Learning from Livongo’s IPO success: 8 components which can make a digital therapeutic solution successful

Livongo, a digital therapeutic solution company with a focus on helping People with Diabetes, made an impressive public-listing debut on NASDAQ last week. The company raised $355M at a valuation of about $2.5B, the 5th highest in history for a Med-Tech company.

Livongo’s IPO proves that digital healthcare solutions can achieve success and highlights key factors for companies on how to do things right. 8 components which made Livongo successful are:

• B2B oriented business model
• Connected devices
• Coaching services
• Ongoing fulfillment of medical supplies
• Clinically supported positive user outcomes
• Expansion into related medical conditions
• Use of AI and Machine learning to automate and customize processes such as chat and pattern identification
• An ecosystem connecting the company products to other connected devices and services such as wearables and Alexa

BACKGROUND ON LIVONGO

Livongo was founded in 2014 and offers digital services and products to help people struggling in managing their diabetes and other chronic conditions such as hypertension and mental health issues. The digital therapeutic company’s proposition is that these conditions can be managed more competently and at a much lower cost by using tech, coaching, and other smart digital tools. With over 164,000 members in its diabetes treatment program, the company is significantly ahead of its peers. The users receive a starter kit at the beginning of the program, followed by regular coaching and continuous monitoring, all of which is paid by the user’s employer or insurance through a monthly subscription model.

LIVONGO HAS BEEN MAKING ALL THE RIGHT MOVES

One can argue that much of Livongo’s success lies in its partnership network and identification of reimbursement routes. Last reported, the company had managed to get over 650 B2B partners on board including employers, insurances, associations and other providers.

Adding to it, Livongo has constantly evolved its product and service offerings to include other chronic conditions, which sometimes required the same processes and infrastructure as diabetes management and were easy to venture into. This includes hypertension and weight management services. In recent years, the company has also been quite acquisitive. Between 2017 and 2019, the Mountain View, California based company acquired the BGM-adapter manufacturer Diabeto, the prediabetes (diabetes prevention) services provider Retrofit and the behavioral health services provider MyStrength. Each of the acquisitions helped Livongo expand its portfolio swiftly into other chronic conditions.

Additionally, a major partnership was announced with Abbott in 2018, integrating the FreeStyle Libre Pro system into Livongo’s programs. One can say, Livongo moved up the value-chain with this development. It is evident from the recent industry developments, CGMs are gaining wider acceptance as the product of choice to monitor blood glucose levels for patients at high risk.

WITH AN IPO IN SIGHT, LIVONGO ACCELERATED ITS EVOLUTION

It can be contended that a lot of these expansion strategies have been partly employed to steer the company towards an IPO and provide extra premium for the investors. This has in turn led the company to grow too swiftly too soon. Even before the IPO, Livongo had managed to raise $235M in six funding rounds over the past five years and was valued at about $800M in the last round in 2018. The IPO’s success should give Livongo’s and other digital health investors a lot of reasons to cheer as it has created a great amount of buzz and euphoria for this segment.

There’s still hesitation in the industry, however, on how well it would bode for other companies which still struggle with moving beyond conducting a few pilot projects. Several challenges remain to be overcome, prominent among them being regulatory clearances, proof of actual benefit to users over long horizons (say 10, 20 years) and the need to create a culture where the users start accepting digital therapeutics as viable alternatives to traditional medical treatments. Which is what makes the digital health industry exciting. It is at the cusp of a revolution, but the wait for that revolution to move into its next phase of rapid growth has been far too long. For now though, one can sit back, admire and learn from Livongo’s success. A Med-tech unicorn has achieved a $2.5B valuation within 5 years of inception.

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