Teladoc shareholders have sued the company in a class action lawsuit claiming the company made false or misleading statements about financial performance.
Shareholders are accusing Teladoc of failing to disclose how “increased competition, among other factors, was negatively impacting Teladoc’s BetterHelp and chronic care businesses” and also how “the growth of those businesses was less sustainable than Defendants had led investors to believe.” Shareholders said this led to unrealistic fiscal projections for this fiscal year, according to the complaint.
In February, Teladoc forecasted 2022 revenue of $2.55 – $2.65 billion, as well as adjusted earnings of $330 – $355 million, the lawsuit states. Earnings reported in April in a news release showed first quarter revenue was $565.4 million, up from $453,767 last year. But the revenue missed consensus estimates by $3.23 million. Also in April, the company lowered its 2022 revenue projections to $2.4 – $2.5 billion.
In an emailed statement, a Teladoc spokesperson said, “There’s no factual basis to the suit whatsoever, but unfortunately this type of frivolous litigation has become commonplace for public companies today.”
The company reported a net loss of $41.58 per share in the first quarter of this year, compared to a net loss per share of $1.31 the same time last year, and a total net loss of $6,674.5 million, attributing it to a non-cash goodwill impairment charge of $6.6 million.
In a news release announcing its first-quarter earnings in April, Teladoc CEO Jason Gorevic attributed the losses to higher advertising costs.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
“In the D2C mental health market, higher advertising costs in some channels are generating a lower-than-expected yield on our marketing spend. In the chronic condition market, we are seeing an elongated sales cycle as employers and health plans evaluate their long-term strategies to deliver the benefits and care that their populations need. Despite the revision to our 2022 outlook, we are confident in our strategy, along with our breadth and depth of capabilities, which empower people everywhere to live healthier lives,” Gorevic said.
After a boom during the early stages of the COVID-19 pandemic, telehealth has been trending downward. Teladoc’s largest competitor, Amwell, also reported revenue losses in the first quarter of the year. Amwell reported the company’s net loss was $70.3 million, compared to $39.8 million in the first quarter of 2021. The company’s total revenue in the first quarter of this year was $64.2 million, compared to $57.6 million last year.
A McKinsey report released in February summarized that downward trend, finding that in April 2020, the number of virtual visits through telehealth was 78 times higher than it had been two months earlier but a year later, in mid-2021, telehealth visits had declined to 38 times pre-COVID-19 levels.
Attorneys for the shareholders declined to comment.
The case is 1:22-cv-04687 in the Southern District of New York.
Photo: elenabs, Getty Images
