Judge Dismisses Investors' Class-Action Lawsuit Against Teladoc Health

A New York district judge has tossed out a class-action lawsuit alleging that Teladoc Health misled shareholders.

The lawsuit was filed last year in the United States District Court for the Southern District of New York on behalf of all people and entities who purchased Teladoc securities between Oct. 28, 2021, and April 27, 2022.

The suit alleged that the company, its CEO, and chief financial officer made "materially false and misleading statements" about increasing competition that negatively impacted Teladoc's BetterHelp mental health and chronic care businesses. The company also lowered its 2022 full-year guidance for revenue and adjusted EBITDA in its first-quarter financial statement last year and recognized a non-cash goodwill impairment charge of $6.6 billion related to its 2020 acquisition of Livongo Health.

According to the law firm representing the plaintiffs, the company's leaders blamed the revised guidance and the impairment charge on increased competition impacting its mental health and chronic care businesses, despite having previously dismissed the threat of competition. The law firm stated that company leaders also guaranteed investors that Teladoc had a "dominant market position in the industry," which the lawsuit alleged is misleading.

But US District Judge Denise Cote has dismissed the lawsuit, stating that Teladoc leaders warned investors of risks several times.

For instance, the company's 2020 Form 10-K filed on March 1, 2021, noted that "we operate in a competitive industry, and if we are not able to compete effectively, our business, financial condition and results of operations will be harmed."

The company also warned investors in its 2020 and 2021 Form 10-Ks that the merger with Livongo will be time-consuming and expensive and could "significantly disrupt our business."

Further, the company included cautionary language in its earnings announcements, warning that its statements were not "guarantees of performance or results," Cote's opinion stated.

Not only that, but Cote noted that most of the statements identified as "competition statements" by the plaintiffs were statements of opinion that cannot be called false.

Thus, Cote granted the defendants' motion to dismiss the lawsuit.

The dismissal comes a few months after Teladoc Health released its Q1 2023 financial report, which shows that revenue grew 11 percent to $629.2 million from $565.3 million during the same quarter in 2022. But the company also experienced a net loss of $69.2 million, ending the quarter with an adjusted EBITDA totaling $52.8 million.

Teladoc Health's full-year 2023 forecast includes revenues ranging from $2.5 billion to $2.6 billion and adjusted EBITDA between $285 million and $325 million.

Competition within the virtual care arena is fierce, with telehealth companies competing with healthcare providers, payers, retail clinics, and technology giants.

Last year, Amazon closed its three-year-old Amazon Care telehealth and in-person business and, in its place, launched Amazon Clinic. The new message-based service is currently available in 32 states, and it offers virtual care for more than 20 common medical conditions, including acne, cold sores, seasonal allergies, and urinary tract infections. But the expansion of the service to all 50 states was recently paused.

Microsoft also added new features to its Teams platform last year to support virtual visits. These include a feature that enables patients to request appointments with their providers within Teams and a device tester that allows patients to test their hardware settings before their virtual appointment.

Additionally, Microsoft partnered with Teladoc Health in 2021. The companies integrated Teladoc Health's Solo platform for healthcare organizations with the Teams platform. Through the integration, clinicians can securely access EHR clinical data via Teladoc Health Solo within the Teams environment.