The digital health industry is experiencing a resurgence in initial public offerings (IPOs) after a period of stagnation, but the road ahead is not without its challenges. Experts at the recent HLTH conference highlighted the uncertainties and complexities facing companies looking to go public in the current healthcare landscape.
The past few years have seen a lack of digital health companies entering the public markets, despite a boom in health technology IPOs in 2021. Many firms that did go public during the pandemic struggled to meet expectations and some even faced collapse.
Robbert Vorhoff, managing director at General Atlantic, pointed out the current uncertainties in healthcare, such as the federal government shutdown and the impending One Big Beautiful Bill Act, which could impact insurance coverage and provider finances. These factors make it difficult for companies to commit to the rigorous demands of the IPO process and the subsequent public scrutiny.
Despite these challenges, there is a growing interest among established digital health startups to go public. Companies like Waystar, Hinge Health, and Omada Health have paved the way for others to follow suit. However, the path to IPO success requires careful planning and preparation.
Omada and Hinge Health have set a new standard for what it takes to become a successful public company. By focusing on top-line growth, profitability, and margin improvement, these companies demonstrated their readiness for the public markets. Acting like a public company even while still private helped them navigate the transition smoothly.
For companies considering an IPO, it is essential to seek specific feedback from investors and focus on building a strong financial profile. Mergers and acquisitions (M&A) are also on the rise in the digital health sector, providing alternative exit strategies for companies that may not be ready for the public markets.
As the industry continues to evolve, companies are exploring different ways to consolidate and expand their capabilities through M&A. While the process can be challenging, especially for startups unfamiliar with M&A, it may offer a viable path for growth and sustainability in the competitive digital health landscape.
Overall, the digital health IPO window is open, but companies must navigate carefully through the uncertainties and complexities of the healthcare industry to ensure a successful transition to the public markets. With strategic planning, careful preparation, and a focus on building a strong financial foundation, digital health companies can seize the opportunity to go public and achieve long-term success.
