Shares of Salt Lake City-based analytics vendor Health Catalyst began trading on NASDAQ on Thursday. The initial public offering had been a long time coming.
Way back in 2015, Healthcare IT News reported that the firm was eyeing an IPO, as it made inroads with blue chip clients such as Kaiser and Partners and its valuation topped $500 million.
Since then, Health Catalyst’s growth has only continued. By early this year, the company had doubled that number – becoming a new healthcare unicorn valued at more than $1 billion, after a new funding round of $100 million.
So, years after first laying the groundwork for such a move, today was the day for an IPO, said Health Catalyst Chief Financial Officer Patrick Nelli.
“When we and our board thought about the decision to go public, we wanted to make sure we were of a size and scale, as well as predictability, to be a good public company,” Nelli explained.
“We’ve reached that size and scale, and a level of predictability – with greater than 90 percent of our revenues being recurring in nature last year – where we felt comfortable doing this,” he said.
The company priced initial shares at $26 this week, and with an offering of 7 million of them stood to raise $182 million in cash.
Health Catalyst may have lost its nominal “unicorn” status (the term is reserved for privately held startups), but it’s gained the wherewithal to help advance its founding goal: helping healthcare organizations nationwide improve their use of analytics – and “ultimately hoping that all healthcare decisions become data-informed,” said Nelli.
“There is a trillion dollars of waste in the U.S. healthcare system, 30 cents of every dollar,” he explained. “In order to fulfill our mission, we need to get much larger. So this capital will help support our growth over the foreseeable future.”
As of Thursday afternoon, Health Catalyst shares were up 49%, trading above $38.
“We are in the early innings of the digitization of healthcare,” said Nelli. “A lot of our customers have only had information in a digital format available to them over the last several years. So that means we are just scratching the surface when we think about these types of various use-cases for using data to help these organizations drive improvements.
“Given that we’re still in the early stages,” he added, “we think we’ll continue to see improvements like the ones that we’ve helped customers achieve, such as helping them reduce their sepsis mortality rates by making more data-informed decisions, or helping them increase their patient throughput in the emergency department. We think there’s a lot of room to continue to go in helping our customers with clinical, financial and operational use-cases.”
After several years without many notable health technology IPOs, there’s suddenly been a spate of them in recent weeks. Change Healthcare went public on June 27. Phreesia began trading on July 19. Like Health Catalyst, chronic disease management startup Livongo also had its IPO on July 25 – and, like Health Catalyst, its shares surged on the first day.
Does Nelli think that signifies healthcare is at another inflection point? Or is it just a coincidence?
“We are seeing the digitization of healthcare in front of our eyes,” he said. “We’re able to help our customers leverage all of the data that’s being generated in healthcare, and these other companies that you mentioned are also helping their customers with digitization in various ways.
“We’re very excited for them, and we are excited to help our own customers leverage their data to make better-informed improvements,” he added. “And we think we’ll continue to see a number of innovations going forward.”