Teladoc’s IPO telegraphs telemedicine’s prime-time debut

Teladoc CEO Jason Gorevic is now on the road talking to institutional investors about his company’s upcoming IPO, a Teladoc spokesperson told VentureBeat Monday. Many will be watching the Teladoc CEO with interest to see if Wall Street is truly warming up to digital health companies.

Teladoc filed (private) documents for its public offering in late April, but have yet to announce an official date for the outing. A public S-1 appeared in early June, stating that the company hopes to raise $137 million.

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Teladoc offers telemedicine services on a subscription basis to large employers. The employers then offer non-face-to-face doctor visits to employees as a benefit. While Teladoc does offer video doctor visits, about 90 consults take place over the phone, a fact the company confirmed to VentureBeat Monday.

The ten-year-old company’s business has been booming in the past couple of years. Last year, Teladoc reported $44 million in revenues, a 119 percent jump from 2013. Membership grew by 1.9 million to 8.1 million, while annual per-member revenue increased $2.16 to $5.37. It was that large step-up in per-member revenue that drove three quarters of Teladoc’s 2014 growth.

Rock Health managing director Malay Gandhi forecasts that full year 2015 revenues will come in between $69 million and $79 million, based on first quarter 2015 results and the company’s operating history as described in the S-1.

One of the things investors will probably like about Teladoc’s deals with employers is that Teladoc gets paid whether or not employees use the service. The vast majority of Teladoc’s revenues last year came from the monthly subscription fees employers pay on a per-member, per-month basis. Only a small proportion of revenues came from the per-usage fees Teladoc collects from some of its employer customers.

At the same time, Teladoc faces some worrisome risks in the future. There’s no shortage of telemedicine enablers out there, and some of them — like Doctor on Demand — are offering to provide employers with telemedicine services with only per-use fees and no subscription costs.

Finally, the medical establishment is still in the process of figuring out what it thinks about telemedicine as the treatment mode gains popularity. In Teladoc’s home state of Texas, the state medical board very recently restricted the number of health problems that can be treated via telemedicine. Telemedicine visits can be used for complaints like sore throats and skin rashes, but not for things that require prescriptions.

There may be more reason for optimism than skepticism at this point, however. Telemedicine is probably here to stay. As the Affordable Care Act pushes the themes of population care and ease of access, telemedicine visits will account for an increasingly large proportion of the 1.2 billion ambulatory care visits that take place each year.

Finally, the Teladoc IPO will happen in the wake of two other encouraging digital health IPOs. Fitbit’s stock opened with an impressive 50 percent pop last week, and Evolent Health stock has been holding its own since its June 4 IPO.

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A less-than-stellar IPO from Castlight Health last year (the company’s stock opened at $37.50 in March 2014 and is coasting in the $9 range today) had soured institutional investors’ taste for health IPOs for months and months, but the Teladoc IPO — especially if it finds Fitbit-style success —  may signal fairer weather for companies in the space.