A deeper dive on Hinge vs Omada

Hinge is going out on the NYSE; Omada on NASDAQ, per recent S1 filings. It’s a momentous moment for digital health. Some are saying it’s the end of digital health IPO winter, meaning for years we had very few companies going public.

To refresh your memory:

• Hinge Health provides employees and health plan members with virtual physical therapy and musculoskeletal care. It offers education, a personalized program of movements and stretches, with a goal of helping people with joint or muscle pain. Some of these people will then avoid expensive and unnecessary surgeries as a result.
• Omada Health is a virtual care delivery program that helps people achieve their health goals by connecting them to a care team and other resources. It focuses primarily on chronic cardiovascular disease. It also mostly sells to employers and health plans.

It’s hard not to compare the two companies, particularly given the IPO timing and the similarities between them. Both sell to employers, and one could argue that they’re even slightly competitive in the musculoskeletal (MSK) category because of Omada’s acquisition of Physera. I would argue that Omada and Hinge are also second generation digital health companies, meaning they’re of a different breed than some of the telemedicine players like Teladoc that went public many years ago.

But these businesses are actually very different.

Let’s talk about it in more detail, and I’ll share some thoughts along the way as someone who’s paid very close attention to both companies over the years!

Financials

Here’s a little side-by-side snapshot:

Metric (FY‑2024)

Omada Health

Hinge Health

Net revenue

$169.8 M (+38 % YoY)

$390.4 M (+33 % YoY)

GAAP gross margin

61 % SEC

77 % SEC

Operating loss

–$42.7 M (–25 % margin)

–$31.9 M (–8 % margin)

Net loss

–$47.1 M SEC

–$11.9 M SEC

Cash & mkt. secs

~$235 M post‑raise (pro forma)

$467 M cash + securities SEC

Customers

2 000+; 20 M covered lives; 90 % retention

2 250+; 20 M lives; 98 % retention

Condition beach‑head

Diabetes‑prevention → full cardiometabolic

MSK PT → pelvic health & fall prevention

At a glance, Hinge appears to be in a stronger position moving into the IPO - and most of the Internet commentary so far seems to agree with that. It has larger revenues, similar growth, a higher gross margin and is moving into being profitable. MSK is a very large total addressable market (TAM), and it’s a huge driver of cost for both employers and health plans. What Hinge offers is convenient access to physical therapy, increasingly powered by AI, that members can take advantage of to potentially avoid expensive and unnecessary surgeries.

What Omada has going for it is a more comprehensive offering, as it has expanded from pre-diabetes into core diabetes, weight management, hypertension and more. That seems to be more of a requirement these days, as employers are looking to get out managing so many “point solutions.” Where there’s a lot of potential is in the GLP-1 space, but Omada has opted to stay in the lane of providing wraparound lifestyle support and health coaching to people taking the medicines. The goal is to provide an off-ramp, so members don’t rapidly regaining the weight after weaning off of the drugs. I personally view that area as the highest potential for them.

So where will that land both companies? Most people seem to think (so far) that Omada’s valuation will be somewhere in the $1-1.5 billion range, per revenue multiples for similar companies. Hinge is reportedly testing the waters at a $2.6 billion number, which may seem high but is actually a haircut from its last private valuation of more than $6 billion. It goes to show how much has changed since Hinge last raised from firms like Coatue and Tiger Global in 2021 (a product of overpaying and overbidding). For one thing, interest rates have shot up in the past four years, so the cost of capital has materially changed. These firms may also have expected a faster path to profitability and higher growth rate, given the rapid shift to virtual forms of care delivery.

What’s also potentially changed since 2021? As I’ve been asking digital health executives in my network, another big problem is pricing. Because there’s so much competition in the market - Hinge competes with Sword and Vori, for instance, and Omada with Vida Health and Virta — that has meant vendors need to go out of their way to appeal to customers, regardless of which company may have the superior product.

Unit economics

The devil is in the details, so let’s get into it. And it’s worth noting here that there’s been an increasing shift in the employer landscape towards forms of pricing that are based on outcomes and engagement, and that will be an easier transition for some companies and care models over others. MSK, for instance, was one of the first categories to really embrace this trend. Sword Health, which competes with Hinge, was one of the early advocates of outcomes-based pricing, meaning that its customers would only pay when a member, or user, engaged with one of its programs.

Omada pricing is blended: It’s a per-member, per-month (PMPM) fee that covers marketing, tech and device shipping, plus an outcome fee tied to weight-loss and diabetes thresholds, like a dip in A1c levels. Its costs are driven by health-coach labor, device COGS and debt interest. It drove improvements in its services COGS in 2024 by renegotiating scale-based contracts on scales and glucometers.

Hinge contracts are also a PMPM after the member completes a billable activity. Newer contracts also include a platform fee and per-session micro-charge. The company got a boost by ditching tablets in 2023 and rolling out smartphone-based motion capture in 2024. That led to a reduction in hardware COGS by 75%, and improved its GAAP gross margins.

Comparative benchmark. If we normalize for sales cycles (both 12‑month) and customer acquisition payback:

Omada

Hinge

CAC payback (mgmt est.)

13‑15 months

11‑12 months

Member‑level gross margin

70 %

82 %

Contribution margin after S&M

24 %

36 %

Hinge has certainly been making moves behind the scenes in the past few years to improve its financials to get it ready for the public markets. It brought in a professional, experienced CFO in James Budge a little more than two years ago, who previously worked at companies like Anaplan and PluralSight. Omada Health’s CFO Steve Cook was previously a finance leader at OneMedical, so has strong credentials in virtual care delivery.

Both companies will need to articulate to the public markets how the intersection of health and technology is the future - because there are certainly more compelling SaaS businesses out there with insane margins. This isn’t just a problem for Hinge and Omada to tackle. This is a post for another time, but the whole industry has a bit of a PR problem when it comes to public markets investors. Even with AI, there is still a heavy human component to these companies because they’re in care delivery, so that needs to be articulated well. Another issue will be that there are traditional health investors and tech investors — how do we treat digital health companies that fall between the two categories?

Expanding beyond employers for GTM

MSK is a very large and growing TAM. Hinge pegs that at around $661 billion - and it’s even more expansive if you include the drag on productivity (up to $1 trillion). Meanwhile, Omada posits its serviceable TAM is around $300 billion, given the rising spend around cardiovascular disease. What I’m curious about is how much the GLP-1s and all these medications targeted to cardiovascular disease and weight management will impact the category in the next decade.

Both are primarily focused on the self-insured employer and commercial payers, but are looking to broaden that. On a personal note, I’ve long been skeptical of the over reliance on the employer channel, given sales cycles are super long and there’s a limited universe of companies willing to pay for digital health. Companies need to figure out how to diversify their customer base — and that’s particularly true for Omada, which does struggle with revenue concentration.

Medicare is an opportunity for both companies, and both tout pilots with Medicare Advantage plans. Medicaid may also be part of their growth story, although I’d argue that requires deeply specialized expertise. Otherwise, it’s going to be challenging for both companies to keep up with growth that’s north of 20 percent year-over-year, while also staying on track for profitability. Profitability is more essential than ever these days, and the public markets reward companies for it. I’m more concerned for Omada in this regard, given losses. The company is still losing a lot of money. We’re going to have to watch and wait to see if Omada can sustain strong growth in the next few quarters and get to profitability.

Michael Greeley from Flare, the health-tech venture capital firm, has made the point that we should take note of whether Fidelity and Wellington Management, which came into the Series E, choose to double down and invest in the IPO. If these firms do come in, that could be a strong signal that they believe in the business’ fundamentals.

AI pixie dust

It is increasingly essential for digital health companies to have a strong AI story these days. In that regard, Hinge seems to view AI as more of its strategic advantage and its founders have been extremely public about their strong views on its potential. It’s clear to see how the company can leverage it when it comes to physical therapy, particularly given its existing virtual focus. AI is mentioned at the very top of the prospectus, and throughout, given its existing products include AI-powered motion tracking technology, its wearable device - “Enso“ - and AI-supported care team.

Meanwhile, Omada leads with a story that discusses bridging “compassion” with “intelligence” - noting that human relationships are “fundamental” to unlock behavior change. There’s definitely mention of technology/AI, but it’s not as upfront and center in the messaging. Again, I keep going back to this point about how digital health companies need to educate the market on the need for humans staying in the loop. Tech investors, in particular, will be used to software businesses — and they’ll need to get conviction on this sector based on the fresh crop of companies going out.

That said, I do see potential for AI with both businesses, but it’s far more obvious with Hinge. And given the sentiment around AI, which remains all the rage, public market investors will likely reward the company for it.

Impact to the industry

Digital health has not had a lot of exits yet - needless to say, we desperately need more examples of companies returning money for the smaller companies to continue to raise capital. So much so that I’ve seen folks in the industry joking on X that we should all pile on and buy shares in Hinge and Omada, because how these companies perform will define everyone else.

These IPOs are very important for the industry!

What worries me candidly is that neither company is going to provide an amazing return for the last round’s growth stage investors. Omada’s last private company valuation was around $1B and Hinge’s landed a little above $6 billion. So clearly, private market investors had a rosy view of the market potential for digital health companies, and we discussed the reasons why that is. Hindsight is 20/20.

My bet is that valuations will continue to come down to earth at the growth stages, where comps are everything. And that will have an impact on seed through Series C. I don’t think we’ll see too many examples of companies in health-tech raising at crazy revenue multiples in the next few years.

What I’m keeping my eye on

For Omada, it’s definitely the GLP-1s. If the market continues to open up, payers get on board and prices come down, I could see Omada getting a tailwind. Ahead of these expensive injectables coming off patent, employers will continue to face tough questions around their plans to cover these medications, particularly as their employees agitate for them.

I’m also paying attention to studies on the true clinical benefit and outcomes. Peterson Health Technology Institute (PHTI) did not report “meaningful health benefits” to patients for Omada and its competitors, although Virta did perform better. While that same organization, which operates independently and does not have a profit motive, found a stronger ROI case for MSK. A big part of that comes down to the condition itself. MSK is more episodic and tends to acute, and patients are often highly motivated to make changes. Chronic cardiovascular disease requires behavior change - and that, as Omada consistently notes in its prospectus, is hard.

Both companies face strong competition. For Hinge, it’s definitely primarily Sword, which has been making strategic acquisitions and has plenty of cash on the books. Omada’s competition includes Vida Health and Virta. Another challenge I have with the employer market is that close competitors often undercut each other on price, as there’s only so many employers to go around.

Second mover advantage?

What fascinates me though is that Hinge is actually a younger company than Omada. Hinge got its start three years after Omada’s 2011 launch, so it had the benefit of getting to witness the birth of some of the earliest digital health solutions that sold into the employer market. No matter how you feel about the business, Omada paved the way for a lot of the companies that came after it.

This is subtle but bear with me. The other major unlock that Omada realized early on, and many digital health companies have followed: It is usually better to be a clinic than a vendor. What that means is that it’s worth setting up the infrastructure to be a clinic and directly touch medical spend. Both Omada and Hinge are clinics - and that distinction might seem subtle, but it’s actually a huge advantage. I continue to have a strong preference for this approach.

Which brings me to my final point that I’ve been mulling a lot over the last few months and I’ll write about in more depth. I think in our category the “first mover” advantage is actually a bit of a myth. I keep seeing examples of second and third movers that are growing more quickly than those who came before them, mostly because they are taking existing playbooks and building off of them. Our space is still so nascent that the first cohort of companies usually have to learn the hard lessons while burning through a lot of venture money. I don’t fault them for it. It’s not easy to be an innovator, especially in health care.

I’m happy to share my list of second and third movers that I am seeing crush it! And if you have thoughts on Hinge and Omada, I’m all ears. Email me at christina@secondopinion.media.