Oscar Health’s $1B IPO sets the stage for more health tech exits in 2021

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Oscar Health has unveiled a plan to go public for $1.054 billion, making it the largest public debut by a health tech startup so far this year and there could be many more digital health startups maturing soon.

As interest rates remain low and investment interest in the stock market remains high, the New York City-based company’s offering is a harbinger for good things to come in the digital health space, particularly as many of these startups mature and new ways to go public pop up in the market, according to Michael Yang, managing partner of the Omers Venture investment firm.

“It’s just building off the crescendo of the last two years,” Yang said. “You had a few in ’19, you build that drumbeat in ’20 and by ’21, people are just kind of conditioned to expect this.”

Last year, seven healthtech startups went public, according to a recent report by Silicon Valley Bank. Over the next 18 months, the banking group expects the number of digital health IPOs to nearly double to 15. So far this year, Clover Health, 23andMe and Owlet have all entered the public markets. Telehealth platforms MDLive and Talkspace have also been vocal about their plans to go public in 2021. After primary care providers One Medical and Oak Street Health launched IPOs in 2020, Yang said he expects competitor Crossover Health to go public this year too.

“If one of your notable, related competitors has gone out it’s, you know, keeping up with the Joneses. You’re not that far behind,” Yang said.

This year, he expected the number of health tech companies going public through special-purpose acquisition company to rise. Adam Block, an assistant professor of economics at New York Medical College, similarly said the rise in new ways to go public has led to an increase in companies exiting into the public markets.

But, the major mover and shaker in the marketplace was the creation of the Center for Medicaid & Medicare Innovation Center under the Affordable Care Act in 2014. He said the organization’s charge of improving the quality of care, customer service and lowering consumer healthcare costs created natural opportunities for tech companies that specialize in organizing data and creating user-friendly interfaces. Healthcare is so different across sectors, and that has led to an explosion of different products for different disease types, like apps dedicated to organizing blood sugar information for diabetics or tools focused on aggregting data for asthmatics, he said.

“If those set of organized data and user friendly apps can improve health, reduce the number of emergency room visits or avoidable readmissions, well, they can save [accountable care organizations] and health insurers lots of money and they’re starting to realize that,” Block said. “So that’s why there has been this sort of blossoming of the environment for all of these types of companies.”

He expects digital health companies with services specific disease types to go public this year. Block also expected a boom in telehealth companies thanks to the pandemic.

And, as people continue to avoid traveling, going out to eat and attending shows during the pandemic, Block said more people will invest their savings in the stock market.

“People are saving more money and when they save more money, interest rates are at record lows. So you can save money, and get 0.01% on your money or you can put it in the stock market, which is growing by leaps and bounds,” Block said. “So what that means is that there’s a higher demand for stocks that’s not necessarily related to the fundamentals of the company.”

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