About 147 million Americans are currently suffering from chronic health conditions, and over 40% have more than one. Currently, patients in this category account for more than 90% of the U.S. healthcare budget, and that number is showing no signs of decline. In response to skyrocketing healthcare costs, Livongo Health (LVGO) is deploying its data-based health-coaching app to help patients with diabetes save money -- upwards of $1,908 per patient per year.
As a result, the company is gaining a lot of traction both in the healthcare sector and among healthcare investors. Today, let's take a look at why everyone is talking about Livongo Health stock, and why I think its shares are a strong buy.
An innovative mobile app
The Livongo app collects blood pressure, blood glucose levels, weight, insurance claims, and food and beverage logs from patients with diabetes. The data is then compiled in a health-summary report. The app offers real-time feedback on areas to improve, with a response within minutes in emergency cases. Afterward, patients can be referred to virtual coaching sessions to reduce their stress and anxiety as they manage their diabetes.
The app boasts a high satisfaction rating among participants. Moreover, patients receive meters, test strips, and lancets (blood-sampling devices) to set up the app free of charge, with fully paid shipping costs. This helps patients save a great deal of money while achieving improved health outcomes. Livongo Health makes money by soliciting pharmacy benefit managers, employers, health plans, government entities, and labor unions that keep track of patients' diabetes progression.
Skyrocketing subscriber count
In the first quarter of 2020, Livongo added 380 new paid clients for a total of 1,252, representing 44% growth over the fourth quarter of 2019. Due to the COVID-19 pandemic, demand for the Livongo app has skyrocketed. More than 78% of ICU admissions from COVID-19 are coming from patients with pre-existing or chronic conditions. Healthcare providers everywhere are scrambling to find ways to manage patients' diabetes without risk of infection.
Meanwhile, Livongo Health's revenue grew by 115% year over year in the most recent quarter, totaling $68.8 million. Keep in mind that the COVID-19 pandemic only began to ramp up in the U.S. in late March, meaning Livongo Health may achieve more growth in the second and third quarters of 2020. The company reported 328,000 Livongo for Diabetes participants at the end of the quarter, more than double the amount in the same period last year.
Why the momentum is not over
Currently, COVID-19 cases in the U.S. are shattering new records every day, which may lead even more diabetes patients to sign up for the Livongo app to manage their disease progression. Hence, I think Livongo Health is well on its way to achieving its target of a small net loss this year and profitability by 2021.
With more than $368 million in cash and investments at the end of Q12020 and a recent $400 million convertible offering, Livongo Health will have ample capital on its balance sheet to avoid needing to issue new shares. Management recently announced it had exceeded its revenue expectations in Q22020 and raised its original guidance by 15%. The good news is far from over for Livongo Health, and I think avid healthcare investors should add this growth stock into their portfolios.