This year saw a boom in healthcare IPOs, especially for tech companies, as the coronavirus pandemic turbocharged telehealth use and investors saw a shining opportunity.
The activity follows a relatively sparse few years in terms of the decision to go public among health firms, other than a few high-profile examples.
The year started off with primary care chain One Medical announcing its IPO at a market cap of $1.7 billion. At the end of January when ONEM started trading, the stock jumped 60% on its first day.
Then the world changed as COVID-19 began its spread, hitting the U.S. hard starting in March and April. As the economy slowed nearly to a halt, stocks went into freefall and most companies hunkered down, avoiding any major moves.
The subsequent months, however, saw the nascent telehealth industry vaulting forward. That pushed companies like SOC Telemed and Hims & Hers to go public in July and October, respectively.
In between, telehealth vendor Amwell announced its IPO to an eager market. Its first day of trading saw shares jump nearly 30%, though it's been relative steady since.
A handful of health companies went public this year
David Ethridge, U.S. IPO services leader at PwC, said the IPO market has been active this year across multiple industries — not just in health IT — which is somewhat puzzling considering the volatility of the market. "The wacky aspect of 2020 is we've had tons of uncertainty and we've had a really active IPO market. And I've never seen that in my 30-year career on Wall Street," he said.
Through the third quarter of this year, healthcare companies raised nearly $30 billion in IPO activity, which is more than the full-year amount from each of the past five years, according to a recent S&P Global Market Intelligence report.
Arielle Trzcinski, a senior analyst at Forrester, said the spate of IPOs tells her that consumers, and their employers offering coverage, are looking for more convenient and accessible care.
"That points to a really big market opportunity for primary care that meets people where they are, for digital health whether it be remote patient monitoring or the use of artificial intelligence," she said. "It just points to this future on the horizon of moving toward a more continuous model, and I think these IPOs and companies that are already public are going to have a significant impact in terms of how the healthcare landscape is going to look very different."
Looking forward, she sees space for other sectors to bloom, including behavioral health and physical therapy — needs that have grown during the pandemic.
Ethridge said there are many reasons a company may decide to go public. Perhaps it's looking to fund ambitious growth or M&A. Or it could be looking to bring more attention to the brand and distinguish itself from private competitors.
One key question going in 2021 is whether this spate of IPOs will continue and what the trend means for the sector.
Ethirdge said he'll be watching whether companies are pricing within range of the original pricing. A lot of pricing above range, for examples, could mean investors aren't scrutinizing deals as well as they should be.
With health IPOs showing so far what Ethridge calls "stupendous returns," the momentum for next year will be high, especially if telehealth continues to show its staying power.