“Omada’s $1B IPO: Can It Slash Corporate Health-Care Costs?”
Inside the S-1: GLP-1 weight-maintenance data, soaring marketing spend, and whether Omada’s model pays off for employers.
1/ Omada was early to the game of diabetes management. Then the GLP-1 wave surged, and Omada was overtaken in size by a number of D2C businesses – like Hims, Ro, LifeMD, and others. Now Omada is filing its S-1, claiming it can manage chronic conditions (weight loss, MSK, hypertension, etc.) through a differentiated employer channel. I have my doubts it ever achieves enormous scale.
2/ Financials at a glance: Omada pulled in $170M revenue in 2024 (+38% YoY) – a far cry from Hims’ $1.5B or even Hinge Health’s $390M. Omada is still unprofitable (-$47M net loss in 2024), though losses are narrowing. Q1 2025 revenue accelerated to $55M (+57% YoY), perhaps thanks to new GLP-1 offerings.
3/ Valuation: At a rumored ~$1B IPO valuation, Omada would trade around 5–6× revenue – in line with more profitable and equally fast growing digital health plays. Hinge Health is trading at 8.3x trailing 12 month revenue and is profitable. Hims currently trades ~6.5× trailing 12 month sales after achieving profitability. Meanwhile, smaller telehealth peer LifeMD is ~2× sales. So Omada’s ask is aggressive and prices in a lot of growth and margin improvement.
4/ Can Omada justify that valuation? On one hand, gross margins are ~60% and rising, and operating expense growth has slowed. On the other, Omada’s marketing spend is still ~40% of revenue – heavy for a B2B model. For context, Hims (D2C) has managed to drive marketing toward ~30% of revenue as it scaled. Omada must convince investors it can follow suit – i.e. grow without burning cash.
5/ A quick and dirty DCF. Assume ~25–30% annual growth for the next 5 years, gradually slowing to ~10% by year 10. Suppose EBITDA margins improve from negative in 2024 to breakeven by 2025–2026 and reach ~20% by year 10. Under these assumptions (with a 12% discount rate and ~3% terminal growth), Omada’s DCF-implied value would likely hover around or below the ~$1 billion mark. The company would achieve free cash flow breakeven by ~2026, in this scenario, given improving operating cash flows.
6/ Retention is a bright spot. Omada boasts a net revenue retention of 128% in 2024– meaning existing customers significantly expanded usage - with upsells like adding hypertension or GLP-1 weight programs. This is higher than Hinge Health’s 117% and even above Livongo’s ~114% back in the day. In plain English: Omada isn’t bleeding clients at all; it’s growing within them. That’s a SaaS-like metric VCs love to see in digital health.
7/ What’s driving revenue expansion? A big factor: Omada’s push into GLP-1 support programs. As GLP-1 weight-loss drugs (think Ozempic/Wegovy) exploded, Omada rolled out an “Enhanced GLP-1 Care Track” for members. Employers who cover GLP-1s are pairing them with Omada’s coaching. Early data looks good – Omada claims its members maintained their weight loss 16 weeks post-GLP-1 (virtually zero regain, vs ~6% regain typically). If true, that’s a compelling story: Omada makes pricey weight-loss meds actually stick. 🎯
8/ GLP-1 twist: However, it’s worth noting this data is short-term and based on Omada’s own analysis (not a long randomized trial). Competitors won’t sit idle: Hims, Ro, etc. are all about GLP-1 and could add coaching components (perhaps not as robust as Omada’s, but they have the capital to try). It may help win some clients now, but maintaining a lead will require continuously demonstrating better outcomes/cost savings.
9/ Does Omada have a moat? 🤔 Let’s be candid: Omada’s model is not easily scalable like pure software, and switching costs for employers, while present, aren’t huge if a better/cheaper vendor comes along. It has no network effects (each employer’s program is independent). Omada’s brand is decent in the benefits community but not consumer-famous. The business has some process know-how (they keep users engaged ~30 times/month). That said, the biggest moat is likely employer love —> net revenue retention points to Omada gaining share of wallet with employers versus losing out to competitors.
10/ Competition and Channel Risks: Omada’s expansion into MSK (via a 2020 Physera acquisition) means it’s going up against Hinge and Sword in musculoskeletal care – and those are formidable, well-funded rivals. In weight loss, it faces the telehealth crowd (Hims/Ro/Others). The employer-focused go-to-market is what Omada touts as “differentiated.” But even here, note that ~60% of Omada’s revenue comes via two Cigna-affiliated health plans/PBMs. That’s a concentrated channel. If Cigna/Evernorth ever pivots to a different solution (or builds its own), Omada could take a big hit. In short, Omada is navigating between being not quite as viral as D2C, and not as embedded as traditional care – a challenging middle ground.
11/ Too small to win? The skeptic’s case: Omada might simply be too small and late in a winner-take-most landscape. Hims & Hers is an order of magnitude larger in revenue and now profitable. Hinge Health just IPO’d and is not only larger but also turned a profit in Q1, proving the unit economics in enterprise health can work. Omada, at ~$170M and still losing money, could struggle to ever reach the scale of those peers. Plus, its customer acquisition (though B2B sales) still ultimately relies on convincing individuals to enroll – something that has historically been a struggle for many employer wellness programs (remember that participation rates matter – if only a small fraction of eligible employees sign up, growth is limited).
12/ On the flip side… Omada has shown the ability to adapt - expanding from diabetes prevention into full-stack chronic care, and now integrating meds like GLP-1s. Its net revenue retention of 128% signals that clients who adopt Omada are finding value and giving it more business – a very positive sign. The company also notably improved operating efficiency: 2024 operating cash burn was $34M, down from $50M in 2023. If these trends continue, Omada could break even in the next 1-2 years and shed the “unprofitable” label.
13/ Investor bottom line: Omada’s IPO will test whether public markets are willing to bet on a mid-stage digital health company that isn’t the category leader but has solid fundamentals. The valuation of ~5-6× revenue is not cheap, but if you believe Omada can sustain 30%+ growth and reach 20% margins in a few years, it starts to pencil out (that would be, say, $300M revenue and $60M EBITDA in a few years – at a 15× multiple, ~$900M EV, roughly where it’s pricing). There’s execution risk: they must keep employers engaged, fend off specialized rivals, and prove the “integrated care” model can produce superior outcomes (and cost savings) in the age of miracle drugs like GLP-1s.
14/ Final thought: Omada is a credible vet in digital chronic care—but in 2025 credibility alone won’t clear the IPO bar. At ~6× sales you’re paying up for an enterprise channel that must keep expanding >30 % a year and flip to 20 % margins fast. If the GLP-1 edge proves real and C-suite buyers keep buying more, there’s upside. If not, it slides into the 1–3×-sales penalty box with other slow growth health care stocks.