Castlight Health Inc., a vendor of software to help large employers manage health care costs, went public on March 14 with an opening price of $16 per share that quickly rose more than 150 percent to above $40.
The company initially priced shares at $9-$11, increased it to $13-$15, then raised again to $16 before shares began trading, giving the IPO a value of about $178 million. At 2:00 Eastern Time, the stock was trading at about $38.
Castlight offers a cloud-based platform that is designed to give employees comprehensive information to track spending and quality to make better health care choices, which in turn enables employers to analyze and reduce their overall program costs. For employers, the platform combines pricing, clinical quality and user satisfaction data with analytics software to calculate costs and identify patterns of inefficient behavior for large populations of employees and their families, helping employers optimize benefit plans, attempt to reduce inefficient outcomes and foster behavioral change.
Castlight has more than 100 customers; some of the well-known companies include Kraft, Cummins, CVS Caremark, Honeywell, Liberty Mutual, NCAA, Save Mart, State of Indiana, Harvard Pilgrim and Purdue University. Todd Park, co-founder of athenahealth Inc. and later chief technology officer in the Obama Administration, founded Castlight in 2008 with Giovanni Colella, former CEO at RelayHealth which became part of McKesson, and Bryan Roberts of the investment firm Venrock.
The company still considers itself as an emerging growth company and has yet to turn a profit. While revenue has grown substantially--$13 million in 2013 compared with $1.9 million in 2011so have its net losses. The companys net loss last year was $62.2 million, up from $19.9 million in 2011. Its accumulated debt as of Dec. 31, 2013 was $131.2 million.
But investors typically reward money-losing losing start-ups if theyre growing fast and considered to be innovators in an emerging space, and all indications are that health costs analytics firms are all the rage. One of Castlights competitors, Benefitfocus, lost $16 million in the first half of 2013 before it went public yet its stock rose 102 percent on its first trading day in 2013, Investor's Business Daily reports. The stock sold for $26.50 and now trades around $59. Castlights other competitors include Truven Health Analytics, ClearCost Health, Change Healthcare Corp., Healthcare Blue Book, and HealthSparq, all of which are privately held.
Truven Health, a big player in the space, wasted little time reminding investors and consumers of its place in the industry, issuing a press release on March 13 before Castlights IPO that 20 million consumers now use its treatment cost calculator offered through a customer base of large employers and health plans. The vendor noted a recent survey of users found that 90 percent of cost estimates were within 10 percent of the actual costs.
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