One Medical raises $245M in its IPO and stock jumps on first day of trading

One Medical CEO Amir Dan Rubin rings the Nasdaq opening bell on January 31. (One Medical)

Tech-driven primary care company One Medical closed its first day of trading as a public company Friday about 57% above its set price.

San Francisco-based One Medical announced Thursday the pricing of its initial public offering of 17.5 million shares of its common stock at a price of $14 per share, at the bottom of the range of $14 to $16 per share stated in its S-1 filing with the Securities and Exchange Commission (SEC).

The company, which is not yet profitable, raised $245 million through JP Morgan Securities and Morgan Stanley.

The pricing values One Medical at roughly $1.7 billion, based on the more than 122 million of shares outstanding disclosed in its SEC filing.

One Medical has granted the underwriters a 30-day option to purchase up to 2.6 million additional shares of common stock at the IPO price less underwriting discounts. The offering is expected to close Feb. 4.

The stock started trading at $18 a share late Friday morning, jumping to as much as $22.88 a share, according to MarketWatch. One Medical closed at $22.07, which was 57% higher than its initial price.

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"We had a strong start but today is just one of the milestones at One Medical," Bjorn Thaler, One Medical Chief Financial Officer, told FierceHealthcare. "We set out about 13 years ago to modernize healthcare, particularly your doctor’s office."

The company, which is backed by Google parent Alphabet, is currently in nine different markets across the U.S. and plans to add three more--Atlanta, Orange County, California, and Portland, Oregon--later in 2020.

"We have a lot more geographies and cities that we need to get to so that patients can benefit from our service offerings," Thaler said.

Thaler joined One Medical in April 2019, moving over from Aetna, where he served as VP of corporate finance for eight years, and then briefly at CVS after Aetna's acquisition. He describes the startup as "reimaging primary care through technology."

"We're finally take primary care into the 21st century," he said.

The company decided to go public to help raise capital to fund its continued expansion and to scale up the business.

"Modernizing healthcare is hard and it takes a lot of elbow grease and it also takes a lot of capital," Thaler said. As we continue to scale our business, we want to make sure we have the right capitalization base so that we can do that in a measured and rightly-paced way."

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One Medical joins a growing list of health and wellness and healthcare technology companies to go public this year including Livongo, Health Catalyst, Change Healthcare, Phreesia, and Progyny.

One Medical markets itself as a membership-based, tech-integrated and consumer-focused primary care platform. However, while the company has been growing its overall size, it has continually reported losses.

According to its SEC filing, One Medical grew its membership by 324% from Dec. 31, 2014, through Sept. 30, 2019, to about 397,000 members.

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The company has experienced strong organic revenue growth since inception, One Medical said in its filing.

One Medical reported strong top-line growth reaching $198.9 million in revenue in the first nine months of 2019, up 29% from $154.6 million for the same period in 2018. The company reported year-over-year revenue increase of 20% from $176.8 million in 2017 to $212.7 million in 2018.

One Medical will use the capital raised to continue expanding its service footprint and to build out its technology, most of which it has built in-house, Thaler said.

"At the end of the day that’s a secret sauce that makes this company special. We are inreasingly getting pull from hospital systems and employers in new geographies who want to know when we're coming to their city," he said.

But the primary care company faces significant challenges. It has reported losses since its inception and warned it might never see profitability. 

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"We are in our 13th year, and we are still losing money," Thaler acknowledged. "Why are we raising money? To, frankly, grow and develop into the scale and size that is important to us to deliver value to everybody that touches us--not just members, employers, and employees, but also our shareholders, in fairness."

"We are balancing all of those needs to make sure that we continue to execute, and execute well. and continue our growth and do this responsibly," he said.

The company also competes in a highly fragmented primary care market with direct and indirect competitors and competes across various segments, including traditional healthcare providers and medical practices, technology platforms, care management and coordination, digital health, telehealth and telemedicine and health information exchange, the company said in its SEC filing.

Thaler said he is optimistic about the company's futre opportunities.

"We grew up in the Bay Area, where we have just over a 3% market share. The growth opportunities for us here are enormous. This is a really around our mission to modernize healthcare and the impact that can have on the life of our members and, frankly on the cost of healthcare system, I think, are immense," he said.

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