Healthcare tech seems to be getting a lot of interest lately.
Been looking at two companies lately: Livongo (LVGO) and HealthCatalyst (HCAT).
Livongo grew 132% organically last quarter with 68% gross margins. The company uses coaches and devices to help people with chronic diseases. It started out with Diabetes but has expanded into weight management, hypertension and behavioral health via acquisition. Its customers are health orgs and self-insured employers. For instance, let’s say you manage the health insurance for Amazon and know you have a few thousand employees who have Diabetes. You would use Livongo for $60/month and Livongo would send your employees free starter kits with over-the-air glucose kits. If your blood sugar ever gets out of whack, automated alerts would go out to notify your employee. The value prop is that it would actually save employers/health orgs money in the long run. Sort of a preventative deal. The company is still losing a lot of money but it seems like it has a lot of optionality as it could expand to adjacent chronic diseases.
There is actually a microcap company called Catasys (CATS) that is growing even faster but I’m not as certain about the quality of its offering. Anyway, that is Livongo.
For Health Catalyst (I believe Bert wrote it up), it is more of a data engine for health orgs. Its clients are bigger hospitals who are looking to save on extra costs. This is a good primer on the power of the analytics: https://www.healthcatalyst.com/success_stories/pediatric-sep…
Anyway, organic growth is much lower at 41% because it has very long sales cycles (at least a year in most cases) but gross margins have gone from 30% to 51% in the last two years and operating losses are coming down quickly as a % of sales. HCAT’s valuation is about half of LVGO and rightly so based on growth.
Would love to hear people’s thoughts as I am fairly new to this healthcare tech space. Seems like a worthwhile area of investment though as there are massive secular tailwinds and it seems like not a lot of companies have been able to crack this nut. I’m leaning more towards LVGO because of the optionality but have yet to take a position in either.
All the best,
Fish