LAS VEGAS — The window for digital well being preliminary public choices has opened after an extended interval of stagnation, however the outlook isn’t solely easy for companies seeking to make the leap to the general public markets, consultants mentioned on the HLTH convention this week.
Few digital well being corporations have entered the general public markets lately, in sharp distinction to a surge of well being know-how IPOs in 2021. Nevertheless, many companies that went public throughout the pandemic-era funding growth struggled within the highlight — and a few collapsed altogether.
There’s loads of uncertainty in healthcare proper now, making it tougher for corporations to determine to make a transfer, Robbert Vorhoff, managing director and world head of healthcare at personal fairness agency Basic Atlantic, mentioned throughout a panel dialogue at HLTH.
For instance, the federal authorities shutdown is at the moment stretching into its fourth week and stopping the Securities and Change Fee from reviewing new IPOs. In the meantime, the healthcare sector is bracing for the affect of the One Large Lovely Invoice Act, which is able to probably take away tens of millions of individuals from insurance coverage protection and add new monetary pressure on suppliers.
That creates a tougher surroundings for corporations, which want to fulfill and exceed expectations set throughout the IPO course of of their early quarters on the general public markets, Vorhoff mentioned.
“If there’s uncertainty, it’s very laborious for administration groups to commit to try this,” he mentioned. “And essentially the most precarious time I believe within the progress of that firm, the maturation that helps with the worth creation of that enterprise, is as a brand new public firm.”
Nonetheless, there’s lots of pent-up demand amongst established digital well being startups to make an exit, consultants say.
The sector has seen some shiny spots not too long ago. Healthcare funds agency Waystar went public in 2024. And earlier this 12 months, digital musculoskeletal care firm Hinge Well being and persistent situation administration agency Omada Well being each hit the general public markets.
“We all know lots of corporations who’re very enthusiastic about the opportunity of going public in 2026 and 2027,” mentioned Megan Scheffel, head of credit score options for all times science and healthcare at Silicon Valley Financial institution. “There are corporations who’re prepared. There are corporations I believe who’ve the monetary profile to go public if the market opens.”
The Omada, Hinge blueprint
Watching Omada and Hinge “redefined the blueprint of what it may take to be a public firm,” Sasha Kelemen, a director in Baird’s world healthcare funding banking group, mentioned throughout a panel.
Each companies generated enticing high line progress and margins, and demonstrated they had been both worthwhile or on a path to profitability, she mentioned.
Performing like a public firm while you’re nonetheless personal helped them put together, leaders of Omada and Hinge mentioned at HLTH.
Hinge tried to run its enterprise like a public firm for 2 years earlier than its IPO, doing mock earnings calls and deciding the agency needed to beat and lift expectations for 4 quarters earlier than going public, mentioned Daniel Perez, the corporate’s CEO and co-founder.
And when pitching traders forward of an IPO, corporations ought to attempt to get particular suggestions on their companies as a substitute of solely looking for essentially the most optimum time to hit the general public markets, Sean Duffy, co-founder and CEO of Omada, instructed Healthcare Dive.
“I simply had sufficient traders say, ‘We might love this to return to market,’” he mentioned. “And you’ve got one say that, you’ve got two say that, you’ve got 10 say that, you’ve got 20 say that. You’re like, ‘Okay, it’s prepared.’”
M&A on the rise
Going public is a excessive bar to fulfill — requiring extra prices, restrictions and scrutiny from shareholders — so it might’t be the purpose for all corporations, consultants say. Extra companies will probably be capable to pursue a unique exit by being acquired by a bigger firm.
This 12 months, mergers and acquisitions are rising, largely by way of startups shopping for different startups, in response to Rock Well being. Deal quantity elevated 37% over final 12 months, with the sector recording 166 acquisitions by way of the third quarter in contrast with 121 in 2024.
Some corporations are consolidating, combining two comparable companies to construct effectivity, Scheffel mentioned. Others are combining with adjoining companies so as to add new capabilities. For instance, a behavioral well being firm may merge with a bodily remedy supplier.
Nevertheless, integrating two corporations could be difficult, notably for startups which have by no means launched into M&A earlier than, consultants mentioned.
“Now we’re seeing a type of come to Jesus second usually, the place lots of corporations are realizing throughout digital well being broadly as effectively, that in the event that they’re going to outlive, or if the legacy was going to outlive, they may have needed to come collectively in several methods,” Kelemen mentioned. “However it’s a painful course of to try this.”
