Healthtech Accolade Company Buys 2nd.MD Telemedicine Startup for $ 460 Million, Sources Say

Accolade, a healthcare tech company that helps employees navigate their medical plans, is buying telemedicine startup 2nd.MD to bolster its ability to provide users with a second opinion, CNBC has exclusively learned.

Accolade is set to announce the acquisition of Houston-based parent company 2nd.MD, Innovation Specialists, for around $ 460 million, according to people with knowledge of the situation. Half of the transaction will be in cash and the remainder in Accolade shares, part of which depends on income targets, and will close next month, said the people, who declined to be identified when talking about the transaction.

The move is said to nearly double Accolade’s addressable market to around $ 46 billion by giving the company a provider of expert medical advice to a network of U.S. doctors. Founded in 2011, 2nd.MD automates the process of getting second reviews so that they happen in days over video or over the phone, rather than taking weeks to plan, as is more common.

“At a critical point in a person’s healthcare journey, when deciding to undergo surgery or undertake a particular treatment, you often seek expert advice,” said Raj Singh, CEO of Accolade this week in a Zoom interview.

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

The startup has 300 corporate clients with more than seven million employees and about $ 35 million in revenue last year, according to documents viewed by CNBC. Singh said he plans to incorporate 2nd.MD into his company’s products, as well as offer it on a stand-alone basis.

Just as the digitization of finance has attracted billions of dollars in investment and a wave of M&A activity, the burgeoning field of healthcare technology has seen renewed interest during the coronavirus pandemic.. Digital health start-ups around the world attracted an estimated $ 24.1 billion in venture capital funds in 2020, 29% more than the previous year and reaching a record high in the third quarter, according to CB Insights.

“How consumers access care and how they want to make decisions about care are all changing, driven by a health system under tremendous stress,” Singh said. “You clearly see more consolidation opportunities in this space.”

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