Membership-based primary care platform One Medical's stock price jumped nearly 60% on its first day of trading Friday, rounding out at $22 per share at market close, up from its initial public offering price of $14.
The San Francisco based company priced its initial public offering at the low end of its $14-$16 per share planned range. One Medical, which bills itself as a faster, easier alternative to traditional primary care, trades under the stock ticker ONEM.
One Medical has ambitions of transforming the way primary care is delivered, using same-day appointments, care in patients' workplaces and telehealth. But its rapid growth in recent years, including adding 259 employees in the first nine months of 2019, has spurred losses. The company reported a $34.2 million net loss in the nine months ended Sept. 30, 2019 on $199 million in revenue, compared with a $26.9 million net loss on $154.6 million in net revenue in the prior-year period.
Nonetheless, the company still plans to add Atlanta, Orange County, Calif. and Portland, Ore. to its existing footprint by the end of the year, Bjorn Thaler, the company's chief financial officer, said in an interview. Counting the addition of San Diego last year, that's a 50% expansion in 18 months, he said.
Hence the need to go public.
"As you can imagine, this takes a lot of work," Thaler said. "It takes a lot of great employees and great providers, but it also does take capital."
Thaler declined to speculate on when One Medical will become profitable.
The company, an affiliate of the administrative and managerial services company 1Life Healthcare, sold 17.5 million shares valued at $245 million through its offering managers, J.P. Morgan and Morgan Stanley, raising less than its maximum target of $322 million.
One Medical had 77 offices, including some employer-based clinics, spread across nine markets as of Sept. 30, 2019, including Boston, Chicago, Los Angeles, New York and the San Francisco Bay Area. The company's nearly 400,000 members are mostly working age and 95% are commercially insured. Membership grew 324% between December 2014 and September 2019, according to the company. Members pay $199 annually for the care at One Medical, which also bills their health insurance.
The company makes money from membership fees, contracts with health systems and employers and from billing health insurers. Its health system partners include big names like Partners HealthCare in Boston, Advocate Aurora Health in Illinois and Wisconsin and Renton, Wash.-based Providence St. Joseph Health.
Thaler explained that One Medical's agreements with health systems don't compel its clinicians to refer patients to the hospitals it contracts with. That said, it's easier for One Medical's patients to receive care at those hospitals, since the company's technology infrastructure allows data to flow seamlessly between the providers, Thaler said.
One Medical's employer clients include well-known names like Google and SoulCycle, as well as state governments, unions and retail companies, Thaler said.
One Medical wrote in a Securities and Exchange Commission filing that it continues to "substantially depend" on relationships with health network partners to grow its business, and that future growth depends in part on developing new affiliations. Growth will also hinge on its ability to enter new markets and expand its service offerings.
The offering comes about one month after One Medical announced its proposed IPO. The IPO is expected to close Feb. 4, subject to closing conditions.
One Medical said in a news release it has granted underwriters a 30-day option to buy up to 2.6 million additional shares at the IPO price, less underwriting discounts and commissions.
Allen & Co., Citigroup, Piper Sandler, Wells Fargo Securities and William Blair are acting as bookrunning managers in the IPO, with Baird and SunTrust Robinson Humphrey acting as co-managers.
