Speaker 1:
Welcome to TD Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.
Charles Rhyee:
Hi, this is Charles Rhyee, TD Cowen's Health Care technology and distribution analyst, and I'm here at TD Cowen's 45th Annual Health Care Conference, and I'm pleased to be joined by Amwell, and speaking for the company is Dr. Ido Schoenberg, chairman and CEO. Ido, thanks for joining us today.
Ido Schoenberg:
Hi, Charles. It's a pleasure to be here. Thank you for having me.
Charles Rhyee:
I think that a lot has been going on in digital health over the last five, 10 years now at this point, and a lot of things have really progressed over that time, and I think it's fair to say I think Amwell is a unique player in this space as an enabler of hybrid care for the existing healthcare system. How would you frame where we are in the journey for expanding on virtual care and going to a more digital kind of environment and really what are the barriers then that you see in terms of increasing that adoption?
Ido Schoenberg:
Sure. So we live in truly exciting times. The goal was always to get care much more affordable, in a much more democratic way, for all, and that did not change. What did change are two big phenomena that we noticed. One, finally after many years, more and more people are ready to go online to get care. And the second thing is, with the contribution of AI, machine learning, and other technology, we see a tsunami of clinical programs that are becoming better and better in solving different clinical needs for people. The challenge is still making sure that demand for those that go online is matched with services that are covered by their health plan and their insurance, that are appropriate clinically for them and are available and relevant, and that's where Amwell comes in.
Charles Rhyee:
Maybe expanding on that, where are we then in the state of innovation in the healthcare space? And I guess obviously there's a lot of focus on AI, but even more broadly, as an innovator, what are you looking to seek to help address the biggest clinical and operational challenges today?
Ido Schoenberg:
So the ability of different clinical programs to deliver on the promise of better clinical informational outcomes is very much there. I mean, we see so many great programs. The biggest challenge is to engage the consumer to know which are right for them and to actually go through the benefit that they could provide for them. And that's an opportunity that is still ahead of us, making sure that we have a single consumer experience that is simple and easy to use for everybody to connect you to those clinical programs through a single array of care orchestration, allowing eventually a single reporting to monitor the outcomes so you can really make sure that they're paid for is really the remaining most important challenge. As I mentioned earlier, there is a healthy appetite by consumers to engage online and there is a plethora of clinical programs that deliver on their promise. Packaging it all together is, in my opinion, the most interesting challenge that we are going to see over the next five or 10 years.
Charles Rhyee:
And really isn't this where Amwell kind of fits into the landscape to provide that connection? Maybe talk a little bit about how, particularly with Converge, I guess, you're able to create that orchestration of all these kind of diverse programs.
Ido Schoenberg:
Absolutely, and I've been talking about it when I had hair and your hair was not white, or at least partially white. It's been a long, long journey, but that's our life mission in many ways. Recognizing the fact that you should create a singular simple consumer experience when they're ready to get care to a single orchestration layer and making us extremely friendly and connected to a large and growing number of clinical programs with an ability to report is what Amwell is all about. We raised a lot of capital, we developed a very complicated system that is now complete and working in very large scale and delivering the value that we always wanted it to deliver. So as I mentioned earlier, we are truly excited to grow from this point on.
Charles Rhyee:
And maybe just to remind folks, so the business model for Amwell, as we move forward from here, just remind us again, we're really serving both payers and providers and what is the core that we're trying to deliver for them?
Ido Schoenberg:
So essentially, a sponsor as payers and employers realize that by encouraging people to go online, they can really offer a great experience for them that is also creating significant savings. In order to do that, they need one technology infrastructure that will connect their members with the set of programs that they're ready to pay for. In order to do that, they license our software under their portal and they're paying for the different programs that Amwell is providing, but they also are growingly paying for third-party programs that are integrated under our platform, which is a high-margin opportunity for Amwell.
Essentially, the payers want to offer as many programs in the most diversified way because we as people want to have more options for the care that we need. Those programs have a hard time acquiring the consumer, the customer acquisition costs for a company to offer only a narrow solution is very high and it's very difficult for them to justify it on their own business model. But if you have one customer or member acquisition cost that is shared by many clinical layer programs, that's much easier. So our business model is simple, we are getting paid for our SaaS software sometimes exclusively as evidenced by the military health systems, and sometimes in combination for payment for different clinical programs that Amwell is offering, and we're getting paid by the clinical programs that we are not offering by third parties that are embedded into our software.
Charles Rhyee:
Yeah, and that's a good segue. If we think about then the Defense Health Agency who you guys are deploying with in partnership with Leidos, maybe talk a little bit about what the Defense Health Agency and the US military is really looking to achieve and what they found with Amwell that helps solve for that?
Ido Schoenberg:
So as you may know, I'm a veteran myself and giving better care to our men and women in uniform around the world is something I couldn't be more proud of. It's probably one of the most amazing things Amwell was able to do, and that's what we are doing. Essentially, the DHA chose to, through Leidos, to offer all the military health team members an opportunity to connect with their providers through our platform. A lot of it is live and all of it will be live by the end of this year globally. Anywhere around the world, when you have men or women in uniform or the family members, they can raise their virtual hand and get service that they need through the platform. So it's working, it's working in large scale, and we couldn't be happier about it.
Charles Rhyee:
And then obviously that's going to be a big contributor here in 2025. How do you think investors should think about the potential long-term growth? Obviously, we're focused on reaching breakeven in '26, but as we think about the investment case for the long-term growth prospects and maybe even for potential for margins, how do you think investors should think about that as we think of Amwell, let's say into '26 and beyond?
Ido Schoenberg:
We believe in the secular trends that I mentioned, that more people are going to go online, there are going to be more programs. We also believe that this middle tier that we created that connects the people that reach for care and the people that offer it in a organized way, that can be paid for and demonstrate the value in a very elaborate way is really necessary. We also have a fairly large reach into the market. About one third of the covered lives in United States are potentially connected to our platform today, and we are winning more market share as we speak. So there is an opportunity to basically license our software to more risk-takers, employers and payers that are interested to achieve the benefits, financial and clinical benefits, that we offer.
We believe that more and more clinical programs would want to sell their programs in the marketplace that is created by Amwell, and we are going to get paid by doing that. And we essentially believe that the fraction of care that people get in their day-to-day lives is going to move dramatically from brick and mortar into technology-enabled care that is virtual first through our platform. And the last part is probably the most important part. According to McKinsey and others, only a handful of percent points of care is done online today. That will change, that will change in a very significant way.
So even if you take one of our customers, think about Elevance for example, they cover 40 million people and only a tiny fraction of the care of those 40 million people is happening today on the portal of Elevance called Sydney. But we believe that will change. That will change when there are better ways to engage and get their attention, that will change when Elevance is covering and offering more clinical therapeutic areas through our platform. And as that happens, Amwell will grow and create a high-margin revenue that is very, very sticky.
Charles Rhyee:
Great. Well, we look forward to that. So, Ido, really appreciate your time and thanks for joining us today here.
Ido Schoenberg:
My pleasure, Charles. It's great to be here. Thank you for having me.
Speaker 1:
Thanks for joining us. Stay tuned for the next episode of TD Cowen Insights.
