Credit Suisse https://www.credit-suisse.com in their note 2022 Outlook: Sentiment & Valuations Have Been Reset, Underlying Themes Driving Digitization in HC Remain Intact, discusses the trends they believe are likely to drive digital health growth and innovation in 2022.
Also for 4Q21/2022 outlook expectations for HCIT covered names, and key takeaways from their surveys of investors and industry stakeholders on expectations around developments in digital health and HCIT in 2022.
Digital Health Investments and Interest is likely to remain hot, but also scrutiny around Unit Economics and TAM Rationale to continue. 2021 was a tough year for most of the publicly traded Digital Health/HCIT companies as the promise of clinical and financial benefits to the healthcare ecosystem from these disruptors was more than offset by shifting investor focus (from just top line growth to revenue growth coupled with a realistic path to profitability, favorable unit economics, and attractive LT margin profiles), increasing competition (including increased interest and investment from traditional insurers, Tech giants, etc.) and the lack of visibility into a normalized environment.
However, this did not stop the digital health space from continuing a massive transformation that started almost two years ago. In addition to rollouts of new products/services, the digital health consolidation wave also continued and analysts see these trends continuing for the foreseeable future as companies look to position themselves for the post pandemic era of healthcare and the acceleration of awareness that COVID has spurred on for the consumerization of healthcare.
Digitization in healthcare is a long term process and a social challenge and a process of transformation that will continue. Companies that are able to prove ROI, through better health outcomes and financial savings and prove that their solutions are callable, are likely to be LT winners.
Significant opportunities still exist for making the U.S healthcare system more efficient and improving patient experiences and outcomes, which investors recognize. While valuations in the public market have moderated from the peak, excitement and interest still remain high. The analysts do not see any slowdown in digital health funding activity as well in 2022.
As part of Credit Suisse’s 2022 outlook and review of their coverage, analysts are adjusting TPs for several companies in their coverage. The analysts are also upgrading their rating on MCK to Outperform from Neutral (see the Healthcare Distributors 2022 Outlook 2022 outlook note) and TVTY to Neutral from Underperform. The analysts are downgrading their rating on TLMD to Neutral from Outperform, EHTH to Neutral from Outperform and GOCO to Underperform from Neutral from the e-Brokers outlook: Unlikely to Get Out of the Woods Anytime Soon Volatility to Continue). The rating changes are based on the analysts’ views relative to the broader coverage.
Overall, the analysts are most bullish on Tech-enabled PCP companies. all three companies OP-rated and Drug Distributors (two of the three companies OP rated). The analysts updated TPs are ACCD $43 vs $62 prev, AMWL $8 vs $121 prev, CANO $15 vs $18 prev, DH $30 vs $50 prev, EHTH $31 vs $45 prev, GDRX $41 vs $52 prev, GOCO $3 vs $6 prev, HIMS $10 vs $13 prev, ONEM $29 vs $32 prev, SLOT $14 vs $18 prev, TDOC $151 vs $207 prev, TLMD $2 vs $6 prev, and TVTY $29 vs $25 prev.
For 2022, recognizing some of the key HCIT Themes heading into 2022 are interrelated, and analysts expect that the trends are expected to drive digital health growth and innovations. These trends include:
(1) Digital Health Investments & Interest is Likely to Remain Hot, but Scrutiny Around Unit Economics & TAM Rationale to Continue
2) Employers & Payers to Focus More on Whole Person Care
3) Mental Health continues to be a Key focus For All Stakeholders,
4) AI/ML Adoption to Continue & Likely to Accelerate in Midst of Healthcare Workforce Shortages,
5) Telemedicine Will Remain a fixture Across the Board, but Reimbursement Clarity is Required for Further Acceleration,
6) Evolution of Value-based Care to Continue to Drive PCP Enablement,
7) Continuing Shift to Home-based Care,
8) Continuing Focus to Address Fraud, Waste, and Abuse in the U.S. Health Care System,
9) Cybersecurity is as Important As Ever Given the Reliance on Technology & Data,
10) Continuing Focus on Drug Price Transparency & Affordability Tools.
Preferred Names for 2202 Across Credit Suisse’s Technology and Distribution Coverage:
- Easy Names to own Crisis in Shares but not at the Company: ACCD, PRVA & CANO
- Show Me Stories—High Risk/ High Reward: TDOC and ONEM
- Slip at Night Names: MCK
- Potential M&A/Special Site Candidates: EHTH, GOCO, ONEM, CAH, TLM
For more details on the Credit Suisse’s Note: 2022 Outlook: Sentiment & Valuations Have Been Reset, Underlying Themes Driving Digitization in HC Remains Intact. For more information, ask questions, provide feedback, news, email Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.