Written by: Jay Yi, MBA; Edited by: Chris Thompson, CFA, MBA, P.Eng
eResearch | The healthcare tech sector has been zestful with investment activity as new companies emerge to develop different ways to integrate technology into healthcare products and services to reduce costs, enhance patient experience, and improve medical processes.
Privately funded healthcare tech and biotechnology companies have been quickly growing their customer bases and revenues, and many are starting to look towards the public equity markets for larger and more affordable funding to scale business and capture market share in an increasingly competitive industry.
According to a report by Rock Health, the last US digital health company IPO was in 2016, but 4 companies were scheduled to IPO this year including Livongo (NASDAQ: LVGO), Health Catalyst (NASDAQ: HCAT), Peloton, and Change Health (NASDAQ :CHNG), a spin-off from McKesson Corporation (NYSE:MCK).
On July 24th, 2019, Livongo, a healthcare tech company that develops glucose monitors and test strips for patients with diabetes, listed on the NASDAQ stock exchange raising US$355 million. On its IPO date, the share price started trading at US$28 per share and increased by 36% to US$38.10 with a market capitalization of US$3.4 billion. Livongo’s stock closed today at $31.40.
Livongo was incorporated in 2014 in California, U.S., and, as of March, 2019, its client base of diabetic individuals increased to 164,168 compared with 68,536 year-over-year. In 2018, Livongo’s revenue was US$68.4 million, a 122% increase year-over-year, but its net loss widened to US$33 million, a 106% increase year-over-year.
On the same day in July, Health Catalyst (NASDAQ: HCAT), a healthcare data and analytics company, also had a NASDAQ exchange IPO and raised US$182 million. On its IPO date, the share price started trading at US$26 per share and increased to US$39.17 per share with a market capitalization of US$1.4 billion. Health Catalyst’s stock closed today at $40.77.
Health Catalyst was incorporated in 2008 in Utah, U.S., and, as of December 2018, it has 128 customers being serviced through its subscription-based contract model. In 2018, Health Catalyst’s revenue was US$112.5 million, a 54% increase year-over-year, but its net loss widened to US$61.9 million, a 31% increase year-over-year.
The next billion-dollar unicorn health technology company planning to IPO in 2019 is called Ancestry.com, a research and data analytics company that focuses on family tree research and DNA-testing. Ancestry.com originally listed on the public stock exchange in 2009 under the ticker ACOM, raising US$100 million but it was taken private by Permira Advisers in 2012 for US$1.6 billion. Ancestry.com was last valued at US$2.6 billion in 2016 after it announced a round of equity financing from Silver Lake Partners and GIC.
Alongside the billion-dollar valued companies who are listed or soon to be listed on the public stock exchange, there are many early stage private health companies who are also attracting the attention of investors, such as Canada-based start-up Acorn Biolabs, a biotechnology companies focused on therapeutic cell preservation. , In January 2019, Acorn Biolabs raised C$3.3 million in seed funding from multiple investment firms, which used the funds to prepare the commercial launch of its services in Q2/2019.
As niche services and products such as genome mapping and DNA preservation becomes more affordable and available to consumers, the healthcare technology industry will become a very competitive landscape but will provide an opportunity for white space investments in companies that may become leaders in the industry.
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