Digital Health IPO Landscape Shifts at HLTH Conference
Current State of Digital Health IPOs
LAS VEGAS — The digital health initial public offering (IPO) market is showing signs of revival after a prolonged period of stagnation, although experts at the HLTH conference highlighted that the path forward is fraught with challenges for companies aiming to transition to public markets. Recent years have seen a limited number of digital health companies pursuing IPOs, a stark contrast to the surge of health technology offerings in 2021. Many firms that went public during the pandemic-era funding surge have faced difficulties, with some even collapsing.
Challenges in the Healthcare Sector
Robbert Vorhoff, managing director and global head of healthcare at General Atlantic, addressed the uncertainty currently affecting the healthcare landscape during a panel discussion at HLTH. For instance, the ongoing federal government shutdown has extended for four weeks, hindering the Securities and Exchange Commission’s ability to process new IPOs. Additionally, the healthcare sector is preparing for potential fallout from the One Big Beautiful Bill Act, which is expected to strip millions of individuals of insurance coverage and impose new financial burdens on providers.
Vorhoff emphasized the implications of this uncertainty: “If there’s uncertainty, it’s very hard for management teams to commit to do that. The most precarious time in the growth of that company is as a new public entity.”
Pent-Up Demand for IPOs
Despite these challenges, experts report a significant interest among established digital health startups to pursue public offerings. The sector has experienced some positive developments recently, with healthcare payments firm Waystar going public in 2024. Earlier this year, both Hinge Health, a digital musculoskeletal care company, and Omada Health, focusing on chronic condition management, also entered the public markets.
Megan Scheffel, head of credit solutions for life science and healthcare at Silicon Valley Bank, noted, “We know a lot of companies who are very excited about the possibility of going public in 2026 and 2027. There are companies who are ready, and some with the financial profile to go public if the market opens.”
Blueprints for Successful Public Offerings
Learning from Omada and Hinge Health
Sasha Kelemen, a director in Baird’s global healthcare investment banking group, remarked that Omada and Hinge Health have set a new standard for what it takes to become a public company. Both firms showcased impressive growth and profitability, which were crucial to their successful IPOs.
Leaders from Omada and Hinge shared insights at HLTH about the importance of operating like a public company even while still private. Hinge’s CEO, Daniel Perez, explained that they simulated public company operations for two years prior to their IPO, conducting mock earnings calls and consistently striving to exceed expectations for four consecutive quarters.
Sean Duffy, co-founder and CEO of Omada, advised companies to seek specific feedback from investors when preparing for an IPO. “I just had enough investors say, ‘We would love this to come to market,’” he noted. This kind of encouragement can signal readiness for an IPO.
Alternative Exit Strategies: Mergers and Acquisitions
Rising M&A Activity in Digital Health
Experts indicate that going public is not the only viable route for digital health companies. The increasing complexity and scrutiny associated with IPOs make them less appealing for some firms. Consequently, the trend of mergers and acquisitions (M&A) is on the rise, with many startups opting to acquire other startups. According to Rock Health, M&A deal volume has surged by 37% compared to the previous year, with 166 acquisitions recorded through the third quarter of 2024.
Some companies are consolidating by merging similar firms to enhance efficiency, while others are partnering with adjacent businesses to diversify their capabilities. For example, a behavioral health company might join forces with a physical therapy provider.
Challenges of Merging Startups
However, experts caution that integrating two companies can be a complex process, particularly for startups that lack prior M&A experience. Kelemen commented on the current realization among many digital health companies: “Now we are seeing a kind of come to Jesus moment, where a lot of companies are realizing that if they’re going to survive, they might have to come together in different ways. But it is a painful process to do that.”