In recent years, the digital health IPO market has not been fully active. Rock Health founder Halle Tecco said in a blog post that 57 of the 57 active public digital health companies made their debut in the public markets from 2021 to 21. Since then, only a group of companies have filed lawsuits, including Tempus AI and Waystar.
Many people who are openly stumble to a large extent. Just recently, it announced the acquisition of public honors in 2020 for $621 million. The deal will once again privatize the company. Teladoc Health went public in 2015 and reported a loss of $1 billion in 2024.
Meanwhile, Hinge Health proposed an IPO last week, making a leap in faith. The San Francisco-based company provides digital musculoskeletal care for acute injuries, chronic pain and post-operative rehabilitation. It serves over 2,200 employers and health plans. The company's latest valuation was $6.2 billion in 2021 and has raised more than $1 billion so far.
But understanding the struggles of people who have had an IPO before, and the deep uncertainty that the market is currently involved in is Now open and wise move?
Michael Greeley, co-founder and general partner of Flare Capital Partners, is “cautiously optimistic” about the move. He noted that the company has a high financial position, high profit margins and high growth, not to mention that Hinge is addressing large markets.
“I'm really happy to see the dam break out,” he said in an interview. “But then, you just sit down and look at everything around the industry and the company, [like] Regulatory uncertainty. …You just don’t want it out, don’t succeed, and then have people say, “Look, another digital health IPO went bankrupt, but I think they have quality assets here.”
He added that it was a wise move, just offense rather than defense.
“If it's defensive, the company runs out of funds – I don't think that's the case – that could be a sign of despair,” he said. “But I think it's a high-quality company with a lot of money and very profitable. And, underwriters, the investment bank they work with, said, “Yes, there's a range of public investors who want to buy your stock in an IPO. So we'll successfully get the public public of this company.'''
According to Hinge's S1, it received $390 million in revenue in 2024, with revenue rising 33%. It also has $49 million in operating cash flow, although it is not profitable yet, with a net loss of 2024. This is a huge improvement in 2023, but when Hinge's net loss was $108.1 million. Research shows that MSK is a huge market: it is the second largest cost driver behind cancer.
That said, the timing of the document doesn't make every sense to Christina Farr, managing director of consulting firm Manatt Health.
“I'm curious about why now? Why this moment?” she said in an interview. “Because the stock market is really not in a good place right now. You can see it's very volatile.”
But, since few companies are now listed in public, there is a “full eye” moment on the hinge, Farr notes.
She added that there is a lot to like about hinge health.
“They do have some impressive metrics,” she said. “Growth is really strong. The revenue is huge. They start to expand to health insurance, and I think that's a big opportunity for them. … They tend to do well with their employers, so there are opportunities for the market to expand. But, let's see how everything is. We don't know enough yet to see how the business is.”
S1 shows that Hinge has 2,250 customers and has a lifespan of about 20 million contracts. In addition to employers, it also serves Commercial Insurance Health plans and health insurance. According to its website, this has a lifespan of 10 million compared to the swordsman health of its direct competitors and serves employers, business plans and health insurance benefits. Several other companies in the digital MSK space have popped up, including Vori Health and Recoveryone.
Jordan Cohen, partner at law firm Akerman LLP, agreed that Hinge Health has many people to like, especially those who became Hinge due to a shoulder injury. He noted that it is important to provide MSK support to employees from an employer's perspective because it makes employees healthier and more effective.
The company has also recently established several partnerships, including with Amazon and menopause company MIDI Health.
“It doesn't seem reckless. … Maybe they want to catch the momentum right now,” Cohen said.
According to Greeley, the company's valuation could face challenges, with the final round of $6.2 billion.
“It would be great if it succeeds and goes up from the $6.2 billion price, but the opportunity for the same price will be lower than the previous round,” he said. “Now, maybe the world is finally aware that investments made in 2021 and 2022, while investments in 2023 are rarely bubbled and overvalued. If it is priced below the last round, it will reaffirm those valuations are inappropriate.”
Hinge Health declined to be interviewed.
What does this mean for the future of digital health IPOs?
The industry has been focusing on a long list of publicly available digital health companies: Omada Health, Maven Clinic and MSK provider Sword Health, among others.
However, many companies may be waiting for how Hinge Health IPOs will get rid of it before making any decisions themselves. If the IPO is successful, Farr is expected to start several other companies that apply for disclosure.
“This is an IPO, which will define whether an IPO can be publicly available at this time,” she said.
Greeley responded to Farr's comments, noting that if the company sells for a high price and maintains relatively good value, others may follow it. It is important to note that neither Greeley nor Farr have investment hinges.
He added that he was glad someone finally started the process of applying to the public.
“A lot of us sit on a big unrealized gain and need to sell our companies or make them public so we can start to recover funds and invest in new companies, new startups,” he said. “There is a driving force for recycling, which is a bit stagnant given the lack of mergers and acquisitions and IPO activity. That’s why we all yearn to see some of them successfully public.”
Photo: JXFZSY, Getty Images
