Chronic disease management company Livongo Health is helping break the drought of digital health companies going public. The Silicon Valley-based company expects to raise $100 million in its initial public offering and will be listed on the Nasdaq later this year under the symbol “LVGO.” The company could be valued at $2 billion.
Digital health funding has been in the doldrums prior to the latest wave of companies planning to go public. A Rock Health Report revealed that in the first quarter of 2019, digital health investments were just under $1 billion, about half of the amount invested in the same quarter a year earlier. The amount was also at about the same level as funding during the first quarter of 2017 and more than 30% under first-quarter 2016.
Experts said the industry was in a bubble. That was the consensus of those attending the annual Health 2.0 conference in Santa Clara, California last September. It featured speakers from Canaan Partners, GE Ventures and Sanofi Ventures, the VC arm of Sanofi (SNY, Financial).
The momentum appears to have shifted. A host of health care technology companies besides Livongo are tapping the public market. They include Change Healthcare (CHNG, Financial), Phreesia and Health Catalyst, both of which recently filed for IPOs.
Livongo’s mainstay is diabetes management, though it’s also moving into areas of hypertension and mental health, according to a recent article on Feedspot.com. Livongo for Diabetes has nearly 165,000 members. The management solutions consist of a connected glucose monitor, unlimited test strips, personalized health suggestions, digital tools and coaching. It’s estimated the program has saved clients nearly $130 a month.
The company makes a blood-glucose meter that's used by 120,000 diabetes patients to instantly upload their blood sugar data to Livongo's analytic engine. If a user's results are outside normal, they immediately get a call or text from a diabetes consultant who evaluates the situation and suggests next steps, which include calling the doctor or just taking a walk. Livongo counselors are available around the clock for consultations.
Livongo derives part of its revenue from clients like Amazon (AMZN, Financial) and Target (TGT, Financial). They pay the company $65 to $75 a month for each of their employees it monitors.
Clearly, Livongo needs to expand its customer base. Its losses last year doubled from 2017 to $33 million. The trend is continuing into 2019 as the company posted a loss of $15 million in the first three months of the year. The revenue side is looking good, though. It doubled from 2017 to nearly $69 billion last year, and that trend is continuing. For the first three months of the year, sales were more than $32 million.
According to the Feedspot article, half of the company’s revenue comes from distribution channel partners and resellers. The top five channel partners are Express Scripts (ESRX, Financial), CVS (CVS, Financial), Health Care Service Corp., Anthem (ANTM, Financial) and Highmark.
The number of shares being offered in the IPO and the price range has not yet been determined. Underwriters are Morgan Stanley, Goldman Sachs and J.P. Morgan.
Livongo’s largest current shareholders according to its S-1 are venture capital firm General Catalyst at more than 25%, while Swedish investment company Kinnevik AB owns 12% and Kleiner Perkins holds nearly 9%.
Disclosure: The author holds no positions in any of the companies mentioned in this article.
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