- American Well, a telehealth giant and rival to Teladoc, made its stock-market debut on Thursday after pricing its initial public offering at $18 per share.
- By the end of trading, shares closed at $23.07, a 28.17% surge that values Amwell at about $5 billion based on outstanding shares.
- As part of the IPO, Google's cloud division invested $100 million.
- We read the 196-page filing and spoke with Google Cloud's head of healthcare sales to find 5 critical details about the companies' plans.
- For more stories like this, sign up here for Business Insider's daily healthcare newsletter.
Telehealth company American Well on Thursday went public in what's become a huge year for companies that deliver healthcare over the internet.
The stock, originally set for $18 per share, surged to $23.07 by the end of trading on Thursday. That values Amwell at $5.08 billion based on its outstanding shares.
Lockdowns in the wake of the coronavirus pandemic have made Amwell's services newly relevant to people who need mental healthcare, physical therapy, prescriptions, and a whole host of other medical needs from the safety of their homes.
It comes on the heels of rival Teladoc making an $18.5 billion bid for Livongo, a chronic care company, the biggest deal that digital health has ever seen. It's sending ripple effects through a market that insiders are saying is ripe for more huge deals and initial public offerings.
As part of Amwell's IPO, Google made a $100 million investment in Amwell at the IPO price. Through the arrangement, Google's cloud business will host Amwell's technology and partner with the company in all-things-healthcare.
It's not typical for Google Cloud to make investments of this nature, according to the company. But Chris Sakalosky, its head of healthcare sales, said in August that telehealth's rapid growth during the pandemic set off a "light bulb moment" that has Google reimagining its work in the $3.6 trillion healthcare industry.
The two companies have plans to make the disconnected healthcare industry more connected through devices in people's homes, data analytics, and machine learning to lighten doctors' administrative loads, he told Business Insider. They're also going to market each other's services to their respective client bases.
Founded in 2006, the Boston-based Amwell works with 55 health plans, which support 36,000 employers and include more than 80 million people, as well as 150 of the nation's largest health systems.
It's paid primarily through subscription fees and set-up costs when providers and health systems pay to use Amwell's technology to run their own virtual shops. Amwell also conducts separate doctors visits through its giant medical group, wherein patients pay for online visits in primary care, mental health, and other areas.
Amwell's S-1 filing provides a detailed look at its financials, risks, and vision for the future. Here are five takeaways from the filing.
Amwell is riding a coronavirus wave that won't last forever
With the recent surge in telehealth visits around the globe, many are wondering how long it can last after doctors' offices reopen and lockdowns ease.
Amwell conducted a record 912,000 medical visits in April, with daily visits increasing 1,279% since the same time last year, the filing said. But monthly visit volume has already dropped since then, hitting 540,000 in June, though that number was still a 592.3% increase year to date.
When Teladoc reported earnings last month, CEO Jason Gorevic told Business Insider that volume growth stabilized in late May at roughly 40% higher than it was before outbreaks, even in states where coronavirus is relatively under control.
Amwell didn't provide estimates like that in the filing, but said it's expecting a similar trend.
Prior to coronavirus, Amwell's revenue was increasing steadily — from $113.9 million in 2018 to $148.9 million in 2019. Amwell's revenue for the first six months of 2020 was $122.3 million, up from $69 million over the same period in 2019.
Amwell's losses deepened in the first half of 2020 to $113.4 million, compared to $41.6 million in the second half of 2019.
"While the COVID-19 crisis is a unique event, we believe that utilization of the Amwell Platform will remain at higher levels after the crisis versus levels previously forecasted before the crisis," the S-1 said.
Read more: 6 reasons why the telehealth boom is here to stay, according to the CEO of $16 billion Teladoc
Amwell's customers are conducting significantly more visits in 2020
In February of 2020, right before the pandemic hit the US, the majority of Amwell's visits —roughly 57% — were run by Amwell's medical group, a huge network of contracted doctors that can see patients directly over the site or take them from hospitals that are too busy to use their own staff, according to the S-1.
Now, visits run by the medical group have dropped off to roughly 22% in June, and the vast majority of total active providers don't work for Amwell, but rather the health systems or health plans that Amwell contracts with.
It's a significant transition in the company's core business towards partnering with providers to build their own telehealth solutions, rather than essentially taking away appointments and the reimbursement that accompanies them.
It's opening up the doors to a $12.4 billion business among health plans and providers, per Amwell's estimates. Institutional customers also pay subscription fees to use Amwell's tech, creating a steady revenue stream that's less dependent on temporary circumstances like coronavirus.
But large clients are a longer and more complicated play than routine, independent visits, in some ways.
Amwell said that most of its revenue comes from customers, such as hospitals, that purchase access to the telehealth platform. Those contracts are typically three-year deals and require a lot of upfront investment on Amwell's part, the filing said. So the company needs its providers to stay customers for a while in order to win back its initial costs.
More than 20% of Amwell's business comes from Anthem
Amwell derives a lot of its business from a small group of clients, the S-1 said.
Its largest, Anthem, accounted for 22% of its revenue in the first half of 2020. In 2018 and 2019, its 10 biggest customers by revenue accounted for 48% and 44% of Amwell's total, respectively.
That means there's a big risk to Amwell's business if they lose any number of top buyers, particularly Anthem. Google Cloud Sakalowsky told Business Insider it intends to market their services to current cloud customers, and new ones in pitches.
Notably, Amwell's business from health systems accounts for a smaller chunk of its revenue, despite working with 150 health systems that represent 2,000 hospitals.
In the first half of 2020, subscription fees from health systems clients accounted for 19.3% of Amwell's total revenue, down from first half of 2019, when they accounted for 25%.
Regulatory risks remain
Amid the pandemic, regulators did away with a lot of rules that telehealth providers normally had to follow and increased their reimbursement from Medicare and Medicaid.
While people in Washington seem on board with telehealth, these temporary measures still aren't written into law, Amwell said in its S-1.
"Although the COVID-19 pandemic has led to the relaxation of certain regulatory and reimbursement barriers, it is uncertain how long the relaxed policies will remain in effect," the S-1 said.
"And there can be no guarantee that once the COVID-19 pandemic is over that such restrictions will not be reinstated or changed in a way that adversely affects our business," it said.
The silver lining for Amwell in the event that regulations are reinstated is that its HIPAA-compliant and its medical group doesn't perform Medicare consultations, according to the document.
That means a return to the status quo could technically benefit Amwell insofar as less secure telehealth platforms are edged out of the marketplace, sending more customers to Amwell, it said.
Amwell is working with Google to go beyond video visits
Google and Amwell's partnership extends beyond a normal cloud contract.
Amwell is pushing into home care through some of its hardware, like TV Carepoint, that allows patients to access healthcare at home or in their hospital rooms. The company is also investing in remote patient monitoring, advanced analytics, lab services, drug delivery, and various applications of machine learning, the S-1 said.
Part of the idea is that Amwell has to make more technologies if it wants to stay ahead of the curve in telehealth, a market where rapid change and "short product lifecycles" can make services irrelevant almost instantaneously, Amwell said in the document.
That's where Google comes in. Working with patients in their homes opens up doors to increase access to care as well as the types of care that providers can deliver, like managing chronic conditions. Google's tech, like Healthcare API, can connect devices and data together to accomplish things like this.
"To meet patients in their homes, to meet patients when they're remote and to work across that fusion of the digital and the physical, we think that's the area where bringing our technologies together will come to the forefront quite quickly," Google Cloud's Sakalosky said.
This story was published on September 8. It was updated on September 17 with details of Amwell's IPO.
