Amwell acquires two digital health startups for $320M as Telehealth M&A Frenzy Continues, featuring SilverCloud Health

Amwell is acquiring two digital health startups for a combined $320 million as the publicly traded telehealth company looks to expand its platform offerings beyond the Covid-fueled virtual care boom. The two companies—SilverCloud Health and Conversa Health—are part of Amwell’s strategy to work with patients along their entire care journey and not just limit the relationship to one-off virtual visits. “The magic is what happens when you bring them all together, when you use technologies to surround the patients in their reality on a regular basis,” says Roy Schoenberg, who serves as co-CEO of the Boston, Massachusetts-based company alongside his brother Ido. The way to achieve this “omnipresence,” he says, is to use automation to move beyond the usual supply and demand constraints in healthcare.

While Amwell offers telehealth visits with therapists and psychiatrists, there is a shortage of clinicians in the United States and patients are left on their own to manage their care outside weekly visits. Boston-based SilverCloud is a behavioral health platform that works to solve this problem by offering programs to help users address issues like anxiety and depression through cognitive behavioral therapy-based exercises. The idea is to increase engagement while lowering costs and the platform is used by more than 300 organizations, including Kaiser-Permanente, Optum and Providence Health. “To solve the problem of being next to patients on a regular basis, we have to bring in automated companionship,” says Schoenberg. One of the other benefits for Amwell is SilverCloud’s international footprint. It has headquarters in London and Dublin and is used by the national health systems in the U.K. and Ireland.

Portland, Oregon-based Conversa Health operates a patient engagement tool for health systems, which ingests clinical data about patients and generates conversations in between visits. For example, it offers automated and personalized digital check-ins with patients, such as asking how they feel and asking if they’re taking their medications. The company offers a host of tools, including digital triage, as well as Covid-19 screening.

The deals for SilverCloud and Conversa are complementary and will differentiate Amwell from other telehealth players, says CFO Keith Anderson. The key, he says, is that physical, virtual, remote monitoring and now automated care delivered by Amwell’s health system and insurer clients can now converge on the company’s platform (which is actually called Converge). Amwell works with more than 2,000 hospitals and 55 health plans. “The beauty of both of these [acquisitions] is it highlights the partnership with the health system providers, it doesn’t disintermediate them,” says Anderson. It’s possible Amwell could announce more acquisitions by the end of the year, he adds.

The combined acquisitions are valued at $320 million with a 50/50 split of cash and stock. There are also some operational and revenue milestones included in the deal. On a standalone basis, the two companies were growing over 100% year over year with margins on a combined basis around 70%, says Anderson. Combined, they have an estimated $15 million in revenue, which is expected to grow to $30 million in revenue in 2022 (these figures don’t account for the deferred revenue haircut as part of the business combination).

Amwell, which reports second quarter earnings on August 11, recorded a net loss of $228.6 million on $245.3 million in revenue in 2020. The company’s stock price is down 50% since it started trading last year, from $23.07 a share to $11.29 at Tuesday’s close.

Wall Street analysts have been waiting to see how Amwell’s M&A strategy would play out following its September 2020 IPO, given the frenzy of deals in the space over the past year. Teladoc Health’s $18.5 billion acquisition of Livongo set a new highwater mark for digital health deals, and was soon followed by the merger of expert medical opinion company Grand Rounds Health and Doctor On Demand and health insurer Cigna’s acquisition of telehealth provider MD Live, among many others.

Amwell’s last acquisition was Aligned Telehealth, a virtual behavioral health provider, in 2019. “In the period following Amwell’s IPO and cash infusion, management indicated that some of the valuations in the market did not make sense, even for the areas that Amwell was interested in,” Credit Suisse wrote in a June analyst note. “The good news, however, is that valuations have come down and a lot of the targets for Amwell have become more attractive.”

Amwell’s goal, according to Schoenberg, is to rewrite the healthcare experience for patients with technology. “At the end of the day, the whole purpose of all of this, is that when we all grow old, we can expect a very different kind of healthcare experience,” says Schoenberg. “It’s going to be reassuring. It’s going to be always on and around you. And it’s going to help, almost like a concierge, through the different levels of the healthcare system as necessary.”

https://www.healthleadersmedia.com/telehealth/amwell-acquires-two-digital-health-startups-320-million-telehealth-ma-frenzy-continues