Digital Health Companies Face Post-Pandemic Reality

It's been nearly five years since the coronavirus broke out in the U.S., but digital health companies are still reeling from the aftermath. According to a CNBC analysis of 39 public digital health companies, around two-thirds have lost value this year, while the Nasdaq is up 32%. 'The pandemic was a huge pull forward in demand, and we're facing those tough, challenging comps,' said Scott Schoenhaus, an analyst at KeyBanc Capital Markets.

If the Covid era marked a boom time for digital health companies, 2024 was the reckoning. In a year that saw the Nasdaq jump 32%, surpassing 20,000 for the first time this month, health tech providers largely suffered. Of 39 public digital health companies analyzed by CNBC, roughly two-thirds are down for the year. Others are now out of business. While some companies, such as Weight Watchers, which was buoyed by the success of its popular new weight loss offering and its position in the GLP-1 craze, bucked the trend, it was an exception. While there were some company-specific challenges in the industry, overall it was a 'year of inflection,' according to Scott Schoenhaus, an analyst at KeyBanc Capital Markets covering health-care IT companies. Business models that appeared poised to break out during the pandemic haven't all worked as planned, and companies have had to refocus on profitability and a more muted growth environment. 'The pandemic was a huge pull forward in demand, and we're facing those tough, challenging comps,' Schoenhaus told CNBC in an interview. 'Growth clearly slowed for most of my names, and I think employers, payers, providers and even pharma are more selective and more discerning on digital health companies that they partnered with.'. Almost two dozen digital health companies went public through an initial public offering or special purpose acquisition company, or SPAC, that year, up from the previous record of eight in 2020

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