Finance

Healthtech firm Accolade is buying telemedicine start-up 2nd.MD for $460 million, sources say

healthtech-firm-accolade-is-buying-telemedicine-start-up-2nd-md-for-460-million-sources-say

Raj Singh, CEO of Accolade, speaks during the GeekWire Summit event on October 3, 2018 in Seattle, Washington.

David Ryder | Bloomberg | Getty Images

Accolade, a healthcare technology company that helps employees manage their medical plans, is acquiring telemedicine start-up 2nd.MD to strengthen its ability to provide second opinions to users, CNBC has learned exclusively.

Accolade is about to announce the acquisition of Houston-based Innovation Specialists, 2nd.MD’s parent company, for approximately $ 460 million, according to people aware of the situation. Half of the transaction will be in cash and the rest in Accolade shares, part of which will depend on sales targets. It will be finalized next month, said the people who refused to be identified, speaking about the deal.

The move is set to nearly double Accolade’s addressable market to approximately $ 46 billion by providing the company with a provider of expert medical opinion from a network of U.S. physicians. 2nd.MD was founded in 2011 and automates the process of obtaining second opinions so that they can be done within days via video or phone, instead of the usual weeks of planning.

“At a critical moment in your journey to becoming a healthcare professional, when you are deciding on surgery or specific treatment, you are often looking for expert guidance,” said Raj Singh, Accolade CEO, in a Zoom interview this week.

“2nd.MD will take your medical records and make them available to a network of doctors who specialize in these disease categories and those doctors will do a video consultation to give you a different opinion on what is the right next step is “he said.

The start-up has 300 corporate customers with more than seven million employees and sales of around 35 million US dollars last year. This is evident from documents that have been viewed by CNBC. Singh said he plans to incorporate 2nd.MD into his company’s products and offer it on its own.

Just as the digitization of financial markets has attracted billions in investment and a spate of M&A activity, the nascent field of health technology has seen a surge in interest during the coronavirus pandemic. Digital health startups around the world received an estimated $ 24.1 billion in venture capital in 2020, 29% more than last year and a record third quarter according to CB Insights.

“How consumers access care and how they choose to make care decisions is all changing, driven by a health system that is under tremendous stress,” said Singh. “You see significantly more opportunities for consolidation in this area.”

Accolade, which went public in July, counts CNBC’s parent company Comcast as both a major customer and an investor. Seattle-based Accolade was advised on the deal by Goldman Sachs.

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