Healthcare software company Phreesia preparing for $125M IPO

Healthcare software company Phreesia filed a preliminary prospectus with the Securities and Exchange Commission (SEC) Friday for a $125 million initial public offering (IPO).

The New York City-based company plans to trade on the New York Stock Exchange under the ticker symbol "PHR," according to the S-1 registration statement Phreesia filed. The number of shares to be offered and the price range have not yet been determined, according to the filing.

Phreesia, founded in 2005, develops a patient intake management platform to automate the patient check-in process.

In the SEC filing, Phreesia said in fiscal year 2019 it facilitated more than 54 million patient visits for approximately 50,000 individual providers, including physicians, physician assistants and nurse practitioners in nearly 1,600 healthcare provider organizations across all 50 states. The company's platform processed more than $1.4 billion in patient payments in fiscal 2019, the company said in the filing.

The company has experienced strong organic revenue growth over the last two fiscal years, generating almost $100 million in revenue in fiscal 2019, up 25% from its fiscal 2018 revenue of $79.8 million, according to the SEC filing.

For the three months ended April 30, 2018, and April 30, 2019, revenue was $23.9 million and $28.3 million, respectively.

Adjusted EBITDA increased from a loss of $4.1 million in fiscal 2018 to income of $3.5 million in fiscal 2019. For the three months ended April 30, 2018, and April 30, 2019, the company's adjusted EBITDA was $1 million and a loss of $300,000, respectively, according to the filing.

RELATED: After record-setting 2018, digital health venture funding levels off

Phreesia develops and markets solutions that increase efficiency, reduce costs and improve clinical effectiveness in the healthcare industry, the company said in the SEC filing. The company identified a number of industry trends that represent significant opportunities for the company including waste and inefficiency, increasing patient financial responsibility, increasing consumerism in healthcare and the shift to value-based payment.

Phreesia estimated the current market for its platform and services to be approximately $7 billion based on the potential subscription-based revenue generated from 890,000 U.S.-based ambulatory care providers currently taking medical appointments, consumer-related transactions and payment processing fees, which are based on a percentage of payments that can be processed via the Phreesia platform, and a portion of the $6 billion spent by life sciences companies on direct-to-consumer prescription drug marketing, the company said in the filing.

The risks facing the company include privacy concerns and security breaches and the potential to ineffectively manage its growth. The company also notes that the healthcare industry is changing rapidly and the market for technology-enabled services that empower healthcare consumers is "relatively immature and unproven."

While digital health funding hit record levels in 2018, venture funding for digital health companies leveled off in the first quarter of 2019, dropping 19% compared to the first quarter of 2018, according to Mercom Capital Group.

RELATED: Venture deals, funding for digital health companies reached $9.5B last year

The last IPO of a U.S. digital health company was in 2016, according to Rock Health. Some investment firms said the lack of a robust exit market in digital health and the decline of acquisition activity was a sign the market was becoming a bubble that would soon burst.

In the first quarter of 2019, IPO activity heated up as four companies—Livongo, Peloton, Change Healthcare and Health Catalyst—made plans to go public in 2019. Goldman Sachs and JPMorgan are leading all four IPOs.

Last week, Change Healthcare upped its IPO to $1 billion, according to the Nashville Business Journal. The company originally filed its IPO in March seeking to raise $100 million before upping it to $200 million last month, the newspaper reported. 

According to the SEC filing, Change Healthcare is proposing to offer more than 49 million shares at a price of $16 to $19 each for a total potential maximum raise of $936.4 million.

In addition, Change Healthcare will sell what are formally called "tangible equity units." The company expects to raise nearly $300 million from that sale, according to the filing. Combined, the two offerings total approximately $1.2 billion, according to the Nashville Business Journal article.

Phreesia raised $30 million in funding led by private equity firm LLR Partners in 2014 and secured a $34 million funding round in late 2017, according to a report (PDF) from New York Healthcare Business Leaders. The latest funding rounding was led by Echo Health Ventures. 

Phreesia manages intake for over 70 million patients annually across its rapidly expanding network, and the company has checked in more than 15% of the U.S. population since its founding, according to an Echo Health Ventures press release from January 2018.