Livongo Upsizes IPO to $355M in Bid to Become Netflix of Health
Livongo Health, a digital health company developing devices and software to help patients manage treatment for diabetes and other chronic conditions, said it expects to net $355.2 million in an initial public offering.
Mountain View, CA-based Livongo late Wednesday priced its offering of approximately 12.7 million shares of its common stock at $28 per share. That would give the company a market capitalization of about $2.5 billion. Strong investor interest enabled Livongo to offer more shares than it planned, and for a higher price. When the company set IPO terms last week, it targeted the sale of 10.7 million shares for between $20 and $23 apiece. On Monday, it pushed the range to $24 to $26 per share.
Livongo’s shares are expected to start trading on the Nasdaq Thursday under the stock symbol “LVGO.”
Founded in 2014 by Glen Tullman, now Livongo’s executive chairman, the company 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. The company 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.
Livongo said it had 720 customers as of June 30, according to the IPO filing. Its roster of clients includes about 20 percent of the nation’s 500 largest corporations, as measured by annual sales, including Microsoft (NASDAQ: MSFT), PepsiCo (NASDAQ: PEP), and Target (NYSE: TGT).
The company generates revenue under a software-as-a-service business model. Livongo charges its clients a monthly fee for each employee or member at the organization who participates in one of Livongo’s programs. Its typical agreement with a client lasts one to three years, according to the filing.
But one factor that distinguishes the company in the healthcare technology sector is that Livongo’s software is designed to run on its own hardware. For example, the company’s glucometer, which it said has received FDA clearance, communicates to users what a particular reading means, and whether they should take any urgent action in response. The company says its users’ average age is 53, and the majority of the 192,000-plus people in its Livongo for Diabetes program have type 2 diabetes, which is typically developed in middle-age or later.
According to the filing, part of the company’s long-term vision involves having devices and software provide real-time “signals” and “nudges” to patients to help them better understand their health. Over time, these communications could lead to fewer trips to the hospital or clinic to see a doctor in person, Livongo says in the document.
As Livongo gathers more data on its users’ behavior, preferences, and results, it will become more sophisticated at making recommendations, “in much the same way Netflix makes entertainment recommendations based on your preferences,” Livongo said.
Livongo had raised about $235 million in private investment, according to Crunchbase. A large chunk of that reported total came via the company’s most recent financing, a $105 million Series E round announced last year. Its backers include General Catalyst, Echo Health Ventures, and Kleiner Perkins Caufield & Byers.
The company, which had 471 employees as of March 31, said total sales in 2018 were $68.4 million, up from $30.9 million the previous year. Still, Livongo has yet to turn a profit on an annual basis. It recorded a net loss of $33.4 million last year, nearly twice as high as its net loss in 2017.
In the filing, Livongo said it expects its losses may widen as costs increase. The company mentioned product development, sales and marketing, and hiring more employees as areas where it expects to continue investing.