The life sciences sector will likely be one of the major drivers in what some analysts predict as the beginning of the largest economic expansion in recent history. Fenwick’s 2021 survey of 366 tech and life sciences executives and investors points to a post-pandemic IPO boom fueled in part by innovation related to the success of COVID-19 vaccine development.

Startups working in technology and life sciences went public in record numbers during the second half of 2020 with a spate of traditional IPOs, direct listings and special-purpose acquisition companies (SPACs). This rush of activity is expected to continue at least through this year, according to our survey.

Behind the Boom

Nearly all executives and investors surveyed agree we’re in the early days of a boom period, and that the steady stream of market debuts will continue. Life sciences respondents also foresee companies in their space choosing a merger with a SPAC over traditional IPOs – especially as higher-quality sponsors and institutional investors continue to launch SPACS.

Offerings in the life sciences space could gain additional momentum from the success in developing COVID-19 vaccines. The largest life sciences IPO of 2020 was a $1.6 billion offering from private-equity backed Maravai LifeSciences, which produces biopharmaceutical products that are critical to vaccines—including Pfizer’s COVID-19 vaccine. Along with a steady stream of scientific breakthroughs in other categories, Maravai’s rising tide could lift many vessels—even those of companies with no connection to inoculations.

Bankers tell us they are bullish all the way through the year, believing the market will accelerate as vaccine distribution picks up speed.

Perhaps not surprisingly, the survey revealed differing mindsets between life sciences professionals and those from the wider technology community when it comes to how startups will go public.

The Prevalence of SPACs

Historically low interest rates, the high quality of institutional investors and other factors are driving the popularity of SPACs. However, life sciences executives and investors are spending a lot less time thinking about these special-purpose vehicles than their counterparts in technology.

About two thirds of life sciences executives and investors say the SPAC boom will last through 2021, compared to 85% of those in technology. Just 25% of life sciences respondents say they believe there is a SPAC bubble, compared to 70% of tech investors and 72% of tech executives.

It could be that these life sciences investors and executives are less concerned about SPACs because of the large number of promising life sciences companies lining up to take the traditional IPO route this year.

Learn more about what tech and life sciences leaders told us they believe is fueling the SPAC boom and what the future holds for key IPO terms such as lock-ups and dual class structures: “IPO Landscape: Surging SPACs and a Pandemic Boom Ahead.”

Even with the COVID-19 vaccine rollout beginning to accelerate, for the majority of companies—those that aren’t taking the ‘virtual-only workforce’ leap—transitioning employees safely back into an office setting, even on a part-time basis, likely won’t happen for many months. However, there are steps companies should be taking now to prepare, and Fenwick has several resources available, highlighted here, for our clients and other friends.

Staying informed of the latest news and the most recent guidance from your area is important in order to gauge when to ask employees to return to the office once they can safely do so, and for working parents, once their children are back in school or daycare. Companies are continually evaluating timelines for return-to-work protocols.

From preparing the physical workplace for return, general health and safety considerations, establishing employment and employee leave policies, and planning for employee health and testing procedures, there are myriad considerations and emerging best practices to implement before re-opening the office doors or more fully populating offices that have remained open on a limited basis.

Fenwick’s Return to Work Checklist, compiled by our Employment Practices group, is a helpful tool when considering these issues, as employee health and well-being must be a company’s absolute highest priority.

Best practices outlined in the checklist include:

  • Create a company taskforce—consisting of representatives from no less than senior management, legal, HR/people, facilities, payroll and IT departments—to oversee planning, implementation and troubleshooting of return-to-work activities.
  • Conduct a thorough hazard assessment of the physical workplace, in accordance with federal Occupational Safety and Health Administration (OSHA) recommendations, to identify all potential COVID-19 hazards and formulate a plan accordingly.
  • Establish open and transparent communication with employees around COVID-19 issues (e.g. employer efforts to maintain a safe workplace, employee rights under applicable sick and safety leave policies). Encourage employees to voice concerns and ask questions.
  • Establish a designated point person (or department) to whom employees should report all COVID-19-related issues. This should be a human resources professional, or someone in a similar role, who is trained to maintain employee confidentiality.
  • Consider proactively inquiring whether employees are experiencing COVID-19 related symptoms through a questionnaire issued to all employees on a non-discriminatory basis.

Our employment group is also keeping close track of important decisions by government agencies related to the workplace and hosting webinars aimed at keeping businesses informed. Also check out Fenwick’s COVID-19 Resource Center, which offers legal, regulatory and commercial insights that can help companies understand and navigate the pandemic and its impact on the economy and business.

Many uncertainties remain as we continue to learn more about COVID-19, new variants and vaccine availability. Navigating such a rapidly-unfolding situation may feel daunting, especially considering the “unknowns” affecting families, businesses and communities. Please don’t hesitate to reach out to me or another member of the Fenwick team if we can assist with your return-to-work planning or provide other resources that may be of help.

Questions or thoughts? Leave a comment, drop me a line or reach out on Twitter.

In prior years, it was almost a foregone conclusion that promising digital health startups would be acquired by other companies before having the opportunity to debut on the public markets. However, that changed in 2019, which was declared the “year of the digital health IPO.”

The trend continued in 2020, even as the U.S. economy struggled to recover from the economic shock brought about by the COVID-19 pandemic. Six digital health companies took the traditional IPO route in 2020 and another became publicly traded in a Special Purpose Acquisition Company (SPAC) transaction.

Analysts are expecting another healthy crop of digital health companies to join the public markets in 2021. Companies such as Clover and Hims already have via SPAC deals, and others, like Talkspace, have announced plans to do the same.

As analysts and investors weigh the potential risks and rewards of upcoming digital health IPOs, they will be looking closely at the reception that comparable companies have received during the past year from the public markets.

With these trends in mind, what does the current landscape for the digital health IPO class of 2020 look like?

The Companies

The digital health companies that went public last year have distinctly different value propositions when it comes to using new technologies to create a positive healthcare experience. But looking at their post-IPO performance, it’s clear they have some important things in common: Most of the class of 2020 is performing well on the markets, and investor sentiment surrounding all of them remains positive.

Here is a snapshot:

  • Accolade, an employee insurance benefits navigation tool, priced its stock (ACCD) at $22 per share and jumped 35% in its first day of trading. Its stock was trading at $46 per share 180 days after its IPO, and analysts agree that it is still a good buy.
  • Telemedicine company Amwell priced its shares at $18 and closed about 28% above that on its first day of trading in September 2020. Its stock (AMWL) was trading at $34 per share a month later, and $26 per share three months after its debut. Analysts are still calling the stock a buy.
  • Medicare-focused health insurance marketplace GoHealth went public last July at $21 per share. And while the stock (GOCO) is trading at a lower price today, analysts are saying the price dip represents a good buying opportunity, as the company looks to have high growth and improved margins in its future.
  • GoodRx, an online pharmacy, set its price at $33 per share and jumped more than 50% on its first day of trading last September. The company’s stock (GDRX) traded at $52 per share a month after its IPO, and it trades in that same range today. Analysts continue to assess GDRX as a good buy.
  • Outset Medical, the maker of portable dialysis machines, priced its stock (OM) at $27 per share when it debuted on the market in September, jumping more than 124% on its first day of trading. Three months after the IPO, OM was trading at around $50 per share. Most analysts are bullish and rate the stock a buy.
  • Schrodinger, a digital health company bringing artificial intelligence into the world of drug discovery, began trading at around $17 per share in February of 2020. The stock (SDGR) trades have been above $80 per share since early January, and is rated by analysts as a buy.
  • SOC Telemed, a telemedicine company that went public via a SPAC in July when startup SOC Telemed acquired “blank check company” Healthcare Merger, is trading lower today than the $10 per share it commanded in its debut last February. Most analysts, however, say the company’s stock (TLMD) is a good one to buy.

Stock prices change by the day, and analysts do not always agree on whether investors should buy, hold or sell any given security. But broadly speaking, digital health’s newest public companies—its class of 2020—are still commanding good prices in the market and receiving positive reviews from analysts.

Sentiment can be far more telling than day-to-day stock price when gauging companies’ future prospects, and the sentiment surrounding the class of 2020 ranges from positive to downright bullish.

Looking Ahead

We will likely see quite a few digital health IPOs in 2021, including companies entering the public markets in SPAC deals. In such transactions, a privately held company acquires an already public, “blank-check” company in order to list on an exchange.

SPACs used to represent just a small fraction of IPOs, but now make up more than a third of all market debuts. Some VCs recommend these deals as a more efficient and cost-effective way to reach the public markets, while others staunchly defend the traditional IPO route.

The SPAC trend may have started in other corners of the technology world, but it has since arrived in healthcare. The past two years have seen dozens of SPAC IPOs in the biotech sector, and digital health looks to be moving in the same direction.

Traditional IPOs are still going strong, too, even in sectors like biotech where SPACs have gained popularity. Some of the best performing newly public biotech companies—including Prelude Therapeutics, Atea Pharmaceuticals and Sigilon Therapeutics—took the traditional route to the public markets last year.

It will be interesting to watch how IPOs may unfold in 2021. If your company is planning one—or if you are planning to invest in one—we are here to assist as you consider your options. And, if you think the SPAC option may be a right fit, check out Fenwick’s SPAC resources, particularly our recent primer on the exit strategy discussing some of the most important aspects to consider.

Questions or thoughts? Leave a comment, drop me a line or reach out on Twitter.

Digital health companies and investors had a remarkable 2020, as fundraising totals broke records and deal volume significantly outpaced previous years. Moreover, the increase in investment activity has triggered more exit opportunities, from IPOs to M&A deals.

Among the most notable digital health transactions in 2020 was the $18.5 billion merger of telemedicine pioneer Teladoc Health and chronic disease management company Livongo. The deal made waves across the industry not just because of its price tag, but what the merger indicates about the future direction of virtual care.

In the third installment of our video series, “Digital Health Trends Shaping 2021,” I continued our virtual sit down with my good friend Megan Zweig, Rock Health’s chief operating officer, to discuss the significance of the Teladoc-Livongo deal and our healthcare system’s transition to telemedicine 2.0.

In essence, “telemedicine 2.0” involves ongoing patient engagement that is supported by analytics, which helps providers seamlessly integrate virtual care with patients’ day-to-day lives.

Continue Reading Digital Health Trends Shaping 2021: The Move to Telemedicine 2.0

To shed light on the state of diversity in the digital health startup ecosystem, Rock Health launched a new Diversity in Digital Health initiative. The project builds on Rock Health’s annual research into gender equity and now also includes analysis of the racial and ethnic makeup of startup leaders within the sector.

“This year, we specifically wanted to look at—when we start to think about the digital health teams building product, what does their composition look like in terms of race, ethnicity, gender [and] sexual orientation?” Rock Health Chief Operating Officer Megan Zweig told us. “So, we put out a more expansive survey.”

Continue Reading Rock Health Survey: State of Diversity Among Digital Health Startup Leaders

From the COVID-19 pandemic to a historic U.S. presidential election, 2020 will be remembered as the year the world turned upside down. It has also been an unprecedented year for digital health investors and companies in the sector, which have risen to meet the surge in demand for virtual care.

2020 was declared the largest funding year on record before the fourth quarter even began. It has also been a banner year for megadeals, mega mergers and IPOs, as well as a time of healthy deal flow for early-stage companies. This was also the year that investors learned to trust company founders they could not meet in person, as shelter-at-home orders moved many important pitch meetings to Zoom or Microsoft Teams.

Many of the investment and other trends we have seen accelerate this year will continue to have an impact as we approach 2021.

In the first video of our series, “Digital Health Trends Shaping 2021,” I sat down (virtually, of course) with my good friend Megan Zweig, Rock Health’s chief operating officer, to discuss 2020 investment trends and the investment outlook for 2021. In the video, Megan noted that Rock Health analysts and investors are still bullish on digital health, as Q4 continues the robust dealmaking trend that made headlines at the end of Q3.

View the video here and read key takeaways from my talk with Megan further down.

Continue Reading Don’t Miss Our New Video Series: Digital Health Trends Shaping 2021

When investors survey the digital health sector today, they see nearly every number trending upward.

There is more deal volume than VCs have seen in past years, with the third quarter of 2020 outpacing anything they’ve seen in the past by double-digit percentages. There are more veteran healthcare investors making bets in digital health, and there are more newcomers with little to no prior healthcare experience jumping in with both feet.

Investment activity by corporates and strategics is up,  and appetites for digital health offerings among public-market investors are increasing.

Mature digital health companies are reporting higher revenue, and offering more proof points that their technologies are improving patients’ lives. These companies are raising more funding than they may have done in the past, and at higher valuations. And there are more exit opportunities for these high-quality companies than there were a year ago.

Investors, company founders, policy experts and healthcare professionals at the Rock Health Summit talked about the digital health sector from their point of view. And the word “more” was used consistently.

Continue Reading Rock Health Summit 2020 Takeaways: Digital Health Is Firing on All Cylinders

Virtual healthcare staked out exciting new ground with the recently announced $18.5 billion merger of telemedicine pioneer Teladoc Health and chronic disease management company Livongo.

The deal illustrates the growing appetite among public-market investors for innovative healthcare solutions. Analysts at Rock Health likened the deal to a “starter pistol” that signals the beginning of a race—in this case, a race toward consolidation in a red-hot sector that has been maturing rapidly since the pandemic opened up a need for new models of healthcare delivery. At the same time, the initial public offering window is also wide open this year for privately held digital health companies.

Whether you invest in startups or publicly traded digital health companies, one thing is certain: the coming months and years will be active and fast-paced as established leaders team up to dominate markets and startups race toward liquidity events.

Continue Reading More Consolidation, IPOs Ahead for Digital Health Companies

Venture investors are pleased to see digital health companies continue to transform the healthcare system despite unprecedented challenges brought by the COVID-19 pandemic.

Funding for digital health startups broke records in the first half of 2020 as adoption of telemedicine and other remote programs spiked to meet the sudden surge in demand. But the future of digital health will be determined not just by consumers, technology developers and investors. Government agencies, insurers and public-market investors will also wield considerable influence, and investors are expecting more regulatory scrutiny from these stakeholders going forward.

This was a key takeaway from a July 30 virtual event held by Rock Health, “Unprecedented Funding in an Unprecedented Time,” where I joined Steve Kraus of Bessemer Venture Partners, Liz Rockett of Kaiser Permanente Ventures and Bill Evans of Rock Health for an in-depth discussion about the road ahead for digital health.

Continue Reading Digital Health Investors Offer Cautious Optimism at Rock Health H1 2020 Event

The spread of COVID-19 has created a defining moment for the digital health sector, as many products and services once considered “nice-to-haves” have transformed into necessities. Venture investors and company founders may be operating remotely but they are still hard at work, and the deal flow in the second quarter of 2020 reflects that.

The first quarter of 2020 was a record-breaker, with billions of dollars raised by digital health startups across hundreds of deals. But with social distancing efforts keeping people homebound, more than two out of three digital health investors surveyed by Rock Health at the end of the first quarter said they expected a slowdown ahead. Analysts at CB Insights echoed that prediction in early June, saying U.S.-based digital health startups would likely see a financing drop in the second quarter even as the numbers tick upward for startups based in other countries.

And yet, there has been no shortage of notable deals in the second quarter, especially for companies that, as Bond Capital’s Mary Meeker says in her special COVID-19 trends report, “decentralize medicine away from hospitals and empower patients as consumers.”

Here’s a look at just a few of them:

Continue Reading COVID-19 Pandemic Shines a Spotlight on Digital Health in Q2 2020