With surge in virtual care, Teladoc, Livongo execs saw the chance to 'accelerate' with massive deal

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The combination of Livongo's diabetes coaching and remote monitoring services with Teladoc's telehealth capabilities will provide a single solution for care that will offer a better experience for providers and patients, the executives said. (Teladoc)

Investors initially had a cool reaction to Teladoc's $18.5 billion deal to acquire Livongo, as both companies' stocks fell steeply when the news broke in August. Teladoc's shares were down 15% and Livongo's stock also fell by 14%.

But both stocks have since rebounded. 

"I think, frankly, we took the market by surprise," Teladoc CEO Jason Gorevic said Thursday at STAT’s Health Tech Summit.

"I think there was a surprise at the timing of the deal because both companies were doing incredibly well. In the second quarter, we grew by 85% and Livongo grew 125%," he said speaking with STAT reporter Rebecca Robbins.

Jennifer Schneider, president of Livongo, compared the timing of the deal to running a race. Both companies already had a "massive lead" in the virtual care market.

"When you’re running fast, you don’t slow down. You accelerate. It was exactly the time to accelerate, not to sit back," she said.

RELATED: How Teladoc's blockbuster deal could impact the entire virtual care landscape

The combined companies, two of the largest publicly-traded virtual care companies, are said to be worth about $37 billion, according to Piper Sandler.

Both companies are seeing record growth during the COVID-19 pandemic and the combined company is expected to reach $1.3 billion in revenue in 2020, according to Gorevic.

The combination of Livongo's diabetes coaching and remote monitoring services with Teladoc's telehealth capabilities will provide a single solution for care that will offer a better experience for providers and patients, the executives said.

"The goal here is to provide a single solution that provides whole-person care, regardless of what the clinical condition is and to really bring together the very complementary assets of the two companies," Gorevic said.

The two companies only have a 25% overlap in clients, according to Gorevic, and that opens up big opportunities to scale and grow with the companies' combined capabilities.

Teladoc is betting big on the continued growth of virtual care, which has soared during the COVID-19 pandemic as patients avoided in-person care.

While recent data shows that telehealth usage has been dropping since hitting a peak in April, Gorevic is bullish on the future of remote care.

"We haven’t seen a similar drop off. We’ve seen a seasonal decline that we see every year in August. We’re not going back to pre-COVID levels of utilization because the satisfaction levels and efficacy is so high," he said.

Schneider said Livongo, as a chronic disease management company, is insuluated from the fluxuating rates of telehealth usage.

"We have solutions for people living with chronic conditions and that doesn't go away," she said. Livongo also has seen rapidly rising demand for its behavioral health solutions, with usage up 134%, she said.

RELATED: Telehealth leader Teladoc to buy Livongo in $18.5B deal

The key to Teladoc's future success is to effectively combine those capabilities to provide a better experience for consumers, providers and payers.

"We’re seeing an acceleration mode right now. In five-ish years, we will a see different model for a person receiving healthcare, one that is convenient, that more people have access to, and that patients will actually not hate, and it will cost a lot less," Schneider said.

Livongo's data science expertise will give providers more actionable information to provide better care, she said.

"Providers will love it because they will be able to focus on the people that they need to put their physical hands on and not worry about the worried well," she said.

Schneider also said Teladoc's capabilities will help to "trim a lot of waste out of healthcare while also improving clinical health outcomes."

Both executives acknowledged that they are making big promises while the industry watches to see what Teladoc does next.

"The track record of both organizations is to over-deliver. So, stay tuned and watch us continue to over-deliver," Schneider said.