The digital health initial public offering (IPO) landscape has witnessed considerable fluctuations over the past few years. Following a notable surge in IPO activity in 2021—where 21 out of the 57 currently active public digital health companies made their market debut—interest has largely waned. Reports from Halle Tecco, founder of Rock Health, indicate that since then, only a few firms, like Tempus AI and Waystar, have made moves to file for public offerings. This slowdown is compounded by challenges experienced by companies that have already gone public, such as Accolade’s recent acquisition by Transcarent and Teladoc Health’s alarming $1 billion loss in 2024.

In this climate of uncertainty, Hinge Health recently took the bold step of filing for an IPO. This San Francisco-based company specializes in providing digital musculoskeletal care for conditions such as acute injuries, chronic pain, and post-surgical rehabilitation. With more than 2,200 employers and health plans relying on its services, Hinge Health aims to capitalize on a market characterized by substantial demand. Its last valuation stood at an impressive $6.2 billion in 2021, and it has raised over $1 billion to date.

This brings us to the critical question: is now the right time for Hinge Health to go public? Michael Greeley, co-founder and general partner of Flare Capital Partners, expresses a cautiously optimistic view. He highlights the company’s high margins, strong growth metrics, and its alignment with a massive market demand, making it an attractive prospect. However, Greeley also notes the multifaceted challenges within the sector, including regulatory uncertainties that could jeopardize a successful market entry.

For Greeley, the rationale behind Hinge Health’s IPO pursuits must be offensive rather than defensive. He underscores that a defensive stance—such as running out of funds—could signal desperation. Fortunately, he views Hinge as a high-quality company, well-funded and demonstrably profitable. As interest from potential investors appears to be growing, Greeley is hopeful for the company’s public offering success.

According to Hinge Health’s S1 filing, the company reported $390 million in revenue for 2024, representing a promising 33% year-over-year growth. Even more encouraging is the positive shift in their operating cash flow, netting $49 million despite a net loss of $11.9 million—an improvement from a staggering $108.1 million loss in 2023. Furthermore, musculoskeletal issues are noted to be the second largest cost driver for employers, setting the stage for significant growth potential.

Yet, caution remains. Christina Farr, managing director of consulting firm Manatt Health, questions the timing of the IPO given the current volatile state of the stock market. She notes that Hinge Health could seize the opportunity to stand out in a marketplace where fewer companies are seeking public listing.

Farr recognizes the company’s impressive metrics and growth trajectory, along with its expansion into Medicare, which holds substantial promise. However, she remains apprehensive, acknowledging that improved metrics alone do not guarantee favorable market reception.

The competitive landscape also influences Hinge’s prospects. Hinge Health currently serves 2,250 clients, covering approximately 20 million contracted lives. This position contrasts with competitors like Sword Health, which services around 10 million lives. The question remains if Hinge Health can maintain its valuation, especially given that prior valuations have come into scrutiny.

Jordan Cohen, partner at Akerman LLP, asserts that Hinge Health’s provision of musculoskeletal support is vital for enhancing employee well-being and efficiency, signaling a strong value proposition. He highlights recent partnerships with companies like Amazon and menopause-focused Midi Health as positive indicators of Hinge’s strategic direction.

As the market holds its breath, the implications of Hinge Health’s IPO extend beyond the company itself. The outcome could very well dictate the trajectory for other digital health entities considering public offerings. With potential filings from notable names like Omada Health and Maven Clinic potentially hinging on Hinge’s performance, the stakes are high.

Both Greeley and Farr agree that Hinge Health’s IPO could initiate a new wave of public offerings in the digital health sector, paving the way for a resurgence in entrepreneurial activity. With many investors awaiting realizations of gains, a successful IPO could signal the revival of interest and investment in digital health initiatives.