Virtual visits company Teladoc has filed for an initial public offering, seeking to cash in on investor interest in the burgeoning telehealth field.
Of the telehealth startups, it's the first to test the public markets. The sector had a hot streak last year in venture fundraising. Teladoc received $50 million in venture dollars in September 2014.
“I think it's a solid business with strong leadership and supported by market tailwinds,” said Tom Rodgers, the head of McKesson's venture capital arm. “Smart move to get out now, and I would expect a warm reception from Wall Street.”
“(A) successful IPO would be great for the space,” said Dr. Bijan Salehizadeh, the co-founder of healthcare investment firm NaviMed Capital. If Teladoc proves to be successful, it could fuel greater growth in the cash bonanza for digital health startups.
Teladoc filed a confidential draft registration form with the Securities and Exchange Commission, the company announced late Tuesday.
In a January interview, Teladoc CEO Jason Gorevic said the company's revenue had doubled each of the past two years. As a part of its $50 million funding round, closed in September, the firm had to disclose its revenue. But it was within a wide range—$25,000,001 and $100,000,000 a year. The company did not have to disclose whether it was making or losing money.
Complicating matters for Teladoc and other telehealth companies is the complicated regulatory landscape for their business. Earlier this month, the Texas Medical Board, with the support of the Texas Medical Association, restricted telehealth services by requiring that physicians have an in-person visit with a patient before they can provide healthcare services through telecommunications technologies.
Teladoc, based in Dallas, has a disproportionate number of its patients in Texas. According to statistics the company circulated at the time of the decision, roughly a quarter of its physicians' consults have been with Texas patients during Teladoc's 10-year history.
“They obviously feel they can get it done despite the Texas state board issue,” Salehizadeh said.
Fierce competition in the sector and resistance from health plans is likely to pose a longer-term challenge for Teladoc.
“I expect this market will face pricing pressures,” Rodgers said. Payers will expect more evidence that virtual visits don't simply increase utilization of the healthcare system, he said. "I also expect that telehealth will become an extension of the established health systems and provider networks and perhaps even the pharmacy chains.”