Wellness Lifestyles CEO Alex Read talks to Cantech Letter

The future is now. Or is it tomorrow?

In some spaces, the light of technology has a harder time illuminating the shadows. These days, your phone can get you a ride to the airport, help you pay your bills, or even give you directions to the nearest hospital. Once you are inside that building, however, the advances have abruptly ended. How many of us are still offering a scribbled note to a pharmacist who is picking up a landline to verify the prescription the doctor has written?

But things are changing. The days of a cramped and musty waiting room filled with copies of Sports Illustrated from the 1990’s are about to go the way of BlockBuster. According to a recent report from Grand View Research, the global telehealth market will enjoy a staggering annual growth rate of 18.3 per cent, reaching $113-billion by 2025.

One tech junior is getting out in front of the story. The recently formed Wellness Lifestyles (TSXV:WELL) has a strategy that will see the company introduce emerging digital healthcare technologies to the primary healthcare marketplace. The company has begun to make acquisitions it thinks will position it to both lead and enjoy the tailwinds of the exciting sector.

Cantech Letter talked to CEO Alex Read about what’s next for the company.

Alex, can you tell us how Wellness Lifestyles came together?
The inception of WELL was a CPC on the TSX Venture Exchange called Movarie Capital Ltd. Movarie completed its Qualifying Transaction on the 24th March 2016. It further successfully completed a Fundamental Acquisition on the 15th June 2017 that allowed the company to evolve to its current business and thus resulted in the company being re-named to Wellness Lifestyles Inc. The goal of this journey was to bring together: 1) the right people with a proven track record of success, 2) a focus on operating in the right market and 3) with the right strategy for shareholder focused execution.

The business seems to have pivoted in the short time the company has been around. Why is that?
The overall vision for WELL has remained consistent. We’re focused on accretive M&A activities in the health and wellness sector in order to maximize profitable growth through the latest technological advancements.

With the original transactions (QT and Fundamental Acquisition), we were looking at our Wellness platform being built from the entry point of products and services that would support healthy aging and living (ie. Yoga, athleisure, etc) ; however, as our M&A committee researched opportunities to solve problems and be impactful in large/important markets, our attention turned to the opportunity to modernize the common brick and mortar medical clinic. We believe the vast majority of these clinics are under-achieving from a technology perspective (especially in Canada) and we feel we can make a big and positive consumer impact and at the same time build a very valuable shareholder focused business.

At WELL we’ve identified an opportunity to own and operate a significant number of primary healthcare facilities and through digital technologies, improve patient experience, cost efficiency and care performance…

Wellness Lifestyles is now centered around healthcare clinics. Why healthcare clinics?
The Canadian healthcare (care delivery) sector is valued at $242-billion per year. This is also a market that has been consistently growing for many years, with 3.9% growth in 2017. With the emergence of new healthcare focused technologies over the last few years, this sector has become very fragmented. At WELL we’ve identified an opportunity to own and operate a significant number of primary healthcare facilities and through digital technologies, improve patient experience, cost efficiency and care performance.

You are marrying two different businesses, bricks and mortar clinics and new technologies you think can differentiate them and make them more efficient. What’s the margin mix on each side?
There are indeed different cost structures between a “bricks and mortar” business and a technology company, with the latter typically having a high burn rate in the early days as the model is built out. At WELL our goal is to only conduct clinic acquisitions that enable to company to operate in a profitable manner. Our goal is then to introduce accretive technologies that enhance patient and care performance. Initially such digital enhancements would be introduced through strategic partnerships until the company is in a position where it can become a technology developer.

If you were to simply acquire the clinics, are there efficiencies you can draw out that would make them more profitable?
Absolutely, as with most business consolidations, there are always cost efficiencies able to be unlocked as part of operating within a group. These range from shared backend services (i.e. accounting and finance), to increased vendor buying power, to centralized patient management services, and even shared professional resources (i.e. doctors being able to fill-in for vacations, etc at other clinics). There are certainly numerous efficiencies open to us that will have no negative impact on service quality, yet provide better returns for our investment.

We spent a lot of time ensuring we pulled together the right people with a proven track record of success. Our board is a very key element of this structure. Our focus on a disciplined and accretive M&A strategy has come from blueprints for success from companies who have been extremely successful with M&A…

What kinds of technologies do you hope to introduce to the Wellness Lifestyles clinics?
Our M&A committee is currently reviewing a number of opportunities that are on our watch list. All of these technologies are designed to improve the patient experience, from booking appointments to after visit care. We want to enable doctors to focus on the delivery of excellent medical care, and improve the backend efficiency of the clinic management. Some category examples include Telemedicine, Electronic Medical Records (EMR), Personal Health Records (PHR), Patient Management Systems, and AI integration.

Are you envisioning a whole new type of clinic in Canada?
This is a sector that is highly regulated (and rightly so). So, the fundamental model of healthcare delivery is not something we see changing in the near future (the primary care facility / family doctor practice). However, we do envision developing an entirely new service experience for patients and doctors that’s derived from the use of emerging healthcare technologies. As we grow, we’ll also be looking to increase our non-core product offerings in the clinics to provide additional add-on services that aid a patient’s overall health and well being.

Is there enough of a pool of clinics for WELL to continue to make accretive acquisitions?
Absolutely, that’s one of the key facts that we love the most about this industry and why we decided to go this way, there are a significant number of clinics which are owned and managed by a very diverse group of doctors and/or entrepreneurs. There are still plenty of operating clinics. In fact, since we issued our news on the 30th November 2017 regarding our acquisition plan, we’ve been approached by a number of groups interested in exploring opportunities with us.

As an accretive M&A focused company, the next 12-months will see WELL continue to grow through disciplined M&A activity. It’ll certainly be an exciting journey as we look to create multiple synergies in our foundation portfolio of medical clinics, while looking to add additional clinics and technology assets into our portfolio…

How many clinics would you like to acquire? Is there a timeline?
Our primary objective is being focused on a disciplined and accretive M&A strategy. Therefore, we’re not out simply trying to acquire a certain number of clinics, it has to be the right opportunity and at the right price for us to be interested. When we find potential opportunities, we run them through our diligence process, and will then look to acquire clinics that fit our strict criteria both financially and operationally. But having said that, we also have a desire to be aggressive and grow WELL quickly.

You are focused strictly on the Canadian market?
At this stage we are focused on the growth of our clinic operations within the Canadian market. We understand the landscape (both competitive and regulatory), but in the long term we are also exploring opportunities in the US and beyond. This becomes especially relevant when we look towards the scalability of any future technology platforms that we integrate. The healthcare market is a truly global market, and we intend to have globally scalable technology solutions in our portfolio.

Tell us about working with your board. How has that been so far?
We spent a lot of time ensuring we pulled together the right people with a proven track record of success. Our board is a very key element of this structure. Our focus on a disciplined and accretive M&A strategy has come from blueprints for success from companies who have been extremely successful with M&A.. By extension, our board, which is composed of a number of tenured and experienced public company professionals, has been a huge asset. The board is certainly very hands-on and active in our success, which has been a great asset for management as we look to rapidly grow.

Having this clear alignment on our philosophy and approach has been a really powerful tool within WELL to ensure we’re on the right track and looking at the right opportunities that are in the best long-term interests of our shareholders.

What do you hope to accomplish in the next 12 months?
As an accretive M&A focused company, the next 12-months will see WELL continue to grow through disciplined M&A activity. It’ll certainly be an exciting journey as we look to create multiple synergies in our foundational portfolio of medical clinics, while looking to add additional clinics and technology assets into our portfolio.

Disclosure: Wellness Lifestyles is a sponsor of Cantech and editor Nick Waddell owns shares of the company.