Teladoc rival Amwell scores CVS tie-up to launch retailer's virtual primary care service

Telehealth company Amwell is working with CVS Health to roll out the retail drugstore giant's new virtual primary care service.

CVS announced at the end of May plans to launch a virtual care service that gives consumers access to primary care, on-demand care, chronic condition management and mental health services. Eligible Aetna and CVS Caremark members will be able to use the virtual primary care service to access healthcare services on demand, whether at home or in a retail or community-based setting, the drug store company said.

CVS' virtual care platform is a "consumer-centric offering designed to bring together the many elements of CVS Health ecosystem services into a single integrated experience with a unified digital front door," Dr. Ido Schoenberg, chairman and co-chief executive officer of Amwell, said during the company's second-quarter earnings call Thursday.

Amwell's stock got a slight bump in after-hours trading.

Amwell has been making significant investments in its new virtual care platform, Converge. Announced in April, Converge makes all of Amwell’s products and programs, plus third-party applications, available in one place.

Schoenberg said the partnership with CVS marks a "wonderful demonstration" of the new Converge platform.

"CVS is a fascinating organization with insurance capabilities, retail capabilities, care delivery networks, condition management services and so much more. We couldn't be more proud and excited about the fact that they chose us as the backdrop for their effort and that effort is very significant. It is a very, very important undertaking," he said during the call.

The tie-up is interesting as rival Teladoc already is the exclusive telehealth provider for insurer Aetna, which is owned by CVS.

Wall Street analysts viewed the CVS contract as a major win for the telehealth player. In June, Piper Sandler analyst Sean Wieland raised his price target on Amwell to $6, up from its previous level of $5, citing numerous high-profile client wins, including CVS.

Morgan Stanley analyst Ricky Goldwasser also called the CVS deal a "game-changer" and "a meaningful validation of Amwell's approach," the Motley Fool reported.

CVS said in May the virtual solution will roll out to Aetna members starting Jan. 1, 2023, and for eligible CVS Caremark members during the second quarter of 2023. 


Schoenberg said Amwell is pursuing a strategy to deliver the "leading digital care delivery infrastructure." "Our future is about increasing our mix of high-margin subscription software. As we pursue our long-term path to profitability and beyond, our role in the digital care delivery landscape is clear. The opportunity in front of us is large and expanding. And we believe we are just getting started," he told analysts on the call.

The company is in the process of migrating its customers over to the new platform. About 9% of the company’s total virtual visits occurred through Converge in the second quarter. "Our less complicated migrations are largely behind us. We are now in the process of several more complex migrations with our larger clients. These customers account for a much larger percentage of our visit volume. And as such, we expect our Converge visit percentage to rise over the coming months as those migrations are completed," Robert Shepardson, Amwell chief financial officer said during the earnings call.

The telehealth software company's quarterly losses widened to $69.7 million, or a loss of 25 cents per share, compared to a loss of $38 million a year ago, or a loss of 15 cents per share. For the first six months of 2022, Amwell posted losses of $140 million compared to $78 million in the first half of 2021.

The company's quarterly earnings beat Wall Street estimates as analysts projected a loss per share of 26 cents.

Amwell's Q2 financial performance

Amwell's second-quarter revenue grew 7% to $64.5 million from $60.2 million the same time a year ago. The company's quarterly revenue slightly beat Wall Street estimates of $64.1 million for the quarter.

Subscription revenue came in at $29.6 million, up 10% compared to $26.8 million a year ago, and visit revenue was $29.7 million, up 8% compared to the second quarter of 2021.

"Subscription revenue was fairly flat compared to Q1. This is in line with our expectations and it's reflective of this year as a transition year. Our long-term path to profitability is grounded in our plan to drive high-margin subscription revenue growth at a rate that is faster than that of our overall business over the long run," Shepardson said.

The company's services and care points revenue was $5.2 million versus $5.9 million a year ag, and $4.8 million in the first quarter of 2022.

Amwell saw telehealth visits grow to 1.5 million in the second quarter of 2022, up 19% compared to 1.3 million virtual care visits during the same period in 2021. Scheduled visits grew 20% year over year and represent 73% of visit volume, about even with the first quarter and up from approximately 30% pre-COVID, Shepardson said.

The total number of active providers using Amwell's virtual care platform grew to around 103,5000 during the quarter, up 46% compared to 71,000 providers a year ago. Providers employed by customers active on Amwell's network grew 48% versus last year. The company reported gross margin of 43.4% in the second quarter compared to 43.7% a year ago.

Amwell spent $37.1 million on R&D in the second quarter. "As we indicated in our annual guidance, as we complete the more intensive development work on the platform, R&D should begin to decline during the second half and start to normalize into next year," Shepardson said.

The company reported greater adjusted EBITDA losses than the previous year, with a loss of $42.8 million, 80% deeper than its reported loss in the prior-year period. Amwell reported an adjusted EBITDA loss of $23.7 million in the second quarter of 2021.

The company's adjusted EBITDA loss in Q2 improved from a loss of $47.1 million last quarter.

Cash and short-term securities as of quarter-end were approximately $630.1 million.

For full-year 2022, Amwell projects revenue between $275 and $285 million and virtual care visits between 1.4 and 1.5 million

The company also projects adjusted EBITDA between a loss of $200 million and a loss of $190 million for the year.