On top of the ongoing Covid-19 pandemic, 2020 has been punctuated by devastation: raging wildfires, record unemployment and growing inequality. But despite all of this, a number of healthcare technology companies continue to go public.
Even after the historic market crash in March, several health tech companies found an IPO window this summer. Many of them were ripe for their debut: they had been around for about a decade, had revenues above $100 million and had experienced leaders at the helm, said Omers Ventures Managing Partner Michael Yang.
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So far, seven of these firms have gone public in 2020. They include:
- Primary care startup One Medical, which raised $245 million in its January IPO
- Drug discovery software company Schrodinger, which raised $232 million in a February IPO.
- Benefits navigation platform Accolade, which debuted in early July, raising $220 million.
- GoHealth, an online insurance broker that raised $916 million in its July IPO.
- Oak Street Health, which operates primary care centers for Medicare patients, went public in August raising $328 million.
- Portable dialysis machine company Outset Medical raised $242 million in a recent IPO.
- Amwell, a telehealth company that went public just last week, raising $742 million.
All but GoHealth and Outset have seen their stock increase since going public.
The numbers are on pace with last year, which some investors called the “year of the digital health IPO.” In 2019, five digital health companies went public, including Livongo, which has seen its stock price climb in recent months:
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“Last year Uber and Lyft went public too. Tech IPOs started to happen en masse. That has continued this year,” Yang said. “A lot of these health tech business were Covid-advantaged, frankly. Is that their new baseline of operating or does that revert to the mean?”
A few more companies have recently filed IPO paperwork or are rumored to be planning one. But the window to go public this year will close soon, with the election quickly approaching.
“If you’re going to IPO, you want to do it before the election, because you don’t know what’s going to happen,” Yang said.
GoodRx, a startup that lets users compare prescription prices and access discounts, recently priced its IPO between $24 and $28 per share. Notably, it’s one of the few companies to file for an IPO this year that is turning a profit.
Direct-to-consumer telemedicine company Hims & Hers is reportedly in talks to go public through a merger with blank-check acquisition company Oaktree Acquisition Corp, according to Bloomberg. And the CEO of telehealth startup MDLive has also hinted at plans to go public early next year.
“It’s really about a business objective,” MDLive CEO and Chairman Charles Jones said in a phone interview. “Whether we use funding from an IPO or a private placement, our goal is to use our platform for a reduction in cost while increasing the delivery of healthcare.”
The company recently closed a $50 million crossover equity investment from Sixth Street Growth. Jones said the search for growth in a recession has made digital health attractive to investors, along with the challenges to the current healthcare system highlighted by the novel coronavirus.
“We can’t continue the rate of growth of healthcare delivery that we’ve experienced in the last 10 years. That’s why you’re seeing so much investor interest,” he said. “We have five banks in our syndicate and all we get is encouragement to proceed.”
More to come
As telehealth companies gain more users, and insurers take more of an interest in digital health startups, the segment seems to be maturing.
On top of that, high deductible health plans and rising healthcare prices are pushing patients to shop around more for care — when they can — leading to the rise of startups like GoodRx.
“Employers… they have started thinking about how to bend the cost curve while improving the consumer experience,” said Hemant Taneja, a managing director with General Catalyst. “Livongo, which we built in our office in the early days, was based on that premise.”
Since Teladoc announced its plans to acquire Livongo in a deal that would value the company at $18.5 billion, more digital health mergers are likely to follow. Though Taneja wouldn’t comment on the terms of the deal, he said having a platform that covers both primary care and chronic care is an “exciting place to be in terms of a virtual care provider.”
Taneja expects to see more mergers in the next year, as well as more companies making the leap to go public.
“I do think there’s a series of companies that can and probably should be public companies in the 12,14, 18 months,” he said. “It’s a reflection of the fact that this sector has become extremely interesting.”
In the long term, both Yang and Taneja see a need for more home-care solutions and technologies that would allow for aging-in-place.
“Covid has shown huge parts of the healthcare system that are not resilient,” Taneja said. “That’s actually led to a lot of focus on investing and shoring up those parts of the healthcare system.”
Photo credit: zoom-zoom, Getty Images
This article has been updated with information from Outset Medical’s IPO, bringing this year’s total to seven.
