Teladoc Set to Become First Online Consultation Company to Go Public

Investors have shown strong interest in the rapidly growing telemedicine sector. To capitalize on this interest and secure funding, telemedicine platform Teladoc has filed for an initial public offering (IPO). According to an announcement released by Teladoc last Tuesday, the company has submitted a confidential draft registration statement to the U.S. Securities and Exchange Commission. VCBeat previously reportedThe 14 Internet Healthcare Companies Most Likely to Go Public in 2015Teladoc does hold a place.

Teladoc, founded in 2002, was established significantly earlier than its current competitors offering similar services (such as Doctor On Demand and MDLIVE) and has raised the largest total amount of funding. Teladoc’s core business currently involves providing patients with 24/7 online medical consultation services, including telephone and video consultations, commonly referred to as online medical visits. On the Teladoc platform, users cannot freely choose their physicians; instead, doctors are assigned by Teladoc. In September 2013, Teladoc acquired Consult A Doctor, a telemedicine service platform, to help expand its services in niche markets. Within the emerging market of online medical consultations and telemedicine, Teladoc’s IPO application represented the first foray into this sector. Teladoc’s fundraising activities attracted considerable attention last year, raising $50 million in September alone. Since 2009, Teladoc has completed four rounds of financing, totaling approximately $74.3 million.



TEladoc’s IPO filing will further stimulate the development of internet healthcare service platforms

“I believe that with strong leadership and a favorable market environment, the telemedicine industry will make steady progress.” Tom Rogers, head of venture capital at McKesson, expressed optimism about this move. “Therefore, their decision to go public now is a wise one. I can already imagine the enthusiasm with which Wall Street will welcome them.”

“A successful IPO would be highly beneficial to this industry,” said Dr. Bijan Salehizadeh, co-founder of the healthcare investment firm NaviMed Capital. If Teladoc ultimately achieves a successful IPO, it will bring substantial financial gains and opportunities to other emerging internet-based healthcare service platforms.

In a January interview, Teladoc CEO Jason Gorevic mentioned that the company’s revenue had doubled each year over the past two years. The previous round of financing concluded in September, and as part of this $50 million funding agreement, Teladoc was required to disclose its revenue. However, Teladoc astutely disclosed only a broad range, indicating that figures anywhere between $25 million and $100 million were possible. Furthermore, Teladoc was not obligated to reveal to the public whether it was operating at a profit or a loss.

Navigating the Increasing Complexity of Industry Regulation

However, what truly troubles Teladoc and other telehealth providers is the increasing complexity of the regulatory environment in this industry. Earlier this month, the Texas Medical Board, with the support of the Texas Medical Association, began imposing restrictions on the development of the telehealth sector. They stipulated that only physicians who have previously had face-to-face encounters with a patient are eligible to consult with that patient via telecommunication technologies thereafter.

Teladoc, based in Dallas, Texas, has a patient base in the state that is disproportionately large relative to its small size. Just as the decision to impose restrictions in Texas was being made, Teladoc released a set of data. The data showed that since the company’s founding ten years ago, approximately one-quarter of its consultation services have been provided to patients from Texas.

“Despite the Texas Medical Board’s persistent obstacles, these companies have clearly managed to resolve all issues in the end,” said Saledizadeh. It appears that U.S. entrepreneurs are just as adept as their Chinese counterparts at employing indirect strategies to navigate industry regulatory challenges.

Intense competition within the industry and resistance from national healthcare programs are likely to pose long-term threats and challenges to Teladoc. Rodgers stated, “I anticipate that the entire industry will face pricing pressures in the near future.” Investors are also eager to see more evidence demonstrating that the telemedicine sector serves purposes beyond merely improving utilization rates of existing healthcare systems. Rodgers further added, “I also expect this industry to become an extension of the current healthcare system, provider networks, and even the broader pharmaceutical industry.”

Price Disparities in Consultations Determine That the Profit Model of China’s Online Medical Consultation Platforms Remains to Be Explored

Teladoc has filed for an IPO. Are domestic online consultation companies also close to going public? VCBeat believes the situation is unlikely to be so optimistic.

Unlike in the United States, online consultation companies in China are still exploring viable business models. A significant difference lies in “physician consultation fees.” In the U.S., an in-person doctor’s visit is very expensive; even with insurance coverage, patients typically still pay tens of dollars out-of-pocket for each consultation. By contrast, online consultation platforms often offer more cost-effective pricing options. Teladoc has previously compiled statistics on cost savings to encourage patient adoption (see figure below).





Due to the anomalous phenomenon of “drug-revenue-dependent healthcare” in China’s medical system, outpatient registration fees have long remained artificially low, preventing domestic online consultation platforms from establishing viable revenue models based on price advantages. These platforms are still exploring alternative monetization strategies, such as advertising, data utilization, e-commerce, and premium services. Without a reasonable and stable profit model in place, pursuing an initial public offering (IPO) would likely be unrealistic.