The long-awaited digital health IPO is back, but most late-stage healthcare startups aren't ready for it, according to bankers

After a prolonged hiatus from the IPO market, the digital health sector is cautiously re-emerging, with Hinge Health and Omada Health leading the charge. Their recent public offerings have sparked some optimism, yet industry experts caution that a significant influx of IPOs is unlikely until at least 2026. Hinge Health, specializing in physical therapy, and Omada Health, focused on chronic care management, successfully launched their IPOs in the first half of the year. Both companies' stock values soared on debut, hinting at a renewed interest from public investors in healthcare stocks. However, the buzz surrounding additional IPOs in the healthcare sector has been minimal, as many startups remain unprepared for the rigorous demands of going public. Rob Stowe, head of Americas equity capital markets at Barclays, noted that numerous companies had not anticipated the current IPO window and were thus not adequately positioned. "There are many firms that have been waiting for others to venture into the public market before making their own moves," he stated. The firms that have taken the leap, like Hinge Health, have reaped the benefits, with its market cap climbing significantly since its IPO. While Hinge Health's impressive performance stands out, the general sentiment among bankers and investors suggests that most healthcare startups eyeing an IPO will likely delay their efforts. Aaron DeGagne, a senior healthcare analyst at PitchBook, expressed skepticism about the imminent wave of listings, stating, "I’m not convinced we’ll see many more in the next few months." The healthcare startup landscape is still feeling the effects of the last IPO drought. Several companies had been poised to enter the market since 2022, only to find that their timing was off. For instance, Included Health, which had confidentially filed for an IPO, has yet to make its public debut. The path to an IPO is complex, requiring extensive preparation that can span over a year. Stowe emphasized that once a company decides to initiate the IPO process, it typically takes at least six months to prepare adequately. This timeline pushes the earliest possible IPOs for late-stage startups into late 2025 or early 2026. Market uncertainties persist, with public investors wary of companies that may be adversely affected by changing tariff policies. This caution could delay IPO plans for companies like Medline, which has also filed to go public. While some in the industry remain hopeful for an uptick in IPO activity, others anticipate a surge in mergers and acquisitions among startups that are not ready for a public offering. Morgan Cheatham of Breyer Capital noted that many companies are currently considering whether to merge or seek acquisition as a viable exit strategy. Despite the challenges, the successful IPOs of Hinge Health and Omada Health are seen as positive indicators for the market. However, the reality remains that not all healthcare companies are prepared to take advantage of the potential opportunities. Stowe remarked, "The current crop of IPO candidates is smaller than what we saw a few years ago, and profitability continues to be a sticking point for many." As the landscape evolves, investors may show more flexibility with unprofitable healthcare AI startups, especially those in high-demand areas like obesity care. Overall, while the market shows signs of recovery, the journey back to a thriving IPO environment is fraught with caution and high expectations.