Bear market for recent digital health IPOs cautions investors

COVID fueled a record year for digital healthcare venture funding in 2021, which included 85 digital health startups achieving “unicorn” status with $1B+ valuations. But 2022 has been marked by cooling expectations amid inflation concerns and recession fears. In the graphic below, we’ve tracked the stock market performances of six recent healthcare IPOs across their opening, peak, and latest months. While not all of them are pure digital health plays, each of these companies promotes its digital solutions or tech-enabled patient platforms as key parts of their value propositions. Since going public, each company has lost between 50 and 90 percent of its initial value, more than double the S&P 500’s roughly 20 percent drop from its January 2022 peak to today’s level. The bear market has influenced the venture funding world as well, as H1 2022 fundraising totals for digital health have dropped from last year’s record-setting pace, though they may still surpass 2020 levels by year end. After the initial fervor, this market correction among “healthtech” companies is not surprising, and acquisitions—like Amazon’s purchase of One Medical—are likely to continue, as long as these market trends hold. The questions every investor should now be asking: does this start-up have a viable path to profitability in the US healthcare market, and does it deliver meaningful value to consumers?