Recent U.S.-Listed Digital Health IPOs Struggle with Declining Stock Prices Amid Mixed Market Reception
In recent years, the internet healthcare industry has been exceptionally vibrant, with numerous successful precedents. In addition to the year-on-year growth in venture capital investment, the proportion of successful initial public offerings (IPOs) has also gradually increased. According to a survey by VCBeat, internet healthcare companies that successfully went public in the United States between 2013 and 2014 raised a total of $2.075 billion.
Among them, two internet healthcare companies successfully completed their IPOs in 2013, raising a total of $332 million. They were BenefitFocus and Veeva. The former, which offers a cloud-based platform for selling health insurance, raised $71 million; the latter, a leading provider of cloud-computing-based commercial solutions, raised $261 million.
In 2014, there were five IPOs, raising a total of $1.743 billion. Among them, IMS Health raised $1.3 billion, Castlight Health raised $204 million, and Everyday Health raised $100 million; the latter had previously canceled its IPO plans in late 2010. Imprivata and Connecture raised $86 million and $53 million, respectively.
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1. Seven companies listed in the United States, with six on the New York Stock Exchange and two on Nasdaq.
2. In terms of launch timelines, products introduced in 2013 were concentrated in the second half of the year, specifically September and October, whereas those launched in 2014 were concentrated in the first half. VCBeat believes this pattern was largely driven by advancements in new technologies and the implementation of the Affordable Care Act.
3. From the perspective of sub-sectors, medical information services are the most popular among the seven listed internet healthcare companies, including BenefitFocus, Veeva, and Castlight Health; followed by prescription drugs, medical device data, medical service communities, and health media.
4. In terms of stock price fluctuations, a comparison of the listing prices with the closing prices on the last trading day of March 13, 2015, shows that five companies experienced declines: Everyday Health, Imprivata, Veeva Systems, Castlight Health, and Care.com. Among them, Care.com saw the largest drop, reaching 70%. The biggest gainer was BenefitFocus, with an increase of 44%. IMS Health, which was delisted in 2010, demonstrated consistent stability after its renewed IPO in 2014. By contrast, emerging concept stocks appear to carry a higher risk of decline.
5. From the perspective of investors behind the listed companies, six out of the seven companies had previously received investments from venture capital (VC) firms, strategic investors, or angel investors. There were a total of 24 VC firms involved, with Castlight Health having the largest number of investing institutions at eight. The total amount of financing before its IPO reached $177 million. Goldman Sachs appears to have reaped the greatest rewards based on the data, as it was an investor in two of the listed companies: BenefitFocus and Castlight Health.
VCBeat believes that more internet healthcare companies will apply for IPOs this year. Although the performance of internet healthcare companies that went public in 2013 and 2014 was less than satisfactory, partly because some were overly hyped on their first day of listing, the industry’s vertical markets remain a blue ocean in the cloud era. Vertical specialization enables companies to capture greater market share in a shorter time frame. Conversely, an overly broad scope tends to dilute the user base and conversion rates. Specialization may even allow your solution to become the industry standard, which in turn can further increase your market share, creating a virtuous cycle.
When Rock Health released its 2014 annual report, it identified internet healthcare companies that were likely to go public in 2015, as shown in the figure below.
Companies Listed in the U.S. via IPO: 2013–2014
Imprivata
A leading vendor in healthcare IT security, dedicated to providing physicians and their care teams with a secure medical consultation and communication platform, serving 130 hospitals and over 200 electronic health record (EHR) vendors worldwide.
Benefitfocus
A cloud-based employee benefits management company, Benefitfocus serves enterprises, their employees, insurance carriers, brokers, and other stakeholders. On the Benefitfocus platform, users can effortlessly view, enroll in, and manage their benefits information. Among these publicly listed companies, Benefitfocus has demonstrated the strongest performance, with its stock price surging by 44% over approximately one and a half years.
Veeva Systems
A global leading SaaS (Software-as-a-Service) CRM solutions provider, specializing in the life sciences industry, delivers a diverse range of innovative applications and services to industry clients worldwide. It provides precise services to more than 170 enterprises, including helping teams improve sales performance, facilitating management and collaborative relationships, and offering professional directories for clients.
Castlight Health
A San Francisco-based mobile healthcare services company that primarily offers a personalized healthcare trading platform to help relevant stakeholders better understand the prices of medical services and the quality of certain providers. (AboutFor detailed information on Castlight Health, please refer to the case study.）
IMS Health
A global leader in providing professional information and strategic consulting services to the pharmaceutical and healthcare industries, dedicated to delivering premier business intelligence products and services that meet clients’ day-to-day operational needs, including portfolio optimization services, product launch and brand management solutions, sales force effectiveness innovations, managed care and over-the-counter (OTC) products, as well as consulting and service solutions.
Care.com
A community website that primarily connects ordinary households with “tens of thousands” of medical product and service providers. Through the Care.com website, users can discuss topics such as daily care experiences, in-home tutoring, eldercare, specialized care, childcare, and pet care with other users or among healthcare institutions.
Everyday Health
Everyday Health, a health information technology company, adopts a multi-brand media strategy, operating 25 health websites, 26 mobile health applications, seven YouTube channels, and 31 social media content promotion platforms.
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