Credit Suisse’s https://www.credit-suisse.com Survey with investors and industry stakeholders was interested in their expectations for various developments in digital health and HCIT trends that are likely to drive digital health growth and innovations in 2021, 4Q20 earnings, and 2021 outlook expectations for HCIT covered names.
Credit Suisse’s takeaways show that they believe the 2021 outlook for digital health and HCIT is likely to drive digital health growth and adoption.
The analyst’s note that the year of the pandemic has blurred the line between traditional healthcare and digital health. The strain that COVID has put on the U.S healthcare system or any other country’s healthcare system, has heightened the need for technology and processes to enhance resource capacity in order to keep the chaos under control as much as possible.
As a result, there has been a huge spike observed in the adoption and usage of various digital health platforms. Digital tools and technologies that once were not used to their full potential are now a staple when used to provide the best possible care for patients.
Credit Suisse’s 2020 outlook note seemed a little optimistic in January 2020, but COVID proved that the analysts were not optimistic enough. In fact, over the past 12 months, digital health solutions in healthcare have evolved from “something just for convenience” to an absolute necessity.
Credit Suisse analysts see 2021 as a year of realignment in digital health, The trends expected to drive digital health growth and innovations include: a) continuing adoption of virtual care, b) acceleration in employer activists, c) increased focus on the mental health crisis, d) continuing the shift to home-based care e) further adoption of artificial intelligence/machine learning tools and applications, f) continuing to focus on fraud, waste, and abuse in the healthcare system, g) reinvention of primary care, h) shifting to value-based care, and i) addressing the importance of cybersecurity.
The survey shows that industry stakeholders are bullish on virtual care/telemedicine, but investors not as much. Analysts surveyed industry stakeholders including C-Level executives, HCIT entrepreneurs, and institutional investor clients on expectations on various developments in digital health and HCIT heading into 2021.
Healthcare Delivery Related Innovations (direct primary care, risk-based physicians, physician engagement etc.) and Data Analytics are two technologies that investors were most excited about while industry stakeholders picked Virtual Care/Telemedicine and Healthcare Delivery Related Innovations. Both investors and industry stakeholders were least excited about Application for Augmented Reality/Virtual Reality Technologies.
For 2021, around 74% of Credit Suisse investor respondents (vs 41% a year ago) are bullish on the HCIT space. The OSH, CHNG and EHTH survey (done before the deal announcement) showed that they were the most preferred HCIT names heading into 2021. The survey also showed that TDOC and AMWL were the least preferred names heading into 2021.
When survey respondents were asked about private Healthcare IT & Digital Health companies, investor respondents selected OMADA Health, followed by VillageMD and Iora Health. Industry stakeholders picked VillageMD as the number one choice, followed by CityBlock Health, and Doctor on Demand. Finally, Amazon was selected by both investors and industry stakeholders as their top pick when asked what non-traditional company is most likely to make significant progress in healthcare in 2021.
In Credit Suisse’s note U.S. Equity Research– Views Around the Room-2021 Outlook, published in December, CHNG, TDOC, and SLQT were highlighted as top picks. With the announcement on CHNG being acquired by UNH/Optum and with CHNG shares rising 30% on the announcement, Credit Suisse analysts now pick TDOC and SLQT.
Credit Suisse’s investment sentiment remains mixed and expectations are low for TDOC. However, analysts are optimistic about the TDOC-LVGO transaction and the combined company growing at ~35% CAGR over the next three years.
At that rate of growth, TDOC shares are trading at a compelling valuations (~12x our 2022 revenue estimates). Analysts reiterate the favorable view that while recognizing that volatility could continue in 1H21 for e-brokers and given the compelling industry growth drivers, SLQT is now the preferred name of the three e-brokers.
For more information on Credit Suisse’s note Healthcare Technology: 2021 Outlook: Digital Health Now a Necessity, Not a Convenience: 2021 to be Realignment Year, have questions on the survey, or to provide feedback, email Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.