Insurtech startup Alignment Healthcare has launched its much-anticipated IPO, through which it aims to raise between $462 million and $516 million.
The Orange, California-based startup — which offers Medicare Advantage plans — is planning to sell 27.2 million shares of its common stock, including 5.5 million shares to be offered by existing stockholders. The IPO price is expected to be between $17 and $19 per share, according to the information contained in a March 18 Securities and Exchange Commission filing.
Alignment expects to have around 187.3 million shares outstanding following the IPO, which would value the firm at roughly $3.6 billion at $19 a share, according to Seeking Alpha.
The company offers Medicare Advantage plans in 22 markets, including in California, North Carolina and Nevada, and it has a health plan membership of approximately 81,500.
Among a growing number of insurtech companies in the healthcare market, the company claims to use predictive analytics to determine what level of care seniors may need. In addition, it has a 24/7 phone line that members can use to get further support for their care needs, including transportation and care navigation.
Trading on the NASDAQ under the symbol “ALHC,” Alignment Healthcare intends to use its IPO proceeds for working capital and other general corporate purposes, including continued investments in growth and potentially repaying debt.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Specifically, it plans to grow its market share in San Joaquin and Stanislaus, California, its most mature markets, by approximately 10% to 20%. The company also intends to enter new markets and partner with providers on new operating and financial arrangements.
Further, Alignment Healthcare is evaluating a contract to participate in the Centers for Medicare and Medicaid Services’ Geographic Direct Contracting Model. Through this model, CMS will enlist direct contracting entities to implement care delivery and value-based payment systems with providers in specific regions.
If the contract goes through, Alignment will become a direct contracting entity beginning in April and it anticipates being assigned around 1,500 to 2,000 members.
At the end of 2020, the company’s revenues totaled $959 million, up from 756 million the year prior. Alignment experienced losses in both 2019 and 2020 — but the loss shrank from $44.7 million the year before to $22.9 million last year.
The company filed preliminary paperwork for the IPO at the beginning of the month. The move came shortly after its insurtech startup rival Oscar Health launched an IPO, priced at $32 to $34 per share, which would value the company at up to $6.7 billion. Oscar Health also offers Medicare Advantage plans, among others.
The Medicare Advantage market is exploding, with 39% of all Medicare beneficiaries — that is, 24.1 million people out of 62 million overall — enrolled in these plans, according to a Kaiser Family Foundation report. Between 2019 and 2020, total Medicare Advantage enrollment grew by about 9%, nearly the same growth rate as the previous year.
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