Dive Brief:

• Analysts at SVB Leerink have made a bullish assessment of the prospects of Livongo Health, arguing the digital health company has “cracked the code” of sustainable behavior modification. 

• Livongo raised $355 million through an IPO last month built on the concept of using technology and data to drive behavior changes that improve health and financial outcomes in people with chronic conditions.

• The IPO gave the startup a market capitalization in excess of $3 billion but the analysts think the company can climb well past that level by growing sales rapidly in the coming years, despite intensifying competition.

Dive Insight:

Livongo and a sea of rivals such as Omada, Onduo and Hello Heart are working to boost patient outcomes and cut healthcare costs by improving management of chronic conditions such as diabetes and hypertension. In Livongo’s case, that entails use of a platform that aggregates and analyzes data and uses the resulting insight to encourage behavior associated with better outcomes.

"The digital health field is littered with companies that have over-promised and under-delivered," the analysts acknowledge.

Other companies have similar platforms. Yet, the analysts contend Livongo has a clear edge over its rivals, in part because of the infrastructure and services it has wrapped around connected devices. 

“In our view, [Livongo’s] “secret sauce,” is it’s ability to marry its connected devices with data science and care coaches to personalize and simplify the experience,” the analysts wrote. “We are convinced that by utilizing data science and live coaches to personalize and simplify what is often times a burdensome and isolating experience, [Livongo] has cracked the code that has eluded so many digital health companies: sustainable behavior modification.”

The analysts expect the company to achieve a compound annual growth rate of 76% from 2018 to 2022, putting it on course to generate sales of $651 million a year by the end of that period. 

The forecast rests on Livongo’s ability to expand beyond the self-insured employer market that makes up the core of its business today by onboarding fully-insured commercial customers, Medicare, labor unions and providers. Livongo makes money from its current customers by charging them up to $75 a month per participant in its programs.

One potential threat to further growth is the prospect of big tech companies such as Apple and Google moving into the field and crushing Livongo. However, the analysts think that is unlikely, arguing that big tech companies are more likely to partner with or acquire Livongo as they lack the clinical expertise needed to compete.