Mental health provider LifeStance Health valued at more than $7B as stock jumps following IPO

A mother is talking with a mental health professional via web conference at home while her children are playing in the background.
LifeStance, founded in 2017, operates 370 centers and employs 3,300 psychiatrists, advanced practice nurses, psychologists and therapists across 27 states. The company, which went public last week, delivered 2.3 million visits in 2020. (recep-bg/GettyImages)

LifeStance Health, one of the nation's largest providers of virtual and in-person outpatient mental health care, climbed in its trading debut after raising $720 million in its initial public offering.

Shares of the company, which is backed by private equity giant TPG Capital, were trading at $25.34 Tuesday, up 40% from the IPO price of $18 a share set June 9.

Additional investors in the company include Summit Partners and Silversmith Capital Partners. 

The company is trading on the Nasdaq stock exchange under the ticker "LFST."

After the IPO, TPG, Summit Partners and Silversmith Capital Partners will make up a block owning 66% of LifeStance’s shares.

The company's shares jumped more than 11% in their Nasdaq debut June 10, giving the therapy provider a market value of nearly $7.5 billion, Yahoo Finance reported.

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LifeStance said it sold 40 million shares above the earlier target range of $15 to $17 a share, raising $720 million. Of the shares sold, 32.8 million were offered by LifeStance and around 7.2 million by the company's existing investors.

The company intends to use the net proceeds from the IPO to repay amounts outstanding under its existing indebtedness and for general corporate purposes, including working capital, operating expenses and capital expenditures. 

LifeStance's outsized IPO underscores the demand for mental health services during the COVID-19 pandemic.

"LifeStance has been on the same growth trajectory, pre-COVID, during COVID and post-COVID," Danish Qureshi co-founder and chief growth officer, told Fierce Healthcare.

"What's unique about our model is that we are delivering a hybrid care model that is agnostic of whether services are delivered in person or through telemedicine. We have built a platform that allows patients to seek care in whatever setting is most comfortable to them and that helps to lower the barrier to care," Qureshi said. "It’s important to increase access to mental health care services for everyone who needs it in the country."

LifeStance, founded in 2017, operates 370 centers and employs 3,300 psychiatrists, advanced practice nurses, psychologists and therapists across 27 states. The company delivered 2.3 million visits in 2020. The company provides virtual and in-person outpatient mental health care for children, adolescents and adults experiencing a variety of mental health conditions including depression, anxiety disorder, schizophrenia and post-traumatic stress disorder.

LifeStance clinicians provide in-network therapy and psychiatry services and accept most forms of commercial insurance, which significantly improves patient access to high-quality behavioral health care. 

The Scottsdale, Arizona-based company's total revenue increased from $100.3 million in 2018 to $212.5 million in 2019 and again increased to $377.2 million in 2020 on a pro forma basis. 

Qureshi said company executives decided it was the right time to go public to open up access to mental health care at a greater scale and to invest in LifeStance's technology and growth.

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"We want to invest in the technology to build out our telehealth offering and make sure we’re always delivering a best-in-class experience for patients and clinicians. We also want to invest in continued growth to be in additional geographies and more cities and states to go down this path to be fully nationwide and open up access to care in all 50 states. It also supports our long-term vision to have a fully integrated care model for mental healthcare," he said.

Going public also enables the company to endow the LifeStance Health Foundation, a separate nonprofit organization with a focus on youth, underrepresented communities and those who are underemployed or uninsured, Qureshi said. Additional investment will enable the foundation to make grants, award scholarships and support organizations that can reach even more patients.

Mental illness is an enormous and growing crisis. In 2019, 1 in 5 adults in the U.S. lived with a mental illness.

LifeStance estimates that the market will nearly double from 2020 to 2025 at a compound annual growth rate of 14% to approximately $215 billion driven by significant, long-term tailwinds including increased incidence of mental-health-related disease, growing awareness and acceptance driving treatment demand, increased access and pursuit of integration with physical care and support from federal and state regulations.

Investors are pouring massive dollars into the mental health sector as the COVID-19 pandemic shines a spotlight on behavioral health issues. Online therapy app Talkspace plans to go public through a merger with special purpose acquisition company Hudson Executive Investment Corp. The deal values Talkspace—which connects users with licensed therapists via video chat or text—at $1.4 billion, including debt. The deal will provide the company with $250 million in cash to be used as growth capital, the company announced in January.

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"There is a recognition by investors of the need to continue to invest in healthcare and deliver innovative models to increase access and lower barriers for patients, and in mental health specifically," Qureshi said. "This is something that is top of mind for the entire country because of the pandemic, but there has been this gradual trend in reducing the stigma around receiving mental health services and greater awareness so that people are able to seek care. We now have really smart dollars coming into this space and helping companies like ours to innovate, and the people who win are the patients."

There is a growing list of companies jumping into the mental health space offering mobile apps and virtual-only services.

"We absolutely think there is room for companies that are focusing on the virtual-only subset of the market and offering self-serve treatment for patients through apps or focusing on patients that are willing to receive care exclusively online. There is a place for that," Qureshi said. "We at LifeStance truly believe in a model that allows patients to get access to care, where and when they want and whatever avenue that may be. That creates a point of differentiation for LifeStance as we are not exclusively in person  and we are not trying to tackle a very complex healthcare issue by delivering care virtually only services."

Morgan Stanley, Goldman Sachs & Co. LLC, JPMorgan and Jefferies are acting as lead bookrunners for the offering. TPG Capital BD, LLC, UBS Investment Bank and William Blair are also acting as joint bookrunners for the offering, and Capital One Securities, AmeriVet Securities, Drexel Hamilton, R. Seelaus & Co., LLC and Siebert Williams Shank are acting as co-managers for the offering.