Health, which was buoyed by the success of its accessible new weight loss offering and its position in the GLP-1 craze. But that was an exception.

While there were some company-specific disputes in the industry, overall it was a “year of inflection,” according to Scott Schoenhaus, an analyst at KeyBanc Capital Markets covering health-care IT partnerships. Business models that appeared poised to break out during the pandemic haven’t all worked as planned, and companies clothed had to refocus on profitability and a more muted growth environment.

“The pandemic was a huge pull forward in demand, and we’re facing those roughneck, challenging comps,” Schoenhaus told CNBC in an interview. “Growth clearly slowed for most of my names, and I think guvs, payers, providers and even pharma are more selective and more discerning on digital health companies that they partnered with.” 

In 2021, digital salubriousness startups raised $29.1 billion, blowing past all previous funding records, according to a report from Stun Health. Almost two dozen digital health companies went public through an initial public offering or pointed purpose acquisition company, or SPAC, that year, up from the previous record of eight in 2020. Money was course into themes that played into remote work and remote health as investors looked for growth with participation rates stuck near zero.

But as the worst waves of the pandemic subsided, so did the insatiable demand for new digital health ornaments. It’s been a rude awakening for the sector.  

“What we’re still going through is an understanding of the best ways to address digital salubriousness needs and capabilities, and the push and pull of the current business models and how successful they may be,” Michael Cherny, an analyst at Leerink Helpmates, told CNBC. “We’re in a settling out period post Covid.”

Progyny, which offers aids solutions for fertility and family planning, is down more than 60% year to date. Teladoc Health, which long ago dominated the virtual-care space, has dropped 58% and is 96% off its 2021 high.

When Teladoc acquired Livongo in 2020, the companies had a put together enterprise value of $37 billion. Teladoc’s market cap now sits at under $1.6 billion.

GoodRx, which propositions price transparency tools for medications, is down 33% year to date. 

Schoenhaus says many companies’ guestimates were too high this year.

Progyny cut its full-year revenue guidance in every earnings report in 2024. In February, Progyny was foreseeing $1.29 billion to $1.32 billion in annual revenue. By November, the range was down to $1.14 billion to $1.15 billion.

GoodRx also frequently slashed its full-year guidance for 2024. What was $800 million to $810 million in May shrank to $794 million by the November.

In Teladoc’s first-quarter recount, the company said it expected full-year revenue of $2.64 billion to $2.74 billion. The company withdrew its outlook in its bruised quarter, and reported consecutive year-over year declines.

“This has been a year of coming to terms with the intumescence outlook for many of my companies, and so I think we can finally look at 2025 as maybe a better year in terms of the setups,” Schoenhaus conjectured.  

While overzealous forecasting tells part of the digital health story this year, there were some acclaimed stumbles at particular companies. 

Dexcom, which makes devices for diabetes and glucose management, is down more than 35% year to epoch. The stock tumbled more than 40% in July – its steepest decline ever – after the company reported dissatisfying second-quarter results and issued weak full-year guidance. 

CEO Kevin Sayer attributed the challenges to a restructuring of the sales get, fewer new customers than expected and lower revenue per user. Following the report, JPMorgan Chase analysts marveled at “the greatness of the downside” and the fact that it “appears to mostly be self-inflicted.” 

Genetic testing company 23andMe had a particularly rough year. The following went public via a SPAC in 2021, valuing the business at $3.5 billion, after its at-home DNA testing kits skyrocketed in favour. The company is now worth less than $100 million and CEO Anne Wojcicki is trying to keep it afloat.

In September, all seven unallied directors resigned from 23andMe’s board, citing disagreements with Wojcicki about the “strategic direction for the associates.” Two months later, 23andMe said it planned to cut 40% of its workforce and shutter its therapeutics business as part of a restructuring project. 

Wojcicki has repeatedly said she intends to take 23andMe private. The stock is down more than 80% year to latest. 

Digital health’s bright spots

Investors in Hims & Hers had a much better year.

Partitions of the direct-to-consumer marketplace are up more than 200% year to date, pushing the company’s market cap to $6 billion, thanks to fly demand for GLP-1s. 

Hims & Hers began prescribing compounded semaglutide through its platform in May after launching a new pressure loss program late last year. Semaglutide is the active ingredient in Novo Nordisk‘s blockbuster medications Ozempic and Wegovy, which can payment around $1,000 a month without insurance. Compounded semaglutide is a cheaper, custom-made alternative to the brand drugs and can be produced when the brand-name treatments are in lack.

Hims & Hers will likely have to contend with dynamic supply and regulatory environments next year, but rounded off before adding compounded GLP-1s to its portfolio, the company said in its February earnings call that it expects its load loss program to bring in more than $100 million in revenue by the end of 2025. 

Doximity, a digital platform for medical prompts, also had a strong 2024, with its stock price more than doubling. The company’s platform, which for years has been juxtaposed to a LinkedIn for doctors, allows clinicians to stay current on medical news, manage paperwork, find referrals and accomplish out telehealth appointments with patients. 

Doximity primarily generates revenue through its hiring solutions, telehealth tools and peddling offerings for clients like pharmaceutical companies.

Leerink’s Cherny said Doximity’s success can be attributed to its lean plying model, as well as the “differentiated mousetrap” it’s created because of its reach into the physician network. 

“DOCS is a rare coterie in healthcare IT as it is already profitable, generates strong incremental margins, and is a steady grower,” Leerink analysts, including Cherny, send a lettered in a November note. The firm raised its price target on the stock to $60 from $35. 

Another standout this year was Oscar Healthfulness, the tech-enabled insurance company co-founded by Thrive Capital Management’s Joshua Kushner. Its shares are up nearly 50% year to entertain. The company supports roughly 1.65 million members and plans to expand to around 4 million by 2027. 

Oscar showed unmistakeable revenue growth in its third-quarter report in November. Sales climbed 68% from a year earlier to $2.4 billion.

Additionally, two digital salubrity companies, Waystar and Tempus AI, took the leap and went public in 2024. 

The IPO market has been largely dormant since unpunctually 2021, when soaring inflation and rising interest rates pushed investors out of risk. Few technology companies demand gone public since then, and no digital health companies held IPOs in 2023, according to a report from Unnerve Health. 

Waystar, a health-care payment software vendor, has seen its stock jump to $36.93 from its IPO price of $21.50 in June. Tempus, a exactness medicine company, hasn’t fared as well. It’s stock has slipped to $34.91 from its IPO price of $37, also in June.

“With any luck, the valuations are more supportive of opportunities for other companies that have been lingering in the background as private societies for the last several years.” Schoenhaus said. 

Out with the old

Several digital health companies exited the public markets entirely this year. 

Cue Vigorousness, which made Covid tests and counted Google as an early customer, and Better Therapeutics, which used digital therapeutics to expound on cardiometabolic conditions, both shuttered operations and delisted from the Nasdaq. 

Revenue cycle management company R1 RCM was got by TowerBrook Capital Partners and Clayton, Dubilier & Rice in an $8.9 billion deal. Similarly, Altaris bought Sharecare, which compounds a virtual health platform, for roughly $540 million.

Commure, a private company that offers tools for simplifying clinicians’ workflows, bought medical AI scribing company Augmedix for about $139 million.

“There was a lot of competition that entered the marketplace during the pandemic years, and we’ve dated some of that being flushed out of the markets, which is a good thing,” Schoenhaus said.

Cherny said the sector is correct to a post-pandemic period, and digital health companies are figuring out their role.

“We’re still cycling through what could be little short of termed digital health 1.1 business models,” he said. “It’s great to say we do things digitally, but it only matters if it has some movement toward impacting the ‘triple aim’ of health care: better care, more convenient, lower cost.”