Digital Health IPOs: Hinge Health and Omada Lead the Way, Setting New Standards for Industry

In a significant turn of events for the digital health sector, Hinge Health and Omada Health have successfully broken the industry's IPO drought, becoming the first two digital health companies to go public this year. This development has sparked widespread interest and speculation about the future of digital health IPOs, with industry experts and investors closely watching for signs of a potential upswing in the public investor market.

IPO Strategies and Market Readiness

Both Hinge Health and Omada Health have emphasized the importance of thorough preparation and business maturity before pursuing an IPO. Daniel Perez, CEO of Hinge Health, revealed that his company operated as if it were public for two years before actually going public, including conducting mock earnings calls. This strategy aimed to ensure predictability and forecast ability of the business.

Sean Duffy, co-founder and CEO of Omada Health, echoed this sentiment, stressing the significance of introspection and operational maturity. "Mature your operations, scale the business, get predictable revenues," Duffy advised during a panel discussion at the HLTH conference. He emphasized that the readiness of the business should be the primary focus, rather than market timing.

Financial Performance and Investor Expectations

The financial performance of both companies has been noteworthy. Hinge Health reported $139 million in revenue in its first earnings as a public company, representing a 55% year-over-year increase. The company also boasted an impressive adjusted gross margin of 83%. Omada Health similarly demonstrated strong growth, with $61 million in revenue in its first quarter as a public company, up 49% year over year.

These figures align with what public investors are seeking in digital health companies: durable revenue growth and free cash flow. Perez noted that growth is currently valued twice as much as profitability in the public markets. He also highlighted the importance of being free cash flow positive, stating that it "completely changes the tenor of conversations you have with investors."

AI Integration and Future Prospects

Both Hinge Health and Omada Health are actively incorporating AI into their operations to enhance efficiencies and improve care experiences. Hinge Health recently unveiled an AI-based movement analysis tool and an AI care assistant named Robin. Perez expressed a bullish outlook on AI's role in healthcare, predicting that all non-touch aspects of healthcare will soon be automated by AI.

Looking ahead, the digital health sector may see a new wave of IPOs, albeit with different characteristics. Duffy suggested that future digital health companies going public will be "fundamentally delivering 'the care' and new care models, more evidence-based models, proven models," which he believes will create durable value propositions.

As the digital health landscape continues to evolve, the successful IPOs of Hinge Health and Omada Health have set new benchmarks for the industry, potentially paving the way for more companies to follow suit in the coming years.