Teladoc-Livongo merger reflects wider trend toward telehealth

Chloe Kent 11 August 2020 (Last Updated August 11th, 2020 16:07)

Teladoc recently acquired Livongo in the third-largest deal for a US company this year, reflecting the growing importance of telehealth as the Covid-19 pandemic continues.

Teladoc-Livongo merger reflects wider trend toward telehealth
Most elective and non-emergency appointments have largely been carried out via telephone or video link for the past six months. Credit: Shutterstock

At the beginning of this year, telehealth company Teladoc and digital health company Livongo were worth a combined $8.5bn. In one of the biggest industry deals of 2020, Teladoc has now acquired Livongo in a cash and stock deal which values the company at $18.5bn.

According to financial services organisation Piper Sandler, the joint enterprise is now worth around $37bn.

Under the terms of the merger, each share of Livongo will be exchanged for 0.5920x shares of Teladoc Health plus cash consideration of $11.33 for each Livongo share. Upon completion of the merger, existing Teladoc Health shareholders will own approximately 58% of the combined company, while and Livongo shareholders will own around 42%.

Teladoc is one of the leaders in the US telehealth space, providing virtual physician visits for its users, while Livongo provides digital coaching services that help people manage chronic conditions – the merger will combine their portfolios to provide “high quality, personalized, technology-enabled longitudinal care” to customers, the partners said in a statement.

Telehealth in a pandemic-stricken world

Both stocks initially fell after the deal was announced last week, due to concerns about the high price of the deal and the integration risks involved in merging the companies. Teladoc fell 19% to $202.01, and Livongo dropped 11% to $128.06. While they have yet to bounce back, they’ve still chalked up strong gains in the year to date. Teladoc has grown in value by 155% since the start of 2020, while Livongo has grown by 427%.

The deal is expected to close in the fourth quarter of 2020. The combined entity is expected to generate $100m in revenue by the end of 2022, and on a run rate basis, is expected to achieve revenue synergies of $500m by 2025.

It’s the third-largest deal for a US company this year, behind 7-eleven’s purchase of Speedway gas stations and Analog Devices’ acquisition of Maxim Integrated. The size of the deal reflects the growing importance of telehealth in a pandemic-stricken world. The telehealth industry has grown steadily over the years, but Covid-19 has acted as a catalyst to accelerate the sector at an unprecedented scale.

While many doctor’s surgeries are now reopening for in-person appointments across multiple territories, most elective and non-emergency appointments have largely been carried out via telephone or video link for the past six months.

“The silver-lining of Covid’s effect on healthcare is that it’s propelling the industry forward decades,” says Skedulo head of healthcare strategy & partnerships Lisa Giacinti. “The healthcare industry has been resistant to adopting technology and interoperability. But because of stay-at-home orders and the need to manage patients virtually, the industry has had to embrace digital transformation.”

Making remote healthcare accessible to all

However, concerns have been raised about the accessibility of these new technologies. A March 2020 study from tech consulting firm West Monroe found that nearly a quarter of Americans aren’t open to trying telehealth, as they don’t trust that it would deliver the same quality of care as an in-person visit. As such, it’s vital that telehealth providers find time to connect with patients before their appointments and instil confidence in their platforms.

“Education will be key and health care providers should make their telehealth services widely known,” says TetraVX marketing manager Becky Linahon. “By providing user adoption materials, such as benefits of telehealth and technical how-to guides, patient adoption of telehealth services will increase along with the standardization of its use in the healthcare industry.”

The global telehealth rollout has also prompted concerns that older patients across the globe may be left behind. Elderly people are more likely to lack the technical know-how required to consistently access telehealth, particularly those with age-related disabilities that may affect their ability to communicate, such as blindness, deafness or cognitive issues. However, as the pandemic continues, it my become necessary for them to learn, and it’s important to note that not all elders will struggle to stay connected.

“Baby Boomers and older generations are a demographic that have been hesitant to adopt telehealth services,” says Giacinti. “However, even they are adopting these technologies out of necessity in order to maintain their necessary level of care. In fact, large global telehealth provider Vivify shared that the average age of the person that they send tablets and remote patient monitoring devices to is 77. Over 90% of this population can get their technology up and running without the help of tech support.”