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Telehealth companies push healthcare IPO activity past $10B mark in Q3'20

IPO activity in the healthcare industry crossed the $10 billion mark for the second time in a row this year after companies attracted $13.44 billion in investment during the third quarter of 2020, data from S&P Global Market Intelligence showed.

A total of 82 companies went public during the three months ending Sept. 30, with one coming close to raising nearly $1 billion. Most companies going public were based in the U.S., with a handful headquartered in Asia.

Healthcare companies have raised about $29.45 billion from IPO activity this year alone, the most in at least the past five years. Third-quarter IPO proceeds were also the most for any single quarter of 2020.

Third-quarter IPO activity was dominated by U.S. telehealth companies GoodRx Holdings Inc. and Amwell, which raised about $944.3 million and $853.3 million, respectively. GoodRx is the sixth digital health company to go public so far in 2020, according to digital health investment firm Rock Health, trailing telehealth provider Amwell and healthcare IT company Accolade, Inc., which also went public during the quarter.

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While only 14 digital health companies went public between 2012 and 2016, Rock Health estimates that if all goes as planned, there will be 13 digital health IPOs in the past two years alone.

The COVID-19 pandemic has caused telehealth and digital health usage to increase significantly as people have been staying at home. "When you take a step back, across the space there's a bit of an arms race happening. There [are] lots of small Teladoc and Livongo look-alikes out right now raising money as fast as they can to broaden their platforms and scale-up," RBC Capital analyst Sean Dodge said in a interview with S&P Global Market Intelligence earlier this year.

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Global markets are still in their early recovery phase following the recession due to the COVID-19 pandemic, PwC noted in its global IPO watch report for the quarter. According to the report, a total of 477 companies went public worldwide in the quarter — raising about $116.7 billion in the process.

Ernst & Young noted in a quarterly trends report that IPOs in the healthcare sector were the third-highest for the year, only behind the industrial and technology sectors. In terms of proceeds, the healthcare sector came in second, with technology leading the pack.

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Joining GoodRx Holdings and Amwell in the list of companies that raised over $250 million through their IPO was China's Winner Medical Co. Ltd. with a total of $543.5 million in gross proceeds, followed by Beijing-based biotech Imeik Technology Development Co. Ltd. that raised about $524.9 million.

Sri Trang Gloves (Thailand) Public Co. Ltd. was the only Thai company that raised over $250 million during the quarter, with an investment of about $480.1 million during its IPO.

"Although the market sentiments can be fragile, the scene is set for a busy last quarter to end a turbulent 2020 that has seen some stellar IPO performance," EY Global IPO leader Paul Go said.

"The U.S. presidential election, as well as the China-US relationship post-election, will be key considerations in future cross-border IPO activities among the world's leading stock exchanges. Despite the uncertainties, companies and sectors that have adapted and excelled in the 'new normal' should continue to attract IPO investors," Go added.