The $700 Million Telemedicine IPO You Need to Know About

By Bruce Harpham Friday, October 9, 2020

American Well Corporation ("Amwell") raised over $700 million in its initial public offering in mid-September 2020. Founded in 2006, Amwell provides telemedicine mobile and web apps for patients and healthcare providers. Amwell could not have gone public at a better time. Low-interest rates are pushing investors to invest in equities, and health care looks like a safe bet.

Investors Snap Up Amwell Price More Than the Nasdaq

Investor demand for Amwell shares has driven up the share price in the past several weeks. The company's initial public offering (IPO) price was $22.91 on September 13. By October 6, the stock had already risen to $38.74, a 69% gain in less than thirty days. Amwell's jump in the stock market has exceeded the growth of other tech stocks. In the same period, the technology-focused Nasdaq index only increased by 5.2%.

Who Uses Amwell’s Digital Health Apps?

Amwell produces a telehealth mobile app and supporting services. Patients can use it to complete online doctor visits 24/7. That means no lengthy waits in crowded emergency rooms. Patients pay for access to healthcare providers on a per-visit basis. Urgent care visits start at $79 per visit, while specialized services like therapy start at $99 per visit. Patients also have the option to receive prescriptions electronically.

From a healthcare provider's point of view, Amwell gives providers the ability to earn additional revenue. Further, healthcare providers can use the web or mobile app to see patients whenever they are available. Amwell is currently used by more than two thousand healthcare organizations, including the Cleveland Clinic and New York-Presbyterian.

Why Google Support Matters for The Company's Future

Investor excitement for a new IPO is nothing new. It also can't be expected to last long. However, investors and customers may take comfort in the fact that Amwell has a financial backer with significant resources: Google.

Through an investment of $100 million, Google supports Amwell. As part of that investment deal, Amwell moved all of its cloud services from Amazon to Google. Google's seal of approval on the company is likely one reason why investors have felt comfortable buying the stock.

Inside Amwell's Financials

Since Amwell recently went public, there is limited data available about its financial situation. The company's S1 prospectus shares a few key details about the state of their business.

  •  Revenue - In 2018, the company earned $114 million in revenue and $148 million in 2019. So far, the company has experienced considerable growth in 2020. In the first six months of 2020, the company reported earning $120 million, up 77% from the first six months of 2019.
  • Providers - Growing the number of healthcare providers on the platform is Amwell's big 2020 success story. As of June 2020, the company has over 50,000 active providers, compared to only 24,000 in March 2020.
  • Net Income - Like many new tech startups, Amwell is making a loss. In 2019, the company reported a net loss of $87 million.

The Prescription Renewal Market

Renewing a prescription is an ideal telemedicine service for Amwell. In many cases, a physician has an existing relationship with the patient. The medication may relate to ongoing health needs (e.g., birth control) or chronic illness (e.g., heart medication).

According to Georgetown University, more than 130 million Americans take prescription drugs. Also, the average out-of-pocket spending on prescription drugs is $177, while those in the age 65 to 79 category spend over $450 on out-of-pocket costs.

If Amwell can achieve a 5% market share of those on prescription drugs, it could add millions of dollars in revenue. However, there are some barriers to this market in the form of regulation.

Health Regulations May Slow Amwell's Growth

Growing a startup in a highly regulated industry presents challenges. In Amwell's case, they face competing demands. Some states require video consultations for some types of prescriptions. However, patients may prefer phone-only consultations. As a result, Amwell's revenue growth may be constrained as it navigates these changes.

Factors Driving the Increasing Demand for Telemedicine Services

The demand for telemedicine has increased significantly. Becker Hospital Review reports that demand for telemedicine may grow more than 60% in 2020. The COVID-19 pandemic is driving some of this growth since patients may look for ways to reduce visits to hospitals and clinics. After the pandemic ends, changed consumer habits and familiarity with the Amwell and similar apps are likely to remain.

Technical Limitations for Telemedicine Remain in 2020

Advances in telemedicine, mostly thanks to smartphones, have come a long way in the past decade. That said, there are still significant limitations to what can be delivered right now by telemedicine. For example, many types of medical diagnostics cannot be achieved remotely, such as those requiring lab tests. However, other types of health services that mainly focus on interpersonal communication like therapy are a good fit for telehealth platforms like Amwell.

About the Author


Headshot of Bruce Harpham

Bruce Harpham is an author and marketing consultant based in Canada. His first book "Project Managers At Work" shared real-world success lessons from NASA, Google, and other organizations. His articles have been published in CIO.com, InfoWorld, Canadian Business, and other organizations. Visit BruceHarpham.com for articles, interviews with tech leaders, and updates on future books.

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