IPO to Watch: Digital Health Developer Livongo Plans to Go Public

Digital health businesses haven’t had trouble raising venture capital funds from investors—2018 was a record year with $8.1 billion in funding—but few of them have made the move to hold initial public offerings.

Livongo Health, a digital health company developing devices and software to help patients manage chronic conditions, believes it is ready, announcing Friday it’s seeking to raise $100 million as part of a planned IPO.

Mountain View, CA-based Livongo develops proprietary health-monitoring devices, such as a glucometer for diabetic patients and a blood pressure cuff for people who have hypertension or risk developing the condition. Livongo pairs these devices with software—also developed in-house, for the most part—and makes its technology platforms available to patients through commercial agreements and partnerships with health insurers and large employers.

Launched in 2014, Livongo has raised about $235 million in outside investment, according to Crunchbase. A large chunk of that total came via the company’s most recent financing, a $105 million Series E round announced in April 2018. Its backers valued Livongo at more than $800 million under the terms of that investment, a company spokesman said at the time.

With that investment, Livongo’s revenue has risen sharply in 2018 and 2019, though it has been losing money on an annual basis, according to a prospectus the company filed with securities regulators.

Livongo said total sales in 2018 were $68.4 million, up from $30.9 million the previous year.

The company’s revenue appears to be increasing on a quarterly basis. Livongo says its revenue in the first three months of 2019 was $32.1 million, more than double the $12.5 million it brought in in the first quarter of 2018.

Livongo believes its technology may help engage patients with chronic conditions, who are often older—its users’ average age is 53—and may not be satisfied with the existing treatment options they’ve considered, which might entail visits to hospitals or a doctor’s office, the regulatory filing says. The company’s system can take actions, such as suggesting users get more physical activity or providing medical information, to aid a person’s condition, according to the filing.

Still, profitability may still be a ways off. The company recorded a net loss of $33.4 million in 2018; that was nearly twice as high as the $16.9 million net loss Livongo recorded in 2017.

While many digital health startups have successfully been raising new funding, issues like high cash burn rates and unclear exit strategies may put a slight damper on the sector. Rock Health said in a report published in January it anticipated a tighter market in 2019 in digital health, an industry in which were no IPOs during 2017 or 2018. The way Livongo’s proposed IPO unfolds may be a bellwether for other healthcare technology companies that have raised large funding rounds and received lofty valuations.

Livongo is led by founder and CEO Glen Tullman. He’s an industry veteran who previously held the top job at Chicago-based Allscripts (NASDAQ: MDRX), one of the leading vendors of electronic health records software.

Diabetes was Livongo’s first area of concentration after Tullman launched the company.

As of March 31, more than 164,000 people were members of Livongo for Diabetes, a program the company offers through employers and health insurers it works with, according to the prospectus. Patients who qualify for the program are able to receive blood glucose test strips from Livongo, which can be used with the company’s glucometer, at no additional cost.

In addition to diabetes and hypertension, Livongo is seeking to help patients in areas such as behavioral health and weight management; the company gained a stronger foothold in weight management through its acquisition of Chicago-based Retrofit last year.

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