The Status and Future of Digital Health IPOs
The digital health sector has experienced significant fluctuations in its initial public offering (IPO) landscape in recent years. Following a notable spike in 2021, when 21 of the current 57 active digital health companies entered public markets, the subsequent years have seen a marked decline in similar activities.
Recent Activities and Performance
Notably, few companies have pursued an IPO since 2021, with some rare exceptions like Tempus AI and Waystar filing for public offerings. The performance of companies that have gone public has raised concerns; for instance, Accolade’s acquisition by Transcarent for $621 million after its 2020 IPO marks a shift back to private status. Furthermore, Teladoc Health, which went public in 2015, has reported substantial losses amounting to $1 billion in 2024.
Hinge Health’s Bold Move
Against this backdrop, Hinge Health—specializing in digital musculoskeletal care—has recently filed for an IPO. The San Francisco-based enterprise serves over 2,200 employers and health plans and boasts a previous valuation of $6.2 billion as of 2021, having raised more than $1 billion to date.
Investor Insights on the IPO Timing
The decision to go public amid sector uncertainties has prompted mixed reactions. Michael Greeley, co-founder of Flare Capital Partners, describes himself as “cautiously optimistic” about Hinge’s IPO prospects due to its strong financial profile and growth potential. Greeley emphasized the importance of approaching this IPO offensively, rather than defensively due to financial pressures.
“I was really excited to see that finally, the dam was breaking,” Greeley remarked. “But then you just sit back and look at all of what’s going on around the sector and the company… You just don’t want it to go out and be unsuccessful.”
Despite its promising metrics—including $390 million in revenue for 2024 and a year-over-year revenue growth rate of 33%—Hinge Health is still navigating losses, with a net loss of $11.9 million, an improvement from a net loss of $108.1 million in 2023.
Market Conditions and Future Potential
In 2024, the musculoskeletal field remains a major cost concern for employers, being the second-largest expense behind cancer treatment according to the Business Group on Health. Nevertheless, Christina Farr, managing director at Manatt Health, questions the timing of Hinge’s IPO given the current market volatility.
“I am very curious about why now? Why this moment?” she stated, indicating skepticism about the market environment.
Farr acknowledged the advantages Hinge Health holds, including strong revenue figures and expanding opportunities within Medicare, which could bolster its growth further.
Comparative Landscape and Competitive Factors
With around 2,250 clients and 20 million contracted lives, Hinge Health stands in contrast to competitors like Sword Health, which services 10 million lives. Hinge’s collaborations with major health players such as Amazon and menopausal health firm Midi Health also enhance its market position.
Potential Impact on the Digital Health Sector
The future of digital health IPOs hinges not only on Hinge’s performance but also on the confidence it instills in other potential IPOs like Omada Health and Maven Clinic. Farr suggests that if Hinge’s IPO is successful, it could pave the way for a resurgence of public offerings in the digital health space.
“This is sort of the IPO that will define whether or not any other companies can go public at this moment in time,” Farr explained.
Greeley supported this outlook, asserting that a successful IPO could rejuvenate the sector by allowing investors to leverage unrealized gains, thereby revitalizing capital flow into new ventures. As the market watches closely, the success or failure of Hinge Health’s IPO could significantly shape the trajectory of future offerings in the digital health arena.
