Digital Health Stocks Plummet as Investors Reckon with Reality
The COVID-19 era marked a boom time for digital health companies, but 2024 was the reckoning. Despite the Nasdaq jumping 32% this year, surpassing 20,000 for the first time, health tech providers largely suffered. Of 39 public digital health companies analyzed by CNBC, roughly two-thirds are down for the year. Others are now out of business.
The sector’s struggles can be attributed to business models that appeared poised to break out during the pandemic not working as planned. Companies have had to refocus on profitability and a more muted growth environment. The pandemic was a huge pull forward in demand, and companies are now facing tough, challenging comps.
Scott Schoenhaus, an analyst at KeyBanc Capital Markets covering health-care IT companies, said, “Growth clearly slowed for most of my names, and I think employers, payers, providers, and even pharma are more selective and more discerning on digital health companies that they partnered with.”
Progyny, which offers benefits solutions for fertility and family planning, is down more than 60% year to date. Teladoc Health, which once dominated the virtual-care space, has dropped 58% and is 96% off its 2021 high. GoodRx, which offers price transparency tools for medications, is down 33% year to date.
Some digital health companies have had a better year, such as Hims & Hers Health, which is up more than 200% year to date. The company’s success can be attributed to its lean operating model and its “differentiated mousetrap” in the physician network.
Other standout companies include Doximity, a digital platform for medical professionals, and Oscar Health, the tech-enabled insurance company. Waystar and Tempus AI also went public in 2024, with Waystar’s stock jumping to $36.93 from its IPO price of $21.50.
However, several digital health companies exited the public markets entirely this year. Cue Health and Better Therapeutics both shuttered operations and delisted from the Nasdaq. Revenue cycle management company R1 RCM was acquired by TowerBrook Capital Partners and Clayton, Dubilier & Rice in an $8.9 billion deal.
The sector is adjusting to a post-pandemic period, and digital health companies are figuring out their role. Michael Cherny, an analyst at Leerink Partners, said, “We’re still cycling through what could be almost termed digital health 1.1 business models. It’s great to say we do things digitally, but it only matters if it has some approach toward impacting the ‘triple aim’ of health care: better care, more convenient, lower cost.”
