Not all digital health companies are fearful of the uncertain regulatory environment in Washington, D.C.
While many telehealth advocates are expressing unease about potential Medicaid cuts and the March 31 deadline for Medicare coverage flexibilities, some publicly traded companies were optimistic about the regulatory landscape in their fourth-quarter earnings calls. Companies such as Talkspace and Amwell were excited about opportunities involving government-based contracts with Medicare and military payers.
Related: Uncertainty in Washington rattles telehealth sector
“The early indications and what we’re trying to convey is that we’ve seen very positive interest from military and Medicare members,” said Talkspace Chief Financial Officer Ian Harris during the company's fourth-quarter earnings call.
Here are four takeaways from digital health’s fourth-quarter earnings season:
Digital health companies embrace changes in D.C.
Changes in Washington, D.C., including the layoffs at the Health and Human Services Department, were mostly met with a shrug by publicly traded digital health companies. Among its mounting staffing reductions within the federal government, the Trump administration has fired workers reviewing artificial intelligence at the Food and Drug Administration within HHS.
Tempus AI, a precision medicine company, sees the changes at the FDA and broader government as a tailwind, said CEO Eric Lefkofsky during Tempus’ fourth-quarter earnings call.
“As somebody focused on AI, these kinds of changes are generally trying to figure out how to get more efficiency and more technology,” Lefkofsky said. “We think we benefit from that kind of thinking. There could be some minor slowdowns related to staffing, as people are let go at the FDA, but we don't expect them to be material.”
Telehealth company Amwell, which has a large contract with the Defense Department for the Military Health System, expects to pursue new opportunities within its government payer segment, said CEO Ido Schoenberg during the company’s earnings call.
In its annual report, Amwell also noted that it’s not concerned about the Medicare coverage flexibilities potentially expiring because it wouldn’t have a material impact on its commercial business. In fact, the company said the changes may force “many marginal digital care platforms out of the marketplace, thereby lessening our competition.”
Virtual mental health company Talkspace said it was focused on growing its Medicare and Medicare Advantage membership in 2025.
GLP-1 decision by FDA looms large for Hims & Hers
The future of glucagon-like peptide-1 agonist weight loss medications hung over Hims & Hers’ earnings call. The company faces headwinds in its weight management segment with the FDA declaring an end to the shortage of semaglutide injection products last Friday, which means companies like Hims & Hers have to largely stop offering compounded versions of the drugs.
Hims & Hers co-founder and CEO Andrew Dudum said during an earnings call Monday that the company will pivot and focus on different offerings such as oral-based weight loss medications and liraglutide, another GLP-1 injection drug.
But investors are not buying what Hims & Hers is selling. As of Thursday afternoon, the company's stock had dropped 22% over the past five days.
Hims & Hers wasn’t the only company to comment on GLP-1s. Teladoc Health, which sells a weight management program that includes GLP-1 prescriptions to employers, sees the weight loss drugs as a source of growth. But its employer customers are still trying to figure out strategies around utilization management to control costs, said Teladoc CEO Chuck Divita.
AI meets clinical care
Artificial intelligence tools continue to be a focal point among publicly traded digital health companies looking to improve user experiences and boost efficiency. While early use cases have been largely focused on administrative tasks, many companies are beginning to experiment with more clinical uses.
Talkspace shared more details about its Talkcast feature, which uses AI to generate a three- to five-minute podcast for adult users. The aim of the tool is to reinforce key takeaways and themes from a user’s therapy session, said Talkspace CEO Dr. Jon Cohen.
Tempus AI, which raised an additional $300 million in incremental debt financing earlier this month, said its partnerships with health systems allowed it to offer more patient insights through its AI tools. The company is using AI to help patients find appropriate clinical trials or understand if they’re on the right therapeutic pathway, Lefkofsky said.
Banking on M&A
As companies face potential profit and revenue shortfalls, they’re looking to their most recent additions to bolster the bottom line. Health Catalyst CEO Dan Burton said during an earnings call the company is banking on revenue and profit growth made possible through its recently closed acquisition of patient engagement company Upfront Healthcare and three other acquisitions the company has made over the past year.
“Each one was an industry leader in its space, and that was one of the reasons we were excited about each acquisition,” Burton said. “Our primary and significant focus is on getting a great return on those investments. And we're seeing some early signs that are encouraging to us.”
Similarly, Teladoc was highlighting its acquisition of home diagnostic company Catapult Health for $65 million to bolster its employer and health insurer businesses. The company expects the acquisition to drive margin improvements as they cross-sell existing customers of Teladoc and Catapult.
