Virtually everyone has heard the tale of Zoom Video Communications Inc. (NASDAQ: ZM) – the came-out-of-nowhere winner of the coronavirus pandemic.
With its work-from-anywhere software and hundreds of millions of meeting participants, Zoom has changed the way we look at our jobs.
And that promises to change the American workplace and the U.S. economy.
There’s another innovator out there – a tech firm that promises to have a bigger and longer-lasting impact on a different sector – the $1.7 trillion U.S. healthcare market.
This company – which I’m referring to as the “Zoom of Healthcare” – could be one of the biggest winners of the COVID-19 pandemic.
But many investors have never even heard of it.
This tech firm – and the pandemic-supercharged telemedicine wave that it’s riding – are part of an enormously profitable trend that will only get more necessary in a post-COVID world. I grabbed my colleague and good friend Michael Robinson, editor of the Radical Technology Profits advisory and one of the sharpest tech experts you’ll ever meet, to talk about how big this is for investors. We covered:
- The massive telemedicine wave and the huge opportunity it offers investors.
- A “hidden in plain sight” tech play – whose revenue could get a “telemedicine boost” of 35% to 63% a year.
- And the lowdown on our “Zoom of Healthcare” stock play.
These are opportunities you can start to get into today. So let’s get started.
William Patalon, III: Michael, let me share a personal tale with you that I think a lot of readers now can relate to…
A couple weeks back, I had a doctor’s appointment – one that had been scheduled for some time – and a few days beforehand, I got a text from the doctor’s office that they were converting it to a teleconference call.
This was a first for me. And it came a week or so after I’d first used Zoom software to dial into an idea conference here at Money Map – joining the 300 million other folks who’ve embraced the work-from-anywhere technology.
But it’s the telemedicine trend that has me so intrigued – thanks to a series of personal experiences that brought into focus the new industry that’s being created and the massive upside it’s creating for investors.
Not long after my “remote doctor’s appointment,” my Mom, who’s in her 80s, had a similar experience. She had a follow-up appointment with a specialist, and they told her they’d do it remotely. They sent her a link ahead of time and – with a little help from my sister Kathy Ann – the appointment went off without a hitch.
Michael Robinson: Those are great stories, Bill – great examples. They’re exciting because they offer a glimpse of what was possible. I know everyone’s excited about the work-remotely and doctor-remotely stories we’re seeing and that are grabbing business headlines during this pandemic. It’s exciting, because it’s like we just rolled up the garage door on an entirely new era.
I know you’re a car guy – so just had to use a motorhead analogy.[Bill and Michael both laugh.]
WPIII: I think folks will be truly fascinated to understand what you mean by “new era.”
MR: We’re talking about telemedicine. Or remote medicine. Or digital diagnostics. Or connected health. Call it whatever you wish.
No matter which term you choose, you’re referring to the paradigm shift in global medicine that doesn’t come close to covering all the cool new things that will be possible.
WPIII: Let’s start by giving folks a general view of what telemedicine actually is.
MR: It goes by telehealth, telemedicine, and other terms – “Connected Health” is a personal favorite – but it’s all the same thing.
You’re talking about using telecommunications/ datamining/ videoconferencing/ monitoring/ data storage and more to help patients – no matter where they are geographically in relation to their doctors.
The concept has been around for probably 40 years, but it’s all the recent innovation that’s really allowing it to achieve a “critical mass” from a business standpoint.
And I love the possibilities, including:
- You can “visit” your primary-care doc or specialist from remote locations. And all three of you can get together on a single consultation – cutting down on the need to do additional in-person appointments. They can even diagnose your problem remotely.
- Your doctor can monitor you from afar – and in real time – to make sure you’re OK. This can happen while you’re up and around – going through your normal daily activities at home or at work. It can happen while you’re home – recovering from an illness. The “data” can include normal metrics like temperature, blood pressure, heart rates, and more – even glucose levels. It can include diagnostic images or video. And that data can be sent along to a specialist or a treatment facility.
- Consumers can benefit in other ways, too. They can wear special monitoring devices – to track a problem or to head off new health issues. They can also access special insights – for instance, from peer-to-peer support groups.
WPIII: It seems like we’re getting to the point in a discussion where numbers are warranted: How big, how fast, how soon? And when you talk about telehealth/ telemedicine, you’re not just referring to a single, amorphous market, correct? You really need to look at some of the “subsets” to mentally picture the markets and opportunities.
You need to look at some numbers.
MR: That’s right. We’re still in the early innings of “connected health.” As for numbers – let’s start with this one: The U.S. healthcare system is worth an estimated $1.7 trillion.
That’s trillion – with a “T.”
The healthcare system is a frustrating, hated, inefficient monolith that’s primed for disruption.
And that disruption is already under way.
Two-thirds of hospitals boosted their technology budgets in 2017 according to Hospital and Health News. More than a quarter of hospitals – 27% – saw increases in their tech budgets of more than 5%.
WPIII: So we’re talking about investment outlays – spending – that’s advancing at double the pace of “normalized” U.S. economic growth.
MR: And the reality, Bill, is that we’re still in the very-early innings of this investment surge.
By 2024 – so just four years from now – we’ll be spending $624 billion a year on “connected health,” Grandview Research says.
This is happening at a time when consumers – the “customers” in this equation – are open to new ideas.
WPIII: Clearly, as we’ve seen with Zoom, the COVID-19 pandemic is making consumers even more amenable to new ways of doing things. My own mother – a not-overly-tech-savvy person – being a case in point.
MR: That’s so very true.
According to the U.S. Centers for Disease Control (CDC), the United States spends $200 billion each year on the cost of healthcare services, medications, and lost productivity.
And as employers and insurers push more and more of those costs onto regular folks, you have to believe most consumers are open to a “better way” of doing things. A recent survey found that 65% of people that have a primary care physician were somewhat or very interested in shifting to video appointments.
WPIII: At this point – to give folks a tangible grasp on some of the very real opportunities we see – let’s identify some of the specific health subsets that telemedicine can target, disrupt, and ultimately help.
MR: Agreed. And as we delve into this, you’ll see that these aren’t totally disparate sectors – there’s lots of overlap, which is actually a good thing. That overlap allows for efficiency and the leveraging of technologies.
One slice of the market – in fact, one that your mom interacted with – is the market for “expert medical opinions.”
WPIII: In other words – specialists.
MR: Exactly. The market for expert medical opinions is $28 billion here in the United States alone.
This is a big early beneficiary of connected health/ telemedicine.
I mean, it’s freezing outside. Or raining. Or blistering hot during the summer.
And you’re chatting with your doctors from the comfort of your family-room armchair. You didn’t have to drive there, fight traffic, fight the weather, park, and then sit in a crowded waiting room – a waiting room that, right now, is full of sick people. That’s an alluring proposition – to say the least.
The easy sharing of your health data (albeit digitally protected or even encrypted) makes that easy, too. You, your family doc, and the “expert” can be on the video call all at the same time – even if that specialist is on another continent, thousands of miles away.
The digital “connection” makes all of this doable.
WPIII: What about remote monitoring?
MR: Yeah, that’s a good one. Huge upside. So-called remote-health monitoring (RMH) is a big opportunity – and is one where there’s the aforementioned “crossover.”
This is where a patient wears sensor-laden devices that make it possible to track the heart, circulation, and other important health functions.
Adoption of RHM surged by more than 40% in 2016 and again in 2017, and its use should expand by 47.9% per year through 2021, according to Berg Insights.
WPIII: There are important subsets here – like diabetes.
MR: Yes, let’s start there. Diabetes, a malady that costs the U.S. economy more than $245 billion every year, according to the American Diabetes Association (ADA). That figure includes lost productivity and medical costs that are about 2.3 times higher than those of other Americans.
The CDC says about 29.1 million people suffer from diabetes, a potentially fatal disease with a laundry list of complications – even when it doesn’t kill you. Another 8.1 million of us may have diabetes and not even know it.
Make no mistake. This is a costly disease often caused by poor diets and lack of exercise.
That makes it a prime candidate for remote monitoring/ diagnostics – the fast-emerging hallmark of telemedicine.
WPIII: The same is true of heart disease.
MR: Oh, absolutely. Here there’s an opportunity to really help people.
Heart disease remains one of the leading causes of death here in America – where about 630,000 people will die from it this year, the CDC says.
That’s one out of every four deaths.
Globally, heart disease is the leading cause of death, accounting for 17.3 million each year, according to the American Heart Association.
Here’s the thing. Only 27% of Americans were aware that they or a loved one were having a heart attack and made the quick move to call 9-1-1.
In fact, 47% of all lethal heart attacks in the United States take place before a person even gets to the hospital.
The cardiovascular testing market is worth about $1 billion – and is a perfect candidate for remote-monitoring via telehealth devices.
There are others, too, but I think folks will get the general idea.
WPIII: Agreed. So let’s change the focus a bit. Let’s talk stocks.
And I know you have several favorites – companies that figure to be big beneficiaries of faster-than-projected adoption of telehealth.
And we can start with one that I just dubbed “The Stealth Telehealth Stock” in Private Briefing.
I’m talking about Apple Inc. (NASDAQ: AAPL).
MR: [Chuckling]. An apt nickname.
What’s great about Apple is that it pioneered the whole “technology ecosystem” concept. It makes “devices” – the iPhone, iPod, iPad, Apple Watch, and Mac desktop and laptop PCs. Over the past decade, it’s added high-value services to the mix – including the App Store, Apple Music, and the new Apple TV Plus streaming service.
Healthcare is the one big piece of Apple’s overall strategy that many people are overlooking. Money Map’s own David Zeiler – one of the most insightful Apple experts anywhere – recently said that healthcare will be the single-biggest source of growth for Apple over the next decade.
We’re really talking telehealth. The Apple Watch has tremendous potential as a monitoring device – it can be used to promote “wellness” because of the “data view” it enables.
WPIII: Dave and I talked about this in an interview I did with him just last month – one that was published in both Private Briefing and Money Morning.
And this focus on health is a corporate focus that emanates from the very top – from CEO Tim Cook himself. Last year, he went on CNBC and said that – in the future – people will consider Apple’s greatest contribution to mankind to be what it did for healthcare. Not the Apple II. Not the Mac. Not the iPhone.
MR: It’s interesting, Bill. In 2016, Apple bought a startup called Gliimpse, a personal health data platform. If it takes a technology ecosystem that starts with iDevices (and that could eventually include AirPods and AR/VR) and ends in the Cloud – and applies that to healthcare – Apple will have the ability to monitor, collect, store, and transmit patient data without the patient having to input that data manually. Patients and healthcare providers will both be beneficiaries.
Apple is also a partner in a health-data standard called FHIR (Fast Healthcare Interoperability Resources).
WPIII: And this can be monetized?
MR: Oh, absolutely. Absolutely.
In a report last year, Money Morning detailed a Morgan Stanley projection that healthcare could boost Apple’s top line by anywhere from $15 billion to $313 billion a year.
WPIII: To give folks some context, Apple had $260 billion in revenue in fiscal 2019 – which we’ll use as a “benchmark” because it’s the last full year of “normalized” earnings ahead of the pandemic.
MR: An excellent point, Bill.
Morgan Stanley pegged the revenue contribution from healthcare to be $90 billion by 2027 – saying that was the “midline” of its estimate. But the mathematical midpoint is actually $164 billion of additional revenue.
So you’re talking about a revenue boost of 35% to 63%. That’s huge.
And when you factor in Apple’s other initiatives – its ability to innovate and its “ecosystem” – you’re really talking about a great foundational play that figures to become a telemedicine stalwart.
WPIII: Let’s look at one more telehealth stock: Teladoc Health Inc. (NASDAQ: TDOC) – which is essentially the “Zoom of Healthcare.”
MR: Well, it goes without saying that Teladoc has the potential to be one of the big winners in the post-pandemic world.
Teladoc has the potential to be to healthcare what Zoom has become to the work-from-wherever trend.
Make no mistake: Even without the pandemic, I believe Teladoc would have been a big beneficiary of “connected health” – otherwise known as the “telehealth economy.”
But the COVID-19 crisis is accelerating that dynamic.
Teladoc has emerged as the leading purveyor of virtual care delivery (VCD) systems, with a platform that makes it possible for:
- Doctors to reach patients directly at their home.
- Pharmacists to run virtual clinics with patients – without a scheduled appointment.
- And medical-records providers to put needed data in the hands of the doctors conducting virtual appointments with patients.
Bill, we’re talking about a company that’s been growing sales at higher-double-digit rates for the last five years.
And it’s capitalizing on three market segments – big ones that each have great promise.
The first is the $28 billion specialist market we’ve been talking about.
The second is the $17 billion ambulatory-care market – which covers outpatient services such as diagnosis, observation, consultation, treatment, intervention, and rehabilitation.
And the third is behavioral health. Teladoc is quickly ramping up its Behavioral Health Division, which works with patients as they shift their lifestyles to speed up recovery. This field covers another $12 billion in yearly domestic spending.
Add them up, and you’re talking about $57 billion worth of medical subsectors that Teladoc is working to “disrupt.” Given the projected size of the telemedicine market, there’s a lot of upside here.
WPIII: OK, we’re talking “disruption” – CEO-speak for “we have better ways of doing things.” Give us an example.
MR: So you have all this negative press about runaway healthcare costs. There’s a lotta pressure to do something about that.
One problem – and Bill, you know this from your own mom’s career as an ER, CCU, and ICU nurse – is that consumers have become far too cavalier about their use of hospital emergency rooms.
The CDC says there are roughly 136 million emergency room visits each year – but only 12.9 million actual admissions. And since many people who visit ERs don’t pay their medical bills, these bastions for emergency care have become giant money pits.
Thanks to superior technology that’s giving it a “brand” (as well as a 75% market share) in the VCD market, Teladoc is already helping to untie this Gordian-spending knot.
It has the best tech solution.
And it works with more than 300 of the top Fortune 1000 employers. And it has deals in place with more than 35 health plans and 250 hospital chains.
I say it has a 0% intention of letting that lead slip away.
To maintain growth, it’s doing a ton of R&D. And it’s doing deals, too.
In June 2017, it spent $440 million to buy Best Doctors, obtaining a network of medical experts, analytics, patient decision-support and regional expertise.
In May 2018, it closed a $352 million deal for Advance Medical – the overseas VCD leader. That’ll position the company for global growth.
In its most-recent earnings report – for its fiscal first quarter – Teladoc said sales jumped 41% to reach $181 million. Telehealth visits skyrocketed 92% to reach 2 million. Visits for all of 2019 totaled 4.1 million – meaning Teladoc matched half of last year’s total in a single quarter of this year.
So between Apple and Teladoc, you’ve got two interesting ways to play telemedicine – a market that’s emerging much faster than anyone expected.
WPIII: Thanks, Michael. This was great – as always.
MR: Glad to do it, Bill.
Source: Money Morning