The virtual healthcare market has exploded into a quarter-trillion-dollar opportunity and these 5 Digital Health Companies are leading the pack.
COVID-19 may have severely restricted patients’ ability to see their doctors in 2020, but it has also created a massive opportunity for investors to gain exposure to the future of medicine: virtual healthcare.
In fact, thanks to the widespread and unprecedented adoption of virtual healthcare delivery systems during the pandemic, digital health stocks have surged higher and made early investors rich along the way.
But with mass vaccinations around the corner and the end of COVID-19 in sight, does this mean that the mad rush into the virtual health care market is about to end in 2021?
According to management consulting firm McKinsey & Co., total annual revenues of US telehealth players were a measly $3 billion prior to the coronavirus outbreak.
However, they estimate that there’s a staggering $250 billion of current US healthcare spending that could potentially be virtualized… AFTER the pandemic ends.
Indeed, by shifting this care to virtual in a post-COVID-19 world, McKinsey estimates that:
- 20% of all emergency room visits could be diverted to virtual urgent care.
- 24% of health care office visits and outpatient volume could be delivered virtually and an additional 9% delivered “near-virtually.”
- 35% of regular home health attendant services could be virtualized.
- 2% of all outpatient volume could be shifted to the home setting, with tech-enabled medical administration.
Keep in mind, there was a combined total of 883.7 million in-person physician office visits in the U.S. in 2016. As modernization accelerates and as consumer and provider adoption of telehealth grows, there’s no doubt that virtual delivery systems will disrupt the healthcare continuum on an immense scale.
For investors, this means that there is still a long runway for digital health stocks — making this the perfect time to begin gaining exposure to the future of medicine.
To position yourself for the $250 billion virtual healthcare revolution, here are 5 of the best digital health stocks you should put on your watchlist today:
- Nuance Communications Inc. (NYSE:NUAN)
- M3 Inc. (OTC:MTHRY)
- Invitae Corp. (NYSE:NVTA)
- NeoGenomics, Inc. (NASDAQ:NEO)
- Agilent Technologies (NYSE:A)
Nuance Communications Inc. (NYSE:NUAN)
Founded in 1992 and headquartered in Burlington, Massachusetts, Nuance Communications is a technology pioneer and a market leader in the emerging technologies of conversational and cognitive artificial intelligence and ambient intelligence.
It is a groundbreaking digital health stock that delivers solutions that understand, analyze, and respond to people amplifying human intelligence to increase productivity and security and they’re a full-service partner with 90% of US hospitals and 85% of the Fortune 100 companies worldwide.
Nuance’s business is divided into 3 main segments: healthcare, enterprise, and other.
The healthcare segment is primarily engaged in providing clinical speech and clinical language understanding solutions that improve the clinical documentation process, from capturing the complete patient record to improving clinical documentation and quality measures for reimbursement.
The enterprise segment primarily engages in using speech, natural language understanding, and artificial intelligence to provide automated customer solutions and services for voice, mobile, Web, and messaging channels.
Finally, their other segment provides voicemail transcription services.
According to their recent earnings report, Nuance reported revenue of $352.9 million, compared to $387.6 million in the same period last year. The company also reported a GAAP net loss of $22.8 million, compared to a net income of $3.0 million in the same period last year.
M3 Inc. (OTC:MTHRY)
Headquartered in Tokyo, Japan and founded in 2000, M3 Inc. operates a members-only website (m3.com) that provides online medical-related services primarily to over 290,000 physicians and other healthcare professionals.
It also operates MDLinx for physicians in the U.S., which allows users to review medical articles and theses. In South Korea, the company also operates MEDI:GATE, which is a source for medical news and content, and features online discussion boards where doctors can exchange opinions and communicate with one another.
M3 also supports marketing of pharmaceutical companies and medical equipment manufacturers. The company’s business segments include: Medical Portal segment, Evidence Solution segment, Overseas segment, Clinical Platform segment, Sales Platform segment, and Others. M3 generates the majority of its revenue from its Medical Portal segment.
This digital health company has essentially shrugged off the effects of COVID-19 and is growing at an accelerated pace. According to their recent Q2 financial results, sales grew 22% YOY, operating profit grew 45% YOY, and net profit grew 47% YOY to roughly US $158.7 million.
Invitae Corp. (NYSE:NVTA)
Founded in 2010 and headquartered in San Francisco, California, Invitae Corp is a medical genetics company that processes DNA-containing samples, analyzes information related to patient-specific genetic variation, and generates test reports for clinicians and their patients in the United States, Canada, and internationally.
The company’s tests include multiple genes associated with hereditary cancer, neurological disorders, cardiovascular disorders, pediatric disorders, metabolic disorders, and other hereditary conditions.
However, what sets Invitae apart from other genetic testing services is its platform. People who get tested open accounts where they can:
- Initiate an order for a genetic test online. This is available for individuals in the US to access proactive testing, carrier screening, and diagnostic testing
- Track the status of their order in real time
- View and download results once they are ready and have been reviewed by their healthcare provider
- Get connected with a healthcare provider through our Genetics Provider Network (GPN)
This digital-first approach to genetic testing combined with their comprehensive and easy-to-use platform is delivering strong growth for the company.
According to Invitae’s Q3 financials, the number of samples processed have soared to ~170,000 in Q3 2020. In 2015, the company averaged less than 10,000 per quarter.
Meanwhile, revenues have skyrocketed from just $8.4 million in 2015 to $245.5 million over the trailing twelve months (TTM). Despite the disruption of COVID-19, this digital health stock is poised for major growth ahead.
NeoGenomics, Inc. (NASDAQ:NEO)
Headquartered in Fort Myers, Florida, NeoGenomics was founded in 2001 as a cancer genetics testing and information services company. It provides one of the most comprehensive oncology-focused testing menus in the world for oncologists, pathologists, and hospitals to help them diagnose and treat cancer.
NeoGenomics operates 11 CAP accredited and CLIA certified laboratories in Fort Myers and Tampa, Florida; Aliso Viejo, Carlsbad and San Diego, California; Houston, Texas; Atlanta, Georgia; Nashville, Tennessee; and CAP accredited laboratories in Rolle, Switzerland, and Singapore. These labs employ over 120 MDs and PhDs, have served over 2,600 hospitals and cancer centers, complete ~100,000 tests per year, and serve ~500,000 patients each year.
The company’s Pharma Services Division serves pharmaceutical clients in clinical trials and drug development. It provides comprehensive support from pre-clinical & research discovery through FDA filing, approval & launch preparation, with labs in the U.S., Europe, and Asia.
Between 2010 to 2019, annual clinical testing revenue soared from just $32 million to a whopping $361 million for a CAGR of 31%. Clinical tests performed also rose at a CAGR of 37% during the same time frame. Meanwhile, costs per test are down by 41% and are down to $188 per test.
The Pharma services business is growing rapidly as well. As of Q3 2020, the company has a revenue backlog of $185.4 million which represents 57% YOY growth.
For investors looking for a digital health stock with great upside, NEO is a pure-play oncology testing company with a track record of profitable growth.
Agilent Technologies, Inc. (NYSE:A)
Originally spun out of Hewlett-Packard in 1999, and headquartered in Santa Clara, California, Agilent has evolved into a leading life sciences and diagnostics firm and is one of the top digital health stocks to buy for 2021.
The company has 3 operating segments: Life Sciences & Applied Markets Group (LSAG), Agilent Cross Lab Group (ACG), and the Diagnostics and Genomics Group (DGG). Just over half of its sales are generated from the biopharmaceutical, chemical, and energy end markets, but it also supports clinical lab, environmental, forensics, food, academic, and government-related organizations.
For 2020, the company reported core revenue growth of 0.9%, with mid-single-digit growth in their services and consumables businesses. Agilent also had operating margins of 23.5%, up 20 bps from 2019. The company also reported operating cash flow of $921M, invested $119M in capital expenditures, paid $222M in dividends, and repurchased 5.2M shares for $469M. Their EPS for 2020 was $3.28, up 5.5% YOY.
-Investing Insider Magazine