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WELL Health’s entry into Quebec gets thumbs up at Desjardins


WELL HealthDesjardins analyst David Newman likes the new deals made by Canadian healthcare tech company WELL Health Technologies (WELL Health Technologies Stock Quote, Chart, News TSX:WELL).

The analyst delivered an update to clients on Tuesday where he reiterated his “Buy” rating and $10.00 target price for WELL, which at the time of publication represented a projected 12-month return of 74 per cent.

Vancouver-based WELL Health owns and operates 20 primary healthcare clinics, has Canada’s third-largest digital electronic medical records (EMR) business serving over 2,000 medical clinics, has a national telehealth service and provides digital health, billing and cybersecurity-related technology solutions.

The company on Tuesday announced the acquisition of Montreal-based omni-channel healthcare company ExcelleMD, which provides virtual and in-person care to companies, executives and consumers through five multidisciplinary clinics in Québec, 26 medical practitioners and 12 nurse practitioners and through its VirtuelMED telemedicine platform and has a B2B service incorporating services such as annual employee health assessments, executive check-ups and pre-hire exams.

WELL Health said the deal, which will be complete following the closing of the share purchase agreement dated December 8, 2020, involves $8.3 million, $4.5 million of which is in cash, $2.25 million in common shares and $1.5 million in holdback and performance earnouts.

“ExcelleMD owns and operates a highly sophisticated multi-disciplinary network of clinics that has successfully integrated virtual care with its portfolio of high-value services which includes primary care as well as corporate and executive health services,” said Hamed Shahbazi, WELL’s chairman and CEO, in a press release.

“Québec is a large market opportunity for us and ExcelleMD is intended to be a foundational acquisition for WELL’s expansion into Eastern Canada and WELL’s entry into corporate and executive health services which we will look to expand nationwide.”

On the acquisition, Newman said ExcelleMD has a revenue run rate of about $6 million which is growing in the double digits yearly and has EBITDA margins exceeding 20 per cent. The analyst estimated the deal at pre-earnout multiples of about 1.4x revenue and about 5.5x-6.5x EBITDA, which he said is higher than WELL’s previous clinic acquisitions at about 0.3x-0.6x revenue but is nonetheless justified due to ExcelleMD’s network of “bricks-and-clicks” and multidisciplinary, high-margin clinics.

Overall, Newman judged the move as a positive for WELL.

“[WELL is] entering Québec, which we previously highlighted as an attractive market for WELL’s clinic acquisitions, with a sizeable footprint — a network of tech-enabled clinics with stickier high-end B2B health revenue (executive health),” Newman wrote.

“We expect the 38 health practitioners will be motivated to join WELL given: (1) ExcelleMD’s two co- founders will remain leaders of the company; (2) practitioners are eligible for performance-based RSUs; and (3) the value add of WELL’s progressive digital healthcare hybrid platform,” he said.

“Bringing its clinical footprint to 25 clinics across BC and Québec. ExcelleMD has also negotiated options to acquire at least two affiliates (ExcelleMD Mont Tremblant and Toronto) within its network of non-corporate-owned locations. WELL intends to exercise these options to grow ExcelleMD’s footprint to at least seven locations within the next couple of years,” Newman wrote.

Newman estimated ExcelleMD will grow WELL’s revenue run rate to $94 million, while the analyst noted WELL’s “robust” acquisition pipelines including close to ten Letters of Intent and funded by over $90 million in dry powder.

WELL Health, whose share price has increased 360 per cent so far in 2020, announced last week a $5-million minority interest in Simpill Health Group, a full-service digital pharmacy with e-prescription products and services. By the deal, WELL has struck a strategic alliance agreement with Pillway to market and promote Pillway’s products and services through WELL’s EMR network and to integrate Pillway into WELL’s OSCAR Pro EMR platform and to feature Pillway’s app on WELL’s marketplace.

On the deal, Shahbazi said Pillway is reimagining the pharmacy experience into a digital one.

“We think the Pillway ‘App’ will be a big hit on with our network of OSCAR EMR clinics. This investment in Pillway is a continuation of WELL’s efforts to democratize access to valuable healthcare services as the overarching goal of our Digital Apps business unit is to offer a broad array of patient facing Apps and capabilities that empower patients to better manage their health and seek the best care available,” Shahbazi said in a December 3 press release.

WELL Health last reported earnings on November 12 where its third quarter 2020 featured revenue of $12.2 million compared to $8.2 million a year earlier and an adjusted EBITDA loss of $153,488 compared to a loss of $512,076 for Q3 2019. The company said it had a significant increase in clinical patient services revenues from Q2 to Q3 2020 brought on by a return to physical in-clinic consultations, while at the same time its virtual care-related revenue continued to increase over the third quarter.

(Disclosure: Nick Waddell and Jayson MacLean own shares of WELL Health Technologies and the company is an annual sponsor of Cantech Letter.)

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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