CloudMD offers an integrated digital and in-person care platform
The digital health care platform is still growing fast through its stock swoon
The stock: Two years ago, at the start of the pandemic, the idea of providing digital health care services was just what the doctor ordered—or was that her investment advisor? With its aggressive acquisition strategy, CloudMD Software & Services (TSXV:DOC) could boast a viral rate of revenue growth in a fast-growing field.
Sadly for the startup, the investing climate has changed, especially for money-losing technology stocks. If you still believe in the thesis, however, this is the time to pick up its shares for pennies—41 cents as of Tuesday's close.
The drivers: Among its 16 acquisitions undertaken last year, the most ambitious was that of MindBeacon Holdings, a digital mental health care provider based in Toronto. The $116-million deal effectively steered CloudMD’s activities towards mental health, as well as into the U.S. market, which now accounts for a third of its revenue. The company also signed a deal with insurance provider Sun Life to provide mental health coach services late in 2021.
Since then, there have been signs of trouble in paradise. CEO Dr. Essem Hamza and CFO Daniel Lee both resigned. President Karen Adams is serving as interim CEO while the company looks for a permanent replacement for Hamza.
The financial prognosis offers more hope, though. Full-year revenue for 2021 was $102 million, up from just $15 million in 2020. Net losses more than doubled to $30.7 million from $13.6 million, but adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the year neared break-even, turning positive in the fourth quarter. Though the fundraising environment may be ailing, the company still has $45 million in life support on its balance sheet.
Word on the street: Canaccord Genuity analyst Doug Taylor adjusted his target price downward (hey, what’s new?) to $1.50 last week, but still regards CloudMD as a “speculative buy.” The MindBeacon acquisition will cause EBITDA to turn negative again for at least a couple of quarters, he predicted, but is a pill the company has to swallow. “We see this pivot as key to broadening CloudMD’s appeal, given the increased emphasis on profitability in the current market,” he wrote in a note to clients.
Coming & going: Technology investment firm All Blue Falcons FZE has made a non-binding takeover offer worth US$773 million or US$10.50 a share for Vancouver biotech Zymeworks (NYSE:ZYME). Dubai-based All Blue said it had enlisted former AstraZeneca oncology head Alan Barge to advise on the transaction. Zymeworks’ board is considering the proposal.