IPOs are hot. A University of Florida professor known as "Mr. IPO" has data showing that the 48% average first-day jump in shares last year was the biggest since the halcyon days of 1999. Need more proof? The Renaissance IPO ETF, a fund that buys shares shortly after they begin trading, is up 200% since March 23, 2020. Most of the headlines were made by popular consumer companies like Airbnb or fast-growing technology companies like Snowflake. This year, there are a couple of companies in the healthcare industry that may also attract the same attention. When shares finally hit the market, they could get snatched up faster than you can say "dot-com bubble."
1. Lucira Health
How would you like to test yourself for COVID-19 at home and get results in 30 minutes? Lucira is betting that most people would really like to do that. The company's all-in-one test kit, launching in the first quarter, is the first prescription at-home coronavirus test authorized by the U.S. Food and Drug Administration (FDA). The molecular test's ability to detect the virus rivals some of the best clinical tests, accurately identifying 94% of infections and 98% of those not infected.
Management estimates the current market for molecular COVID-19 testing at $6 billion. The company also believes the monthly at-home testing demand was roughly 30 million tests per month in November, and will reach 50 million to 100 million tests per month this year. If Lucira can get its product approved for asymptomatic users and for over-the-counter (OTC) sales, it's not difficult to imagine an even rosier outlook. Financial projections are more difficult. The current reimbursement rates for similar tests is $50, and management believes it will have to price OTC devices at around $20 to spur consumer adoption.
Investors who are intrigued but fear the risk of a company going all-in on one product could buy shares of Jabil (JBL 2.14%) instead. The contract manufacturer will be making, packing, and shipping the devices for Lucira.
2. Oscar Health
Oscar is trying to disrupt health insurance by improving customer experience through technology. The company offers an easy-to-use app and online interface, as well as incentives like a dollar per day for hitting a steps goal. The idea is to be a health and wellness guide for its 420,000 members, allowing them to access medical records and lab reports, get recommendations for a doctor, and initiate virtual care through a totally online experience. The numbers show its strategy is working. Membership has grown 70% since 2017 and the company's net promoter score, a measure of customer loyalty, is three times the industry average.
Google parent Alphabet (GOOG -1.22%) (GOOGL -0.95%) reportedly owns 10% of Oscar, having invested in the company through its Capital G investment group, as well as through Veerily, its health and life sciences arm. The tech giant sees the benefit that technology can bring to a broken industry. It's made investments in more than 50 healthcare companies, including Oscar rival Clover Health. Oscar's strategy has been to send members to the lowest-cost care site and expand virtual health. So far, 90% of members have created an online account and 63% of members' interactions with the healthcare system are virtual.
The company generates $2 billion in annual revenue, a 74% increase since 2017. And the growth is going to continue. The company announced last summer it will expand into four new states in 2021. Oscar filed its S-1, the registration to go public, confidentially, so prospective investors will have to wait for their opportunity to give the company a thorough exam.