Digital Health Startups that Could Join the IPO Wave
Although the focus of attention is now on the initial public offerings (IPOs) of well-known tech companies, a number of smaller digital health businesses are revolutionizing the healthcare sector and are probably going to go public within the next year. These firms, which may not be very well-known, have been around for at least 10 years and are attracting investors' interest and funding, according to Business Insider.
ZocDoc, 23andMe, HeartFlow, Modernizing Medicine, Livongo, Health Catalyst, Change Healthcare, Phreesia, and Peloton are nine of these digital health firms. The last five companies on that list have only lately declared their intentions to go public, bringing an end to the industry's multi-year drought of initial public offerings.
As of late, we've seen a group that is developed enough for investors to show interest in them," said Rock Health's managing director and CEO, Bill Evans. The public markets are starting to realize how these businesses are revolutionizing the healthcare industry. They're coming to see that there's a lot of potential.
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What it Means for Investors
In 180 transactions, digital health startups have raised a total of $4.2 billion so far in the first half of 2019. Should the current fundraising rate persist until the latter part of the year, it has the potential to surpass the previous record by $8.4 billion. According to Rock Health, 69% of that funding is coming from return investors, indicating that the investing industry is mature and not merely relying on an influx of capital from inexperienced, new investors.
$36.3 billion has been invested in businesses in the field of digital health since 2011. Mergers and acquisitions (M&As) have been the primary means by which investors have been able to earn a return on their investments. The industry's latest IPO took place in 2016, and of the $36.3 billion invested, $4.1 billion has been achieved via M&As compared to only $1.3 billion for IPOs. However, that is set to change, with several firms having already declared their intention to go public and others seeming ready for an IPO.
23andMe is a consumer genetics and research firm located in California that was established in 2006. Customers may submit saliva samples to the company's lab for testing using DNA kits that are sold to them. Customers may use the information to research their lineage, look for genetic markers associated with inherited ailments, and determine their risk of contracting further possible health issues. Barron's estimates that 23andMe is valued at $2.5 billion, having raised $792 million to far.
Established in 2007, Zocdoc is a New York City-based internet platform for scheduling medical appointments. Patients may use the company's web tool to schedule doctor visits, and appointments are often scheduled within 24 hours. According to CNBC, the firm is valued at over $2 billion and has about six million monthly users. Jeff Bezos is one of the company's well-known sponsors.
HeartFlow is a medical technology firm that was established in 2007 with the goal of revolutionizing the diagnosis and treatment of cardiovascular illness. In order to determine if a patient's coronary arteries are obstructed, the business created software that uses a CT scan to produce a customized 3D model of the patient's arteries. Serving patients all around the globe, the firm is worth $1.56 billion.
Looking Ahead
There is still a lot of value in the digital health sector that has to be discovered because of the $36.3 billion in venture money that has been invested in digital health firms since 2011—of which $29.4 billion has not yet found an exit option. Investors should keep an eye on the other established companies that are probably going to declare intentions for an IPO throughout the course of the next year. Some of that unlocking will come from the startups that have just revealed plans to go public this year, while others will come from ongoing M&A transactions.
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